-----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, Hc3HmJW2ZNHdvPws6/zykUAH00EDYn0eMBRhiKXCNOkIDI8JKtt6fJZhe6ZuFAir Rw8d0nUV40IiWDiiTurjKw== 0000950152-99-007539.txt : 19990915 0000950152-99-007539.hdr.sgml : 19990915 ACCESSION NUMBER: 0000950152-99-007539 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19990831 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANSTECHNOLOGY CORP CENTRAL INDEX KEY: 0000099359 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 954062211 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-07872 FILM NUMBER: 99711059 BUSINESS ADDRESS: STREET 1: 150 ALLEN RD CITY: LIBERTY CORNER STATE: NJ ZIP: 07938 BUSINESS PHONE: 9089031600 MAIL ADDRESS: STREET 1: 150 ALLEN RD CITY: LIBERTY CORNER STATE: NJ ZIP: 07938 FORMER COMPANY: FORMER CONFORMED NAME: SPACE ORDNANCE SYSTEMS INC DATE OF NAME CHANGE: 19740717 8-K 1 TRANSTECHNOLOGY CORPORATION FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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) August 31, 1999 -------------------------- TransTechnology Corporation - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 1-7872 95-4062211 - -------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (IRS Employer Of Incorporation) File Number) Identification No.) 150 Allen Road, Liberty Corner, New Jersey 07938 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (908) 903-1600 -------------------- - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) 2 TRANSTECHNOLOGY CORPORATION FORM 8-K ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. On August 31, 1999, the Registrant concluded its previously announced purchase of substantially all of the assets of the Engineered Fasteners Division ("EFD") of Eaton Corporation for a negotiated price of $173 million in cash. The Registrant will combine its Palnut(TM) fastener operation in Mountainside, New Jersey with the EFD units in Brunswick and Massillon, Ohio and Hamilton, Ontario to form the Engineered Components Group, which is included in the Specialty Fastener Products segment. The Engineered Components Group will be headquartered in Brunswick, Ohio. In connection with the completion of the transaction, the Registrant re-financed and expanded its existing lines of credit with a group of lenders led by BankBoston, N.A. from $145 million to $325 million. The facility is structured as a secured $250 million revolver/term loan (the "Senior Loan") and an unsecured bridge loan in the amount of $75 million (the "Bridge Loan"). The weighted average interest rate on the new facility, of which approximately $292 million was outstanding following the EFD acquisition, is approximately 9.65%. The Senior Loan is secured by substantially all the Registrant's assets. The Bridge Loan requires that the Registrant prepare a Rule 144A prospectus relative to a public issue of subordinated debt within 60 calendar days after the closing for the purpose of facilitating the repayment of the Bridge Loan. In the event that any principal balances on notes issued pursuant to the Bridge Loan (the "Bridge Notes") are outstanding after August 31, 2000, the following consequences will occur: (i) the Bridge Notes may, at the option of the Holders, be exchanged for a class of debt securities which the Registrant would be required to register for public distribution and (ii) warrants to purchase 731,197 shares of the Registrant's common stock at a nominal exercise price will be issued to the holders of the Bridge Notes. The warrants will entitle the holder thereof to acquire ten percent of the common equity of the Company on a fully diluted basis after giving effect to the warrants. Documentation with respect to the notes available upon exchange of the Bridge Notes and the issuance of the warrants, including a certificate representing the warrants, has been executed by the Registrant and placed into escrow. The Registrant may avoid these consequences by completely repaying the Bridge Loan within one year of August 31, 1999. The Registrant has announced that it intends to enter the high yield subordinated debt markets with a $150 million issue in the fourth calendar quarter of 1999 in order to retire the Bridge Loan and a portion of the Senior Loan. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. The Registrant intends to file the financial statements required by this item not later than sixty days after the date this report on Form 8-K is required to be filed. 3 (b) PRO FORMA. The Registrant intends to file the pro forma information required by this item within sixty days after the date this report on Form 8-K is required to be filed. (c) EXHIBITS. Exhibit Description ------- ----------- 10.26 Asset Purchase Agreement dated as of July 9, 1999 as amended by Amendment No. 1 as of August 31, 1999 and further amended by Amendment No. 2 as of August 31, 1999 between Eaton Corporation and TransTechnology Corporation. 10.27 Second Amended and Restated Credit Agreement dated as of June 30, 1995, amended and restated as of July 24, 1998 and further amended and restated as of August 31, 1999 among TransTechnology Corporation, TransTechnology Seeger-Orbis GmbH, TransTechnology (GB) Limited, The Lenders referred to therein, BankBoston, N.A., acting through its London Branch, as Sterling Fronting Bank, BHF-Bank Aktiengesellschaft, as DM Fronting Bank, ABN AMRO Bank, N.V., as Syndication Agent, The First National Bank of Chicago, as Documentation Agent and BankBoston, N.A. as Administrative Agent and Issuing Bank. 10.28 Senior Subordinated Note Purchase Agreement dated as of August 31, 1999 among TransTechnology Corporation, the Lenders and Holders referred to therein and BankBoston, N.A. as Administrative Agent. 10.29 Warrant Agreement as of August 31, 1999 by and between TransTechnology Corporation and State Street Bank and Trust Company as Warrant Agent. 10.30 Warrant Holders' Agreement by and among TransTechnology Corporation, the Purchasers named therein and BankBoston, N.A., as Administrative Agent. 10.31 Registration Rights Agreement dated as of August 31, 1999 by and among TransTechnology Corporation, the Guarantors named therein and BankBoston, N.A., as Administrative Agent. 10.32 Warrant Escrow Agreement dated as of August 31, 1999 among TransTechnology Corporation, State Street Bank and Trust Company as Warrant Agent and as Escrow Agent, and BankBoston, N.A. as Administrative Agent. 4 10.33 Exchange Escrow Agreement dated as of August 31, 1999 among TransTechnology Corporation, State Street Bank and Trust Company as Trustee and as Escrow Agent, and BankBoston, N.A. as Administrative Agent. 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. TRANSTECHNOLOGY CORPORATION By: /s/ Joseph F. Spanier --------------------------------------- Joseph F. Spanier, Vice President and Chief Financial Officer Date: September 14, 1999 -------------------------------------- EX-10.26 2 EXHIBIT 10.26 1 ASSET PURCHASE AGREEMENT DATED AS OF JULY 9, 1999 BETWEEN EATON CORPORATION AND TRANSTECHNOLOGY CORPORATION 2 TABLE OF CONTENTS Page ---- ARTICLE 1 DEFINITIONS ...................................................1 ARTICLE 2 SALE AND PURCHASE OF ASSETS ...................................8 2.1 Transferred Assets ......................................8 2.2 Excluded Assets ........................................10 2.3 Non-Transferability of Certain Assets ..................11 ARTICLE 3 LIABILITIES ..................................................11 3.1 Assumption of Liabilities ..............................11 3.2 Retained Liabilities ...................................12 3.3 Reimbursement for Certain Payments .....................13 ARTICLE 4 PURCHASE PRICE ...............................................13 4.1 Purchase Price .........................................13 4.2 Payment at Closing .....................................14 4.3 Adjustment to the Purchase Price .......................14 4.4 Allocation of the Purchase Price .......................16 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE SELLER .................16 5.1 Organization, Existence and Standing ...................16 5.2 Corporate Authority ....................................16 5.3 Financial Statements ...................................16 5.4 Accounts Receivable ....................................17 5.5 Inventory ..............................................17 5.6 Real Property ..........................................17 5.7 Title to Personal Property .............................18 5.8 Condition and Sufficiency of Transferred Assets ........18 5.9 Contracts ..............................................18 5.10 Proprietary Rights .....................................20 5.11 Tax Matters ............................................21 5.12 Environmental Matters ..................................21 5.13 No Breach of Contract, No Violations of Law, No Prior Approval ......................................22 5.14 Litigation .............................................22 5.15 Finders, Brokers and Investment Bankers ................22 5.16 No Material Adverse Change .............................23 5.17 Governmental Permits and Licenses; Compliance with Laws ..............................................23 5.18 Insurance ..............................................23 5.19 Employees; Labor Relations .............................23 5.20 Employee Benefits ......................................24 5.21 Residency of Seller Subsidiaries; GST Registration .....25 5.22 Liabilities ............................................25 i 3 Page ---- 5.23 Employee Safety ........................................26 5.24 Customer Assets; Location of Assets ....................26 5.25 Year 2000 Compliance ...................................26 5.26 Disclaimer; Cross References ...........................26 ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE BUYER ..................27 6.1 Organization, Existence and Standing of the Buyer ......27 6.2 Corporate Authority ....................................27 6.3 No Breach of Contract, No Violations of Law, No Prior Approval ......................................27 6.4 Litigation .............................................28 6.5 Finders, Brokers and Investment Bankers ................28 6.6 Financing ..............................................28 6.7 GST ....................................................28 6.8 Disclaimer .............................................28 ARTICLE 7 COVENANTS OF THE SELLER ......................................29 7.1 Conduct of Business to Closing Date ....................29 7.2 Access by the Buyer to Properties and Records; Furnishing Information ........................30 7.3 Compliance with Conditions .............................31 7.4 Third-Party Consents ...................................31 7.5 Notification to the Buyer of Damage or Destruction of Transferred Assets or Material Changes ..............31 7.6 Transfer of Warranties .................................31 7.7 HSR/Competition Act Filings; Other Governmental Filings ................................................32 7.8 Transitional Use of Trade Names, Trademarks and Logos ..............................................32 7.9 Negotiations with Third Parties ........................32 7.10 Update of Schedules ....................................33 7.11 Covenant Not to Compete ................................33 7.12 Assignment of Confidentiality Agreements ...............33 ARTICLE 8 COVENANTS OF THE BUYER .......................................34 8.1 Compliance with Conditions .............................34 8.2 Cooperation in Obtaining Consents ......................34 8.3 HSR/Competition Act Filings; Other Governmental Filings ................................................34 8.4 Make Records and Personnel Available ...................35 8.5 Buyer Qualification ....................................35 8.6 London Sales Office ....................................35 8.7 Operation Covenant .....................................35 ARTICLE 9 MUTUAL COVENANTS .............................................37 9.1 GST Election ...........................................37 9.2 Election Regarding Accounts Receivable .................37 ii 4 Page ---- 9.3 Transitional Services Agreement ........................37 9.4 Payments Received ......................................37 9.5 Further Assurances .....................................38 9.6 Certain Tax Payments and Returns .......................38 9.7 Covenant Regarding Personnel ...........................38 9.8 Supply Agreement .......................................39 9.9 Assignment and Assumption of Real Property Leases ......39 9.10 Guarantee of Performance ...............................39 9.11 Joint Environmental Investigation ......................39 ARTICLE 10 EMPLOYEES AND EMPLOYEE BENEFITS ..............................40 10.1 Offer of Employment ....................................40 10.2 Severance Payment Responsibilities .....................40 10.3 Welfare Benefit Responsibilities .......................41 10.4 Seller's Responsibilities and Obligations as to Certain Pensions ....................................46 10.5 Buyer's Responsibilities and Obligations as to Certain Pensions .......................................47 10.6 Transfer of Share Purchase and Investment Plan Responsibilities. .................................50 10.7 Transfer of Savings Plan Responsibilities ..............52 10.8 Allocation of Canadian Savings Plan Responsibilities .......................................53 10.9 Incentive Compensation .................................53 10.10 Foreign Employment Liabilities .........................54 10.11 Vacation Responsibilities ..............................54 10.12 Retained Liability and Successor Liability .............54 10.13 Reimbursement For Other Party's Liabilities ............54 10.14 No Third-Party Beneficiaries ...........................54 ARTICLE 11 CERTAIN REAL ESTATE MATTERS ..................................55 11.1 Title Commitment; Title Policy .........................55 11.2 Objections .............................................55 ARTICLE 12 ENVIRONMENTAL MATTERS ........................................56 12.1 Allocation of Environmental Liabilities ................56 12.2 Seller's Environmental Indemnification .................57 12.3 Buyer's Environmental Indemnification ..................58 12.4 Release ................................................58 12.5 Notice of Claim ........................................58 12.6 Acceptance of Responsibility ...........................59 12.7 Party Declines Responsibility ..........................59 12.8 Cooperation ............................................59 12.9 The Seller's Indemnity and the Buyer's Re-Sale of Real Property ..........................................60 12.10 No Consequential Damages ...............................60 12.11 Access to the Real Property and Documents ..............60 12.12 The Seller's Pursuit of Third Parties ..................60 iii 5 Page ---- 12.13 Limitations ............................................60 12.14 Agency Contact .........................................61 12.15 Survival ...............................................61 ARTICLE 13 CONDITIONS TO OBLIGATIONS OF THE BUYER .......................61 13.1 HSR/Competition Act Compliance .........................61 13.2 No Litigation ..........................................62 13.3 No Casualty ............................................62 13.4 Retail Sales Tax Certificate ...........................62 13.5 Truth of Representations and Warranties ................62 13.6 Performance by the Seller ..............................62 13.7 Statutory Prohibition ..................................63 13.8 No Material Adverse Change .............................63 13.9 Real Estate Matters ....................................63 13.10 Landlord Consent .......................................63 ARTICLE 14 CONDITIONS TO OBLIGATIONS OF THE SELLER ......................63 14.1 HSR/Competition Act Compliance .........................63 14.2 No Litigation ..........................................64 14.3 Truth of Representation and Warranties .................64 14.4 Performance by the Buyer ...............................64 14.5 Statutory Prohibition ..................................64 14.6 Landlord Consent .......................................64 ARTICLE 15 CLOSING ......................................................64 15.1 The Closing Date .......................................64 15.2 Deliveries by the Buyer ................................65 15.3 Deliveries by the Seller ...............................65 15.4 Rights to Possession ...................................66 ARTICLE 16 SALES AND TRANSFER TAXES .....................................66 ARTICLE 17 BULK SALES ...................................................66 ARTICLE 18 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS ........66 18.1 Survival ...............................................66 18.2 Notice of Claim ........................................67 ARTICLE 19 INDEMNIFICATION ..............................................67 19.1 Indemnification of the Buyer ...........................67 19.2 Indemnification of the Seller ..........................67 19.3 Eligible Claim, Threshold Amount, Payment ..............68 iv 6 Page ---- 19.4 Procedures for Claims ..................................68 19.5 Third-Party Claims .....................................68 19.6 Exclusive Remedy .......................................69 19.7 Payment of Amounts .....................................69 19.8 Tax and/or Insurance Offset ............................69 19.9 No Indemnification For Known Breaches of Representations and Warranties .........................70 19.10 Maximum Amount of Any Indemnification ..................70 19.11 Indemnification with Respect to Certain Liabilities ....70 ARTICLE 20 TERMINATION ..................................................70 20.1 Grounds ................................................70 20.2 Effect .................................................71 20.3 Letter of Credit .......................................71 ARTICLE 21 EXPENSES .....................................................72 ARTICLE 22 DISPUTE RESOLUTION ...........................................72 22.1 Notice of Dispute ......................................72 22.2 Investigation; ADR .....................................72 22.3 Selection of Neutral ...................................73 22.4 Prehearing Conference ..................................73 22.5 Written Summary of Position ............................73 22.6 Hearing ................................................73 22.7 Commitment to ADR ......................................74 22.8 Fees ...................................................74 22.9 Confidentiality ........................................74 ARTICLE 23 MISCELLANEOUS ................................................74 23.1 Notices ................................................74 23.2 Waiver .................................................75 23.3 Captions ...............................................75 23.4 Successors and Assigns .................................75 23.5 Enforceability .........................................75 23.6 No Third-Party Beneficiaries or Right to Rely ..........76 23.7 Counterparts ...........................................76 23.8 Governing Law ..........................................76 23.9 Time of Essence ........................................76 23.10 No Strict Construction .................................76 23.11 Public Announcements ...................................76 23.12 Currency/Method of Payment .............................76 23.13 Subsequent Legal Fees ..................................76 23.14 Exclusive Jurisdiction and Consent to Service of Process ..................................76 v 7 Page ---- 23.15 Miscellaneous ..........................................77 23.16 Entire Agreement; Amendment ............................77 vi 8 EXHIBIT CORRESPONDING INDEX AGREEMENT SECTION NUMBER Buyer Guaranty .......................................... Article 1 Assumption Agreement .......................................... 3.1 Services Agreement ............................................ 9.3 Leased Real Property Assignment and Assumption Agreements ..... 9.9 Supplemental Phase II .........................................9.11 General Assignment and Bill of Sale ........................15.3(a) LIST OF CORRESPONDING SCHEDULES TITLE SECTION NUMBER Individuals with Actual Knowledge of the Business ........ Article 1 Seller's Accounting Principles ........................... Article 1 Owned Real Property ......................................... 2.1(b) Leased Real Property ........................................ 2.1(c) Personal Property and Personal Property Leases .............. 2.1(d) Proprietary Rights .......................................... 2.1(h) Other Assets ................................................ 2.1(m) Excluded Proprietary Rights ................................. 2.2(b) Other Excluded Assets ....................................... 2.2(i) Exceptions to Seller's Accounting Principles for Closing Balance Sheet .................................. 4.3(a) Allocation of the Purchase Price ............................ 4.4 Financial Statements ........................................ 5.3 Adjustments to Pro Forma Financial Statements ............... 5.3 Accounts Receivable Exceptions .............................. 5.4 Real Property Exceptions .................................... 5.6(a) Leased Real Property Exceptions and Defaults ................ 5.6(b) Other Real Property Used in the Business .................... 5.6(c) Personal Property Exceptions ................................ 5.7 Material Contracts .......................................... 5.9 Proprietary Rights Exceptions ............................... 5.10 Environmental Exceptions .................................... 5.12 Consents; Creation of Lien on Transferred Assets ......... 5.13(a) Litigation .................................................. 5.14 Material Adverse Changes .................................... 5.16 Collective Bargaining Agreements ......................... 5.19(b) Employee Claims .......................................... 5.19(c) Employee Benefit Plans ...................................... 5.20 Claims Respecting Certain Plans .......................... 5.20(d) Liabilities ................................................. 5.22 Employee Safety ............................................. 5.23 List of Customer or Third Party Assets ................... 5.24(a) Asset Location Exceptions ................................ 5.24(b) vi 9 LIST OF CORRESPONDING SCHEDULES TITLE SECTION NUMBER Year 2000 Compliance ........................................ 5.25 Other Permitted Contracts ................................. 7.1(d) Retained Employees ......................................... 10.1 Severance Obligations ...................................... 10.2 Seller Welfare Plans ....................................... 10.3 Contribution Threshold .................................. 10.5(j) Seller's 1999 Incentive Plans .............................. 10.9 viii 10 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT is made and entered into as of July 9, 1999, between Eaton Corporation, an Ohio corporation (the "Seller"), and TransTechnology Corporation, a Delaware corporation (the "Buyer"). RECITALS: A. The Seller is engaged in the design, manufacture and marketing of metal fasteners, plastic fasteners, retaining rings, metal light shields and automotive headlamp adjusters (the "Business") by and through the Seller's Engineered Fasteners Division (the "Division"); and B. The Seller, directly, and indirectly through (i) Eaton MDH Company, Inc., a corporation organized under the laws of the State of Delaware ("Eaton MDH"), (ii) Eaton Yale Ltd., a corporation organized under the laws of the Province of Ontario, Canada ("Eaton Yale") and (iii) Eaton ETN Offshore Ltd., a corporation organized under the laws of the Province of Ontario, Canada ("ETN Offshore," and together with Eaton MDH and Eaton Yale, the "Seller Subsidiaries"), owns or leases the assets used in the conduct of the Business of the Division, including, without limitation, trade accounts receivable, inventory, land, buildings, fixtures, machinery and equipment, contract rights, customer and supplier lists, records and related information, patents, trade secrets and trademarks; and C. The Seller desires to sell, and to cause the Seller Subsidiaries to sell, and the Buyer desires to purchase, and shall cause its wholly-owned subsidiary, currently named Palnut Fasteners, Inc., a Delaware corporation ("Fasteners"), to purchase, substantially all of the assets and assume substantially all of the liabilities of the Division with respect to its U.S. operations and shall cause a wholly-owned subsidiary to be formed as an Ontario corporation ("Canadian Sub," and together with Fasteners, the "Buyer Subsidiaries"), to purchase, substantially all of the assets and assume substantially all of the liabilities of the Division with respect to its Canadian operations in accordance with the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the payments herein provided for and the covenants herein contained, the Parties hereby agree as follows. ARTICLE 1 DEFINITIONS Unless elsewhere defined herein, the following terms shall have the meanings set forth in this Article 1. "ACCOUNTS RECEIVABLE" means all of the Division's trade and other accounts receivable including all accounts receivable, if any, that are owed by the Seller or by any Subsidiary or Affiliate of the Seller. 11 "AFFILIATE" shall mean, with respect to any Person, at the time in question, any other Person controlling, controlled by or under common control with such Person. For purposes of this definition, "control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. "AGREEMENT" means this Asset Purchase Agreement. "APRIL 30 BALANCE SHEET" means the pro forma interim balance sheet of the Business as of April 30, 1999 included in the Financial Statements. "ASSUMED LIABILITIES" has the meaning set forth in Section 3.1. "BUSINESS" has the meaning set forth in Recital A. "BRUNSWICK FACILITY" has the meaning set forth in Section 2.1(c). "BUYER" has the meaning set forth in the first paragraph of this Agreement. "BUYER GUARANTY" means the Guaranty in the form of Corresponding Exhibit A under which Buyer guarantees any and all obligations of the Buyer Subsidiaries under any Related Agreements to which the Buyer Subsidiaries are parties. "BUYER SUBSIDIARIES" has the meaning set forth in Recital C. "CAA" means the Clean Air Act, 42 U.S.C. Section 7401, et seq., as amended. "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et seq., as amended by, among other things, the Superfund Amendments and Reauthorization Act of 1986. "CLOSING" means the closing of the transactions contemplated by this Agreement. "CLOSING BALANCE SHEET" has the meaning set forth in Section 4.3(a). "CLOSING DATE" has the meaning set forth in Section 15.1. "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, including the rules and regulations promulgated thereunder. "COLLECTIVE BARGAINING AGREEMENTS" has the meaning set forth in Section 5.19(b). 2 12 "CONTRACTS" means all purchase orders, sales orders, distributor agreements, franchise agreements, sales representation agreements, warranty agreements, service agreements, collective bargaining agreements and other contracts with labor unions or employee associations, if any, employment and consulting agreements, guaranty agreements, confidentiality agreements and other agreements, contracts and commitments of any sort whatever except for leases and licenses with respect to the Leased Real Property. "CORRESPONDING EXHIBIT" means an exhibit which is numbered, captioned or named to correspond to the number, caption or name of the section of this Agreement which refers to that exhibit. "CORRESPONDING SCHEDULE" means a schedule which is numbered, captioned or named to correspond to the number, caption or name of the section of this Agreement which refers to that schedule. "CWA" means the Federal Water Pollution Control Act, 33 U.S.C. Section 1251, et seq., as amended. "DAMAGES" has the meaning set forth in Section 12.2. "DIVISION" has the meaning set forth in Recital A. "DIVISION EMPLOYEES" means all persons employed by the Seller or the Seller Subsidiaries in the conduct of the Business as of the Closing Date. "EMPLOYEE BENEFIT PLAN" means each employee bonus, retirement, pension, profit sharing, stock option, stock appreciation, stock purchase, incentive, deferred compensation, hospitalization, medical, dental, vision, life and other health and disability (whether provided by insurance or otherwise), severance, termination and other plan, program, arrangement, policy or payroll practice providing any remuneration or benefits (other than current cash compensation), including, without limitation, each ERISA Plan (other than a multiemployer plan within the meaning of Section 3(37) of ERISA) or each employee benefit plan within the meaning of the Pension Benefits Act (Ontario), which is both (a) (i) maintained by the Seller or any Seller Subsidiary or any Person that would be aggregated with, or treated as the same employer as, the Seller for any purpose under the Tax Code or ERISA (an "ERISA Affiliate") or (ii) to which the Seller, any Seller Subsidiary or any ERISA Affiliate contributes or has contributed and (b) one under which any Division Employee or former Division Employee participates or had accrued any rights or under which the Seller or any Seller Subsidiary is liable in respect of a Division Employee or former Division Employee with respect to his employment with the Division. "ENVIRONMENTAL CONDITION" means the use, generation, handling, storage, emission, discharge, processing, reclamation, recycling, release, transportation or disposal of any Regulated Substance related to the operation of the Business, or the presence of any of them in any environmental medium (air, water, soil, sediments, subsurface strata or groundwater) on, in or under any real property. "ENVIRONMENTAL LAWS" means all laws, ordinances, regulations, rules, orders, permits, approvals, decisions or decrees, and any common law rules, orders, permits, approvals, decisions or decrees, 3 13 and any common or civil law concerning the subject of the introduction, emission, discharge or release of pollutants or contaminants into the air, soil, or surface or ground water; the transportation, handling, use, storage, treatment or disposal of waste materials; or the remediation or investigation of contamination of air, soil, or surface or ground water by pollutants, contaminants or waste materials; or exposure to hazardous substances, hazardous waste, or toxic substances; including, but not limited to, CERCLA, RCRA, CWA, SWDA, CAA, TSCA, and EPCRA, and similar federal, state, provincial, territorial, local, municipal and foreign laws, but will not include laws, ordinances, regulations, rules, orders, permits, approvals, decisions or decrees, and any common law concerning primarily worker health or safety, including, but not limited to, OSHA and similar state, provincial, territorial, local, municipal and foreign laws. "EPCRA" means the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001, et seq., as amended. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, including the rules and regulations promulgated thereunder. "ERISA PLAN" has the meaning set forth in section 3(3) of ERISA with respect to Employee Benefits Plans which are subject to ERISA. "EXCLUDED ASSETS" has the meaning set forth in Section 2.2. "FACILITIES" has the meaning set forth in Section 2.1(c). "FINANCIAL STATEMENTS" means each of the pro forma unaudited balance sheets for each of the three fiscal years of the Business most recently completed prior to the date of this Agreement, the pro forma statements of income for each of the years ended on the date of each of the balance sheets and a pro forma interim balance sheet of the Business as of April 30, 1999 and the pro forma income statement of the Business for the interim period then ended. "FINAL NET ASSETS" has the meaning set forth in Section 4.3(a). "GAAP" means generally accepted accounting principles in the United States of America. "GLOW AVENUE AGREEMENT" means the Agreement of Purchase and Sale, dated June 9, 1999, relating to the purchase by Eaton Yale of real property municipally known as 80 Glow Avenue, Hamilton, Ontario. "GST LEGISLATION" means the Excise Tax Act (Canada), Part IX. "HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, including the rules and regulations promulgated thereunder. "HAMILTON FACILITY" has the meaning set forth in Section 2.1(b). 4 14 "INACTIVE EMPLOYEES" means Division Employees who are temporarily absent from active employment by reason of disability, illness, injury, workers' compensation, military leave, approved leave of absence or layoff. "INDEPENDENT ACCOUNTANT" means PricewaterhouseCoopers LLP. "INTELLECTUAL PROPERTY" means the following items, in each case related exclusively or primarily to the operation of the Business: (a) all inventions (whether patentable or unpatentable, and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and invention disclosures, together with all reissues, continuations, continuations-in-part, revisions, extensions, divisions, and reexaminations thereof; (b) all trademarks and service marks (whether common law or registered), trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith; (c) all copyrightable works, all copyrights, and all applications, registrations, and renewals in connection therewith; (d) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals); (e) computer software, including source code to the extent assignable, disks, documentation, operating manuals, related systems data, source programs, record layouts, program libraries, and any other documentation in those application areas that may pertain to any data processing system or operation; and (f) all copies and tangible embodiments of any of the foregoing (in whatever form or medium). "INVENTORY" means all of the Division's inventory of raw materials, work-in-process and finished goods, as the same shall exist on the Closing Date, whether in the Seller's or any Seller Subsidiary's possession, in transit to or from the Seller or any Seller Subsidiary or held by any third party. "KNOWLEDGE" means the actual knowledge of the individuals set forth on Corresponding Schedule A and any other Division management personnel with compliance responsibility. "LEASED REAL PROPERTY" has the meaning set forth in Section 2.1(c). 5 15 "LEASED REAL PROPERTY ASSIGNMENT AND ASSUMPTION AGREEMENTS" has the meaning set forth in Section 9.9. "LIEN" means any lien, mortgage, charge, pledge, security interest, restriction, reservation or condition on transferability, easement, defect of title or other claim, encroachment or other encumbrance of any nature whatsoever on any Real Property or Personal Property or property interest. "MASSILLON FACILITY" has the meaning set forth in Section 2.1. "MATERIAL ADVERSE EFFECT" means (a) any effect that is materially adverse to the value of the Transferred Assets taken as a whole or materially adverse to the Business, the condition (financial or otherwise), or results of operations of the Business in each case taken as a whole, or (b) any effect that would, individually or in the aggregate, materially impair, hinder or otherwise materially and adversely affect the ability of the Seller or the Buyer, as the case may be, to effect the Closing, to perform any of their material obligations under this Agreement or any of the Related Agreements, or to receive all material benefits of the transactions contemplated by this Agreement. "MATERIAL CONTRACTS" has the meaning set forth in Section 5.9(b). "NON-TRANSFERABLE ASSETS" has the meaning set forth in Section 2.3(a). "OSHA" means the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651, et seq. "OWNED REAL PROPERTY" has the meaning set forth in Section 2.1(b). "PARTY" means the Buyer or the Seller, referred to individually, and "Parties" means the Buyer and the Seller referred to collectively. "PERMITS" has the meaning set forth in Section 2.1(j). "PERSON" means an individual, corporation, limited liability company, partnership, association, estate, trust, unincorporated organization, governmental or quasi-governmental agency or body or other entity or organization. "PERSONAL PROPERTY" means all of the Division's personal property, including, without limitation, all machinery, equipment, computer hardware, vehicles, tools, dies, repair and replacement parts, and office furniture, fixtures and equipment owned by the Seller or the Seller Subsidiaries, except to the extent disposed of in the ordinary course of business prior to the Closing Date, and such additional items as are acquired in the ordinary course of business prior to the Closing Date, in each case consistent with the terms and conditions of this Agreement. "PERSONAL PROPERTY LEASES" means all leases covering any Personal Property. 6 16 "PERSONAL PROPERTY PERMITTED EXCEPTIONS" has the meaning set forth in Section 5.7. "PRE-CLOSING ENVIRONMENTAL CONDITION" means the presence as of the Closing of any hazardous substance, hazardous waste or toxic substance, as defined under the Environmental Laws, as existing and in effect as of the Closing, in any environmental medium (air, water, soil, sediments, subsurface strata or groundwater) on, in or under the Real Property or off the Real Property as a result of migration from the Real Property, in either case in violation of the Environmental Laws, as existing and in effect as of the Closing; provided, however, that "Pre-Closing Environmental Condition" shall not include under any circumstances (a) the presence of any such hazardous substance, hazardous waste or toxic substance that was generated, or caused by a spill or release occurring, off the Real Property, or (b) any matter or condition for which the Seller has not received notice from the Buyer pursuant to Section 12.5 prior to the third anniversary of the Closing Date. "PRIME RATE" means the rate per annum equal to the publicly announced prime commercial lending rate of KeyBank National Association (or any successor thereof) in effect from time to time, changing as such publicly announced rate changes, effective as of the date KeyBank National Association publicly announces each change. "PROPRIETARY RIGHTS" has the meaning set forth in Section 2.1(h). "PROPRIETARY RIGHTS EXCEPTIONS" has the meaning set forth in Section 5.10. "PURCHASE PRICE" has the meaning set forth in Section 4.1. "RCRA" means the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., as amended. "REAL PROPERTY" means the Owned Real Property and the Leased Real Property, collectively. "REAL PROPERTY PERMITTED EXCEPTIONS" has the meaning set forth in Section 5.6(a). "REGULATED SUBSTANCE" means any hazardous or extremely hazardous chemical, hazardous substance, hazardous or special waste (or waste requiring special handling), oil, petroleum or petroleum products or residue, pollutant or contaminant or toxic substance, all as defined under any of the applicable Environmental Laws. "RELATED AGREEMENTS" means the related agreements contemplated by this Agreement including those attached to this Agreement as Corresponding Exhibits. "RETAINED LIABILITIES" has the meaning set forth in Section 3.2. "SELLER" has the meaning set forth in the first paragraph of this Agreement. 7 17 "SELLER'S ACCOUNTING PRINCIPLES" means the accounting principles currently used by the Seller in preparing the Financial Statements which principles are in accordance with GAAP except as set forth on Corresponding Schedule B. "SELLER SUBSIDIARIES" has the meaning set forth in Recital B. "SETTLEMENT DATE" has the meaning set forth in Section 4.3(f). "SERVICES AGREEMENT" has the meaning set forth in Section 9.3. "SUBSIDIARY" means any corporation, the capital stock of which represents more than 50% of the general voting power under ordinary circumstances of such corporation, which is directly or indirectly owned or controlled by another corporation. "SWDA" means the Solid Waste Disposal Act, 42 U.S.C. Section 6901, et seq., as amended. "TAX CODE" means the Internal Revenue Code of 1986, as amended. "TERMINATION DATE" means November 1, 1999. "THIRD PARTY" means any Person not a signatory to this Agreement other than a Buyer Subsidiary or a Seller Subsidiary. "TRANSFERRED ASSETS" has the meaning set forth in Section 2.1. "TSCA" means the Toxic Substances Control Act, 15 U.S.C. Section 52601, et seq., as amended. ARTICLE 2 SALE AND PURCHASE OF ASSETS 2.1 TRANSFERRED ASSETS. On the terms and subject to the conditions of this Agreement, and for the consideration set forth in Article 4, the Seller shall, and shall cause the Seller Subsidiaries to, on the Closing Date, sell, transfer and convey to the Buyer or the Buyer Subsidiaries, free and clear of all Liens, other than the Assumed Liabilities, the Real Property Permitted Exceptions, the Personal Property Permitted Exceptions and the Proprietary Rights Exceptions, all of the Seller's and the Seller Subsidiaries' respective rights, titles and interests in and to the assets that are used exclusively or primarily to operate the Business as currently operated by the Seller or the Seller Subsidiaries, wherever such assets are located and whether real, personal or mixed, tangible or intangible, and whether or not such assets have any value for accounting purposes or are carried or reflected on or specifically referred to in the books or financial statements of the Seller, with such changes, deletions or additions thereto as may occur from the date hereof to the Closing Date consistent with the terms and conditions of this Agreement, subject in each case to Section 2.2 and 8 18 Section 2.3 (the "Transferred Assets"), including, to the extent used exclusively or primarily to operate the Business as currently operated, the following: (a) ACCOUNTS RECEIVABLE. All of the Accounts Receivable; (b) OWNED REAL PROPERTY. All of the real property owned by the Seller or any of the Seller Subsidiaries, including land, buildings, structures and improvements thereon or appurtenances thereto, such real property being located at Massillon, Ohio (the "Massillon Facility") and Hamilton, Ontario, Canada, (the "Hamilton Facility"), as the same shall exist on the Closing Date (the "Owned Real Property") with a legal description of each parcel of Owned Real Property included on the Corresponding Schedule; (c) LEASED REAL PROPERTY. All real property, including, without limitation, the facility located at Brunswick, Ohio (the "Brunswick Facility," which together with the Massillon Facility and the Hamilton Facility may be referred to hereinafter as the "Facilities") listed on the Corresponding Schedule, which real property is leased or subleased or the rights or benefits thereof are licensed by the Seller or any of the Seller Subsidiaries, as the same shall exist on the Closing Date (the "Leased Real Property"); (d) PERSONAL PROPERTY. All Personal Property and Personal Property Leases including those items and leases identified on the Corresponding Schedule; (e) INVENTORY. All Inventory and any packaging, supplies and spare parts; (f) CONTRACTS. All rights and claims under all Contracts including those identified on the Corresponding Schedule A to Section 5.9; (g) LISTS AND RECORDS. All of the Seller's and the Seller Subsidiaries' books and records, customer and supplier lists, sales, cost and shipping records and other lists and documents, other than the corporate minute books, stock books and stock transfer ledgers of the Seller and the Seller Subsidiaries and other than tax records, litigation files and any records related to Excluded Assets or Retained Liabilities; (h) PATENTS, TRADEMARKS, INTELLECTUAL PROPERTY, ETC. All of the Intellectual Property, including those items identified on the Corresponding Schedule (the "Proprietary Rights"); (i) PREPAID ITEMS. All of the Division's prepaid expenses and deposits; (j) GOVERNMENTAL PERMITS AND LICENSES. All of the permits, licenses, certifications, approvals, consents, and other governmental authorizations (the "Permits") issued to the Seller or any Seller Subsidiary, subject to Section 2.3; 9 19 (k) VENDOR PAYMENT IDENTIFICATION NUMBERS, AND UPC CODES. All UPC codes or the similar vendor payment identification numbers used by the Seller or the Seller Subsidiaries for remittances from customers; (l) CLAIMS AGAINST THIRD PARTIES. All claims, actions, suits, proceedings or choses in action, except those relating to Excluded Assets or Retained Liabilities; and (m) OTHER ASSETS. Those other assets, whether or not used exclusively or primarily in the Business, identified on the Corresponding Schedule as Transferred Assets (the "Other Assets"). 2.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the following assets (the "Excluded Assets") shall be retained by the Seller or the Seller Subsidiaries, as the case may be, and shall not be included in the Transferred Assets: (a) all cash (other than petty cash located at the Facilities), cash equivalents, marketable securities and bank accounts; (b) any intellectual property owned, licensed or otherwise used by the Seller or any Seller Subsidiary which is not used exclusively or primarily in the conduct of the Business, including, without limitation any patents or pending applications, trade secrets, the trade names and trademarks "Eaton" and "Eaton Corporation" and any other trade names, trademarks, corporate names and logos incorporating in any way the foregoing names or affiliated therewith and trademarks and other intellectual property as identified on the Corresponding Schedule; (c) any Non-Transferable Assets for which consent or approval to transfer has not been obtained prior to the Closing Date; (d) all claims and rights of, relating to or arising from any of the Excluded Assets or the Retained Liabilities; (e) all rights, properties and assets of the Division which shall have been transferred or disposed of by the Seller or any of the Seller Subsidiaries prior to the Closing in transactions occurring in the ordinary course of the Business and consistent with the terms of this Agreement; (f) except as provided in Article 10, all assets held by or on behalf of the Seller or any Seller Subsidiary in trust, reserve or otherwise, in respect of Employee Benefit Plans or any other obligations pertaining to Division Employees; (g) all rights to the refund of any tax, of any kind, including, without limitation, Canadian workers compensation rebates paid by Seller or any of the Seller Subsidiaries prior to the Closing Date; 10 20 (h) all office furniture and furnishings located at Seller's Administrative and Marketing Center in Southfield, Michigan; and (i) all assets, whether or not used exclusively or primarily in the conduct of the Business, specifically identified on the Corresponding Schedule as Excluded Assets or identified on the Corresponding Schedule A to Section 5.24 as property owned by a customer or other Third Party (the "Other Excluded Assets"). 2.3 NON-TRANSFERABILITY OF CERTAIN ASSETS. (a) To the extent that there are certain assets used in the Business, including without limitation the Permits, which are not assignable without the consent or approval of Persons other than the Seller or the Seller Subsidiaries ("Non-Transferable Assets"), and such consents or approvals are not obtained by the Closing Date, this Agreement and the Closing shall not constitute an assignment or agreement to assign or transfer such assets without such consent or approval. (b) For a reasonable period following the Closing Date, the Seller agrees to cooperate in good faith with the Buyer to enter into any reasonable arrangement (other than an arrangement under which the Seller or any of the Seller Subsidiaries would incur or retain any financial obligation with respect to the Non-Transferable Assets) designed to provide the Buyer the benefit of such Non-Transferable Assets, including the enforcement for the benefit and at the expense of the Buyer of any rights previously enjoyed by the Seller or a Seller Subsidiary in connection with any such assets. Provided that the Seller so cooperates and proceeds in good faith to obtain such consents and provide such arrangements, the Seller shall not be deemed to be in breach of any of its obligations under this Agreement by reason of the failure to obtain any consent or approval. Except as reimbursed by the Buyer, in no event shall compliance by the Seller with this Section 2.3 be deemed to require that the Seller or any of the Seller Subsidiaries incur any obligation or pay any monies to Third Parties in connection with such efforts. (c) To the extent that the Buyer is provided the benefits pursuant to this Section 2.3 of any Permit or approval or the like or any contract, lease, license or other agreement, the Buyer shall perform the obligations of the Seller or the Seller Subsidiary under or in connection with such Permit or approval or the like or any contract, lease, license or other agreement. ARTICLE 3 LIABILITIES 3.1 ASSUMPTION OF LIABILITIES. Upon the transfer of the Transferred Assets on the Closing Date in accordance with this Agreement, the Buyer shall, by an Assumption Agreement in the form set forth on the Corresponding Exhibit (the "Assumption Agreement"), assume and agree to pay, 11 21 discharge or perform, as appropriate, all of the liabilities and obligations of the Seller and the Seller Subsidiaries in respect of the Business (the "Assumed Liabilities"), including but not limited to: (a) all liabilities and obligations of the Seller and the Seller Subsidiaries, including accounts payable and accrued liabilities arising in the ordinary course of business, in respect of the Business on or prior to the Closing; (b) all liabilities and obligations of the Seller and the Seller Subsidiaries in respect of the Contracts which are Transferred Assets, the leases for the Leased Real Property, the Personal Property Leases and the Permits which are Transferred Assets; (c) all liabilities and obligations of the Seller and the Seller Subsidiaries in respect of customer returns and customer warranty claims for products sold by the Seller or any of the Seller Subsidiaries on or prior to the Closing; (d) product liability and similar claims for injury to person or property (including death), in connection with any products sold by the Seller or any of the Seller Subsidiaries on or prior to the Closing and any products included in Inventory as of the Closing; (e) subject to, and in accordance with the terms of, Article 12, all liabilities and obligations in respect of any Environmental Condition on, in or under any Real Property, including the Buyer's share of any Pre-Closing Environmental Condition; and (f) all liabilities and obligations assumed by the Buyer pursuant to Article 10. 3.2 RETAINED LIABILITIES. Notwithstanding the foregoing, the Seller or any of the Seller Subsidiaries, as the case may be, shall retain and shall pay and timely discharge without liability to the Buyer or the Buyer Subsidiaries, the following liabilities of the Seller or the Seller Subsidiaries (the "Retained Liabilities"): (a) any liability or obligation under or in connection with the Excluded Assets and any liability or obligation of the Seller or any of the Seller Subsidiaries with respect to any Retained Liability; (b) any federal, state, local, provincial or other foreign income, capital gain or other tax payable with respect to the Business, the Transferred Assets or the Assumed Liabilities for any period prior to the Closing; (c) all liabilities and obligations of the Seller and the Seller Subsidiaries arising out of claims or similar suits, actions or proceedings by any Transferred Employee (as defined in Article 10) pursuant to governmental workers' compensation or similar law, or occupational disease or injury which arise out of the Business on or prior to the Closing; (d) any indebtedness of the Seller or any of the Seller Subsidiaries or any Affiliate of the Seller for borrowed money; 12 22 (e) any liability for the failure to comply with the bulk sales laws of any jurisdiction, except any such liability arising out of the failure of the Buyer to pay any Assumed Liability; (f) any fees and expenses incurred by the Seller or any of the Seller Subsidiaries in connection with negotiating, preparing, closing and carrying out this Agreement and the transactions contemplated by this Agreement, including, without limitation, the fees, disbursements and expenses for the Seller's investment bankers, attorneys, accountants and consultants; (g) all liabilities and obligations retained by the Seller pursuant to Article 10, including, without limitation, (i) all withdrawal liability (both for any complete or partial withdrawal) under any multiemployer plan (as defined in Sections 3(37) and 4001(a)(3) of ERISA) to which Seller has at any time made contributions, and (ii) all liability to any single-employer plan (as defined in Sections 3(31) and 4001(a)(15) of ERISA) to which Seller has at any time made contributions and (iii) all liabilities and obligations of the Seller pursuant to Section 10.3(d); (h) subject to, and in accordance with the terms of, Article 12, all liabilities and obligations in respect of the Seller's share of any Pre-Closing Environmental Condition; and (i) all liabilities and obligations in respect of any Environmental Condition on, in or under any real property, other than the Real Property, previously owned, leased or otherwise used in or by the Business prior to the Closing or to which any Regulated Substance generated by the Business was transported or disposed prior to the Closing. 3.3 REIMBURSEMENT FOR CERTAIN PAYMENTS. If the Seller or any of the Seller Subsidiaries pay any of the Assumed Liabilities, then the Buyer shall reimburse the Seller or the appropriate Seller Subsidiary by wire transfer within two business days of receipt by the Buyer of a demand for reimbursement, together with corresponding documentation of such payment, from the Seller. If the Buyer or any of the Buyer Subsidiaries pay any of the Retained Liabilities, then the Seller shall reimburse the Buyer or the applicable Buyer Subsidiary by wire transfer within two business days of receipt by the Seller of a demand for reimbursement, together with corresponding documentation of such payment, from the Buyer. ARTICLE 4 PURCHASE PRICE 4.1 PURCHASE PRICE. The aggregate purchase price for the Transferred Assets shall be $173,000,000 (the "Purchase Price"), subject to any adjustment as provided for in Section 4.3, and the assumption by the Buyer of the Assumed Liabilities. 13 23 4.2 PAYMENT AT CLOSING. At the Closing, the Buyer shall wire transfer the Purchase Price to the Seller and/or the Seller Subsidiaries as may be designated by the Seller in writing prior to the Closing, in immediately available funds to a bank account or at bank accounts designated by the Seller in writing prior to the Closing. 4.3 ADJUSTMENT TO THE PURCHASE PRICE. (a) Following the Closing Date, the Seller shall prepare or cause to be prepared, at its sole expense, a balance sheet of the Business dated as of the Closing (the "Closing Balance Sheet") setting forth the net book value of the Transferred Assets (excluding amounts for depreciation and amortization expense since April 30, 1999) and the Assumed Liabilities as of the Closing (the "Final Net Assets") determined in accordance with the Seller's Accounting Principles except as set forth on the Corresponding Schedule. The Seller shall deliver the Closing Balance Sheet to the Buyer within 90 days after the Closing. (b) The Buyer and its representatives at the Buyer's sole expense shall have the right to observe the work performed by the Seller or its representatives in connection with the preparation of the Closing Balance Sheet, and shall have the right to examine and make copies of the work papers used in connection with the preparation of the Closing Balance Sheet; provided, however, that to the extent such work papers are prepared by outside independent auditors, the Buyer shall have the right to examine, but not make copies of, such work papers, unless otherwise permitted by applicable accounting standards. (c) The Buyer shall have 30 days after the delivery of the Closing Balance Sheet to review the Closing Balance Sheet. If within said 30-day period, the Buyer notifies the Seller in writing that it is unwilling to accept any item(s) on the Closing Balance Sheet, specifically identifying the item(s) and amount(s) in dispute and the basis for such dispute, the Parties shall use their reasonable efforts to reach agreement within the 30 days following the delivery of the Buyer's notice of dispute, or such longer period as may be agreed upon by the Parties, with respect to such disputed item(s). Any items on the Closing Balance Sheet not identified in writing as a disputed item within the foregoing 30-day period as provided above shall be deemed to have been accepted by the Buyer and not subject to any further review or change. (d) If the Parties fail to reach a mutually agreeable determination with respect to the Closing Balance Sheet within the foregoing 30-day period, or such longer period as may have been agreed upon, the disputed item(s) shall be submitted to a partner having relevant expertise and practicing at the Cleveland, Ohio office of the Independent Accountant for resolution. The Independent Accountant's determination shall be made using the Seller's Accounting Principles, shall be final and binding on both Parties, and judgment on such determination may be entered in any court having jurisdiction, in accordance with Section 23.14. The costs and expenses of the Independent Accountant will be paid by the Party against whom the disputed item(s) are resolved, or shall be prorated between the Parties by the Independent Accountant to the extent disputed item(s) are resolved in favor of each Party based on their relative degree of success and shall be paid promptly following the Settlement Date. 14 24 (e) The resolution of any disputed item(s) shall be combined with the undisputed items from the Closing Balance Sheet to re-calculate the Closing Balance Sheet. The Parties shall request that such determination by the Independent Accountant be resolved as promptly as possible. (f) Upon the later of the expiration of the 30-day period referred to above, during which time the Buyer may notify the Seller of any disputed item(s) in the Closing Balance Sheet, or, in the event the Buyer provides the Seller with written notice of disputed item(s) in accordance with the foregoing, the final determination of such disputed item(s), either by agreement of the Parties or a final determination by the Independent Accountant (the "Settlement Date"), the Parties shall make the adjustments, if any, to the Purchase Price provided for in subsections (g) and (h) below. Between the Closing Date and the Settlement Date, the Buyer shall, during regular business hours, afford the Seller and its representatives reasonable access to all books, records, correspondence, files, financial statements, operating data, and all other information with respect to the Business, and shall provide to the Seller and its representatives such operating and financial data and any other information with respect to the Business as it or they may from time to time reasonably request for the purpose(s) of preparing the Closing Balance Sheet and resolving any disputed item(s). The Buyer shall cause the personnel of the Buyer to perform such procedures and measures as are reasonably necessary to prepare the Closing Balance Sheet. The Seller and its representatives shall be provided with offices at the Business and telephones, facilities, office equipment and miscellaneous office supplies, as the Seller reasonably requests subsequent to the Closing Date until the Settlement Date. The Buyer shall make reasonably available during regular business hours the appropriate officers and employees of the Business after the Closing for purposes of the Seller or its representatives interviewing the same in connection with the preparation of the Closing Balance Sheet and resolving any disputed item(s). During the 30-day period following the initial delivery of the Closing Balance Sheet to the Buyer by the Seller, the Seller shall make reasonably available during regular business hours its relevant officers and employees to address questions regarding the preparation of the Closing Balance Sheet. (g) If the Final Net Assets exceed the net book value of the Transferred Assets and the Assumed Liabilities as of April 30, 1999 as set forth on the April 30 Balance Sheet, the Buyer shall pay to the Seller and/or the Seller Subsidiaries (as may be designated by the Seller) within three business days following the Settlement Date the amount of the excess, with interest on such amount calculated at the Prime Rate (net of any applicable tax withholding) accruing from the Closing through the Settlement Date by wire transfer of immediately available funds to an account or accounts designated in writing to the Buyer by the Seller. (h) If the Final Net Assets are less than the net book value of the Transferred Assets and the Assumed Liabilities as of April 30, 1999 as set forth on the April 30 Balance Sheet, the Seller shall pay to the Buyer within three business days following the Settlement Date the amount of the deficit, with interest on such amount calculated at the Prime Rate (net of any applicable tax withholding) accruing from the Closing through the Settlement Date by wire transfer of immediately available funds to an account or accounts designated in writing to the Seller by the Buyer. (i) The Parties agree and acknowledge that the Closing Balance Sheet shall be prepared solely for the purpose of determining the value of the Final Net Assets of the Business and the final 15 25 Purchase Price to be paid to the Seller and/or the Seller Subsidiaries, and that such valuations do not reflect or indicate the price to be paid for any, or any class or category, of the Transferred Assets. 4.4 ALLOCATION OF THE PURCHASE PRICE. The Purchase Price, as adjusted, shall be allocated among the Transferred Assets as set forth on the Corresponding Schedule. Such allocation shall be used in the preparation and filing of Internal Revenue Service Form 8594 and any other domestic or any foreign income tax returns with respect to the transactions contemplated hereby, and no Party hereto shall take or assert any position inconsistent therewith. The Buyer and the Seller shall cooperate in connection with the preparation, execution and filing with the Internal Revenue Service of all necessary information returns required by Section 1060 of the Tax Code and comparable provisions under applicable foreign law relating to the allocation of the consideration for the Transferred Assets. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE SELLER As of the date hereof, the Seller makes the following representations and warranties to the Buyer. 5.1 ORGANIZATION, EXISTENCE AND STANDING. The Seller and each of the Seller Subsidiaries is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation and has full corporate power and authority to own or lease the Transferred Assets owned or leased by it, to carry on the Business as it is now conducted by it and to consummate the transactions contemplated by this Agreement and the Related Agreements. The Seller and each of the Seller Subsidiaries is duly qualified to do business in all of the jurisdictions in which the nature of the Transferred Assets owned or leased by it, or the conduct of the Business conducted by it, requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect. 5.2 CORPORATE AUTHORITY. The entering into and the execution and delivery of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby (a) have been duly and validly authorized by requisite corporate action of the Seller and prior to the Closing Date will have been duly and validly authorized by requisite corporate action of each of the Seller Subsidiaries, and (b) constitutes the legal, valid, and binding obligation of each (to the extent a party to this Agreement and/or any of the Related Agreements), and no additional corporate or shareholder authorization or consent is or will be required. 5.3 FINANCIAL STATEMENTS. Copies of the Financial Statements have been delivered to the Buyer and are attached to Corresponding Schedule A. The Financial Statements (i) have been prepared from information contained in the books and records of the Seller, (ii) present fairly, in all material respects, for those items listed therein, the financial position of the Division as of the dates shown, and the results of the Division's operations (as the same are set forth on the Corresponding Schedule) for the periods then ended, and (iii) have been prepared in accordance with the Seller's 16 26 Accounting Principles applied on a consistent basis, except as set forth on Corresponding Schedule B. 5.4 ACCOUNTS RECEIVABLE. The Accounts Receivable included in the Financial Statements constitute all of the Accounts Receivable of the Seller or the Seller Subsidiaries, as the case may be, that relate to the Business as of April 30, 1999. Other than those reserved for in the allowance for doubtful accounts on the Financial Statements, all of such Accounts Receivable are, and those existing on the Closing Date will be, valid and existing accounts receivable arising in the ordinary course of business. Except as set forth on the Corresponding Schedule, to the Seller's Knowledge, none of such Accounts Receivable is or will be at the Closing Date subject to any counterclaim or set-off except to the extent reserved for in the allowance for doubtful accounts on the Financial Statements. 5.5 INVENTORY. The Inventory included in the Financial Statements consists only of raw materials, work-in-process and finished goods of a quality and quantity usable and saleable in the ordinary course of business, as determined in accordance with the Seller's Accounting Principles. Except where the book value of such Inventory has been written down on or prior to the Closing Date, the Inventory is valued in the Financial Statements in accordance with the Seller's Accounting Principles. 5.6 REAL PROPERTY. (a) OWNED REAL PROPERTY. Except as set forth on the Corresponding Schedule, the Seller, with respect to the Massillon Facility, and Eaton Yale, with respect to the Hamilton Facility, each has good and marketable fee simple title to such Owned Real Property free and clear of all Liens, except (i) Liens for real estate taxes and assessments, both general and special, not yet due and payable, for which adequate reserves have been established on the Financial Statements or which are being contested in good faith, (ii) easements for electricity, water, gas and telephone lines serving only the real property and the business conducted thereon and easements of record; (iii) any laws, regulations or ordinances (including, but not limited to, those related to or affecting zoning, building and environmental matters) adopted or imposed by any governmental authority or agency, (iv) workmen's or other similar Liens imposed by law and arising or incurred in the ordinary course of business, (v) public or private rights, if any, in such portion of the Real Property as may be presently used, laid out or dedicated in any manner whatsoever, for street, roadway and/or alley purposes, and (vi) other Liens, the cost of which to remove, individually or in the aggregate, is not in excess of $20,000. The exceptions set forth in clauses (i) through (vi) above shall be referred to as the "Real Property Permitted Exceptions." (b) LEASED REAL PROPERTY. Except as set forth on the Corresponding Schedule, the Seller has good and valid leaseholds as to the Leased Real Property, free and clear of all Liens except Real Property Permitted Exceptions. Each of the leases for the Leased Real Property is in full force and effect, and the Seller has provided the Buyer with complete copies of all such leases. Except as disclosed on the Corresponding Schedule, the Seller has in all material respects performed and is performing all obligations required to be performed by it under the leases, and neither the Seller, nor, to the Seller's Knowledge, any other party thereto, is in default of any material obligation under any 17 27 of the leases. Except as disclosed on the Corresponding Schedule, the Seller has not received any written notice of default under any of the leases, nor to the Seller's Knowledge has any event occurred which with notice or lapse of time or both would constitute a material default by the Seller thereunder. (c) REAL PROPERTY. Except as described on the Corresponding Schedule, the Real Property constitutes all of the real property used by the Seller or the Seller Subsidiaries in connection with the conduct of the Business. There are no pending or, to the Seller's Knowledge, threatened condemnation or eminent domain proceedings involving the Real Property or any portion thereof, or for a sale in lieu thereof. 5.7 TITLE TO PERSONAL PROPERTY. Except as set forth on the Corresponding Schedule, the Seller or the Seller Subsidiaries, as the case may be, have good and marketable title to all of the Personal Property included in the Transferred Assets, free and clear of all Liens, except for (a) Liens for taxes not yet due and payable or which are being contested in good faith, and (b) Liens, the cost of which to remove, individually or in the aggregate, is not in excess of the greater of (i) $10,000 or (ii) ten percent (10%) of the asset's original purchase price. The exceptions set forth in subsections (a) and (b) above shall be referred to as the "Personal Property Permitted Exceptions." 5.8 CONDITION AND SUFFICIENCY OF TRANSFERRED ASSETS. Except for matters that would not have a Material Adverse Effect and matters set forth on the Corresponding Schedule to Section 5.12 and Item (v) of Corresponding Schedule A to Section 5.9, (a) the Transferred Assets currently used in the operation of the Business are in such condition and repair, reasonable wear and tear excepted, as is suitable for the purposes for which they are presently used in the Business, and (b) the Transferred Assets, together with the Buyer's rights and interests under the Related Agreements, constitute all of the assets, rights and interests which are related primarily or exclusively to the Business (other than Excluded Assets) and are sufficient, together with the items set forth on Corresponding Schedule to Section 5.24(a), for the operation of the Business. 5.9 CONTRACTS. (a) Except as set forth on the Corresponding Schedule A, neither the Seller nor any of the Seller Subsidiaries is a party to or bound by any agreement or contract, whether written or oral, of the following types that involve the Business, the Transferred Assets or the Assumed Liabilities nor are any such agreements or contracts presently being negotiated or discussed: (i) Any contract, lease, agreement, plan or arrangement (other than blanket purchase orders from customers) involving commitments to others to make capital expenditures or purchases or sales involving $50,000 or more in any one case or $100,000 in the aggregate in any period of 12 consecutive months which are not cancelable by the Seller or the Seller Subsidiaries, without penalty, on less than 90 days prior written notice and any blanket purchase orders from customers involving $100,000 or more which are not cancelable by the Seller or the Seller Subsidiaries, without penalty, on less than 90 days prior written notice; 18 28 (ii) Any contract, lease, agreement, plan or arrangement relating to any direct or indirect indebtedness for borrowed money (including loan agreements, lease purchase arrangements, guarantees, agreements to purchase goods or services or to supply funds or other undertakings on which others rely in extending credit), or any conditional sales contracts, chattel mortgages, equipment lease agreements and other security arrangements with respect to personal property with an obligation in excess of $50,000 in any one case or $100,000 in the aggregate in any period of 12 consecutive months which are not cancelable by the Seller or the Seller Subsidiaries, without penalty, on less than 90 days prior written notice; (iii) Any contract, lease, agreement, plan or arrangement between the Division and the Seller or any of the Seller Subsidiaries or any Affiliate of the Seller or any of the Seller Subsidiaries or related party in their respective individual capacities; (iv) Any employment, consulting or management services contract or any confidentiality or proprietary rights agreements with any employee of the Seller or any of the Seller Subsidiaries or any Third Party; (v) Any contract containing covenants limiting the freedom of the Seller or any of the Seller Subsidiaries to compete in any line of business with any Person or in any area or territory; (vi) Any license agreement, either as licensor or licensee, or any other agreement or arrangement of any type relating to any patent, trademark or trade name or other Transferred Asset; (vii) Any contract, agreement or arrangement of any kind whatsoever, whether exclusive or otherwise, with any sales agent, sales representative, franchisee or distributor; (viii) Any contract or arrangement of any kind whatsoever which requires the payment of royalties; (ix) Any prime contract with any government or any agency or instrumentality thereof; and (x) Any other legally binding contract, agreement, plan or arrangement not of the type covered by any of the other items of this Section 5.9 involving money or property having an obligation in excess of $50,000 in any one case or $100,000 in the aggregate in any period of 12 consecutive months which are not cancelable by the Seller or the Seller Subsidiaries, without penalty, on less than 90 days prior written notice. (b) "MATERIAL CONTRACTS" shall mean those contracts listed on the Corresponding Schedule A. All of the Material Contracts are in full force and effect and are valid, binding and enforceable in accordance with their terms as to (i) the Seller or the Seller Subsidiaries, as the case may be, and (ii) to the Seller's Knowledge, the other parties to such Material Contracts. Except as 19 29 disclosed on the Corresponding Schedule B, the Seller and each of the Seller Subsidiaries, to the extent a party to the Material Contracts, has in all material respects performed and is performing all obligations required to be performed by it under the Material Contracts, and neither the Seller or any of the Seller Subsidiaries, to the extent a party to the Material Contracts, nor, to the Seller's Knowledge, any other party thereto, is in default of any material obligation under any of the Material Contracts. Except as disclosed on the Corresponding Schedule B, neither the Seller nor any of the Seller Subsidiaries has received any written notice of default under any of the Material Contracts, nor has any event occurred which with notice or lapse of time or both would constitute a default by the Seller or any of the Seller Subsidiaries, as applicable, thereunder. (c) Except as disclosed on the Corresponding Schedule C, neither the Seller nor any of the Seller Subsidiaries has received any written or verbal notice of intent to terminate any Material Contract. 5.10 PROPRIETARY RIGHTS. The Seller or the Seller Subsidiaries are the sole owners of all of the Proprietary Rights listed as "OWNED" on the Corresponding Schedule to Section 2.1(h), and the Seller or the Seller Subsidiaries has the right, under valid, binding and subsisting license, technology or similar agreements to employ or otherwise use the Proprietary Rights listed as "licensed" on the Corresponding Schedule to Section 2.1(h). Except as disclosed on the Corresponding Schedule (the "Proprietary Rights Exceptions"): (a) Neither the Seller nor any of the Seller Subsidiaries or, to the Seller's Knowledge, any other party thereto, is in default of any material obligation under any such license, technology or similar agreement; (b) Neither the Seller nor any of the Seller Subsidiaries has granted any right or interest to any Person, other than a Seller Subsidiary, in connection with any of the Proprietary Rights; (c) Neither the Seller nor any of the Seller Subsidiaries is obligated to pay any amount, whether as a royalty, license fee or other payment, to any Person in order to use any of the Proprietary Rights in the conduct of the Business or the ownership of the Transferred Assets; (d) The Seller and the Seller Subsidiaries have acquired sole and exclusive ownership of all Proprietary Rights listed as "owned" on the Corresponding Schedule to Section 2.1(h) and applications thereof (whether or not patentable) and have the right to use or license the use of such Proprietary Rights on the products or services on, or in respect of which, they are now being used and all of such patents and registrations and applications therefor are free and clear of any Liens; and (e) Except with respect to the software for which the Seller and the Seller Subsidiaries have been granted standard form end-user licenses or licensed proprietary rights and for routine patent prosecutions in various patent offices, (i) none of the Proprietary Rights and none of the applications therefor set forth on the Corresponding Schedule to 20 30 Section 2.1(h) are subject to any pending or, to the Seller's Knowledge, threatened challenge, claim or dispute, (ii) none of the Proprietary Rights and none of the applications therefor set forth on the Corresponding Schedule to Section 2.1(h) have during the prior five years been the subject of any challenge, claim or dispute, (iii) to the Seller's Knowledge, the operation of the Business and the ownership of the Transferred Assets does not infringe upon or otherwise violate any right of any Third Party, (iv) to the Seller's Knowledge, none of the Proprietary Rights is being infringed by any Third Party; (v) to the Seller's Knowledge, there are no impediments to the ability of the Seller or the Seller Subsidiaries, as the case may be, to maintain and, where lawful, to renew the Proprietary Rights, (vi) none of the Proprietary Rights is subject to any outstanding order, decree, judgment or stipulation, and (vii) neither the Seller nor any of the Seller Subsidiaries has received any notice of conflict with asserted proprietary rights of others. 5.11 TAX MATTERS. (a) The Seller and the Seller Subsidiaries have filed all tax returns and tax reports required to be filed by them with respect to the Business or the Transferred Assets, including, without limitation, those returns and reports pertaining to federal, state, provincial, local, foreign or other income taxes, gross receipt taxes, ad valorem taxes, transfer taxes, excise taxes, sales and use taxes, payroll taxes, unemployment insurance payroll premiums, withholding taxes, occupation taxes, property taxes and franchise taxes, and all taxes, interest and penalties shown or claimed to be due thereon have been paid. There are no Liens for taxes (other than for current real and personal property taxes not yet due and payable) on the Transferred Assets or with respect to the Business. (b) None of the Transferred Assets, directly or indirectly, secures any debt the interest on which is tax-exempt under Section 103(a) of the Tax Code. None of the Transferred Assets is "tax-exempt use property" within the meaning of Section 168(h) of the Tax Code. 5.12 ENVIRONMENTAL MATTERS. Except for matters described on the Corresponding Schedule or except as would not have a Material Adverse Effect (a) the Business and the Real Property are operated in compliance with all applicable Environmental Laws, (b) to the Seller's Knowledge, no Real Property contains, with respect to the ownership and operations of the Business, any Regulated Substances in any environmental medium (air, water, soil, sediments, subsurface strata or groundwater) to an extent or in a manner or condition now requiring remediation under any currently applicable Environmental Law existing and in effect as of the Closing Date, (c) no judicial or administrative proceeding is pending or, to the Seller's Knowledge, threatened relating to liability with respect to the Business for any off-site disposal of any Regulated Substance, (d) none of the Seller or any of the Seller Subsidiaries has received in writing within three years prior to the Closing any claims or notices alleging it is not in compliance with or liable with respect to the Business under any Environmental Law, and (e) the Corresponding Schedule sets forth all those Permits that Seller or the Seller Subsidiaries now holds in connection with the operation of the Business pursuant to Environmental Laws. 21 31 5.13 NO BREACH OF CONTRACT, NO VIOLATIONS OF LAW, NO PRIOR APPROVAL. (a) Neither the execution and delivery of this Agreement or any Related Agreement nor compliance with their terms and provisions will conflict with, result in the breach or violation of, or constitute a default under, any of the terms, conditions or provisions of (i) the Seller's or any of the Seller Subsidiaries' Articles of Incorporation or Regulations (or comparable charter documents); (ii) any agreement or instrument to which the Seller or any of the Seller Subsidiaries is a party, or by which either the Seller or any of the Seller Subsidiaries is bound or to which any of the Transferred Assets or Assumed Liabilities are subject except as identified on the Corresponding Schedule; or (iii) any law applicable to the Seller, any of the Seller Subsidiaries or any of the Transferred Assets, other than, in the case of clauses (ii) and (iii) of this Section 5.13(a), conflicts, breaches, violations or defaults which would not, individually or in the aggregate, have a Material Adverse Effect. Except as identified on the Corresponding Schedule, neither the execution and delivery of this Agreement nor compliance with its terms and provisions will result in the creation or imposition of any Lien upon any of the Transferred Assets. (b) Other than the filing of a pre-merger notification report under the HSR Act, filings to be made under the Competition Act (Canada) with the Commissioner of Competition, and those filings, Permits, authorizations, consents and approvals identified on the Corresponding Schedule or addressed in Section 5.12, no filing with, or Permit, authorization, consent or approval of, any domestic or foreign government authority is required for the consummation by the Seller of the transactions contemplated by this Agreement, except for any filings, Permits, authorizations, consents or approvals the failure to make, file, give or obtain which would not, individually or in the aggregate, have a Material Adverse Effect; provided, however, that the representation given in this Section 5.13(b) is limited to the Seller's Knowledge with respect to foreign Permits, filings, authorizations, consents or approvals. 5.14 LITIGATION. Except as set forth on the Corresponding Schedule or on the Corresponding Schedule to Section 5.10 or 5.12, there is no pending or, to the Seller's Knowledge, threatened claim, litigation, proceeding or order of any court or governmental agency or arbitrator or governmental investigation relating to the Business or any of the Transferred Assets. Except as set forth on the Corresponding Schedule or on the Corresponding Schedule to Section 5.10 or 5.12, no claim, litigation, proceeding or order listed on the Corresponding Schedule would, if adversely determined, have a Material Adverse Effect, and there is no existing or, to the Seller's Knowledge, threatened order, judgment or decree of any court, governmental agency or arbitrator that specifically applies to the Business or the Transferred Assets. 5.15 FINDERS, BROKERS AND INVESTMENT BANKERS. Other than Bowles Hollowell Conner, a division of First Union Capital Markets Corp., whose fees will be the responsibility of the Seller, no finder, broker or investment banker acting or who has acted on behalf of the Seller or any of the Seller Subsidiaries in connection with the transactions contemplated by this Agreement is entitled to receive any commission or finder's fee in connection with such transactions, and, to the Seller's Knowledge, no other Person is entitled to receive any commission or finder's fee from the Seller or any of the Seller Subsidiaries in connection with such transactions. 22 32 5.16 NO MATERIAL ADVERSE CHANGE. Except as disclosed on the Corresponding Schedule, since April 30, 1999, the Seller and each of the Seller Subsidiaries have conducted the Business in the ordinary course consistent with past practices and there has not occurred: (a) any Material Adverse Effect; (b) any uninsured damage to, destruction or loss of any Transferred Asset that could reasonably be expected to have a Material Adverse Effect; (c) any material change by the Seller to the Seller's Accounting Principles, except changes mandated by GAAP; (d) any material revaluation by the Seller or any of the Seller Subsidiaries of any of the Transferred Assets, including, without limitation, writing down the value of Inventory or writing off notes or Accounts Receivable other than in the ordinary course of business; (e) any other action or event that would have required the consent of the Buyer pursuant to Section 7.1 had such action or event occurred after the date of this Agreement; or (f) any sale or transfer of a material amount of the Transferred Assets, other than sales of inventory in the ordinary course of business. 5.17 GOVERNMENTAL PERMITS AND LICENSES; COMPLIANCE WITH LAWS. Except for matters which would not have a Material Adverse Effect and except for those matters addressed by Section 5.12, (a) the Seller and the Seller Subsidiaries have all of the Permits required to own the Transferred Assets and to carry on the Business as presently conducted, and, assuming proper action by the other party thereto or by the issuer thereof, all such Permits are valid and in effect, and (b) to the Seller's Knowledge, neither the ownership of the Transferred Assets by the Seller or the Seller Subsidiaries, nor the operation of the Business by the Seller or the Seller Subsidiaries as it is presently conducted, violates any applicable order, law, ordinance, code or regulation. Except for those matters set forth on the Corresponding Schedule to Section 5.12, neither the Seller nor any Seller Subsidiary has received any written notice from any governmental authority of any such violation. 5.18 INSURANCE. The Seller has adequately insured all of the Transferred Assets against loss or damage resulting from fire or other risks insured against by extended coverage and public liability insurance of a kind and in an amount customarily obtained by similar businesses. 5.19 EMPLOYEES; LABOR RELATIONS. (a) Seller has provided to Buyer a complete list which sets forth, as of the date so indicated, the name, position, salary, length of service and location of all persons employed (including persons who are temporarily absent from active employment by reason of disability, illness, injury, workers' compensation, military leave, approved leave of absence or layoff) by the Seller or the Seller Subsidiaries in the conduct of the Business. The Seller and the Seller 23 33 Subsidiaries have paid in full or accrued in the Financial Statements all wages, salaries, commissions, bonuses, benefits, and other compensation due to any employee of the Division or otherwise arising under any employment related policy, practice, agreement, plan, program, statute or law. (b) The Corresponding Schedule sets forth a correct and complete list of all collective bargaining agreements (the "Collective Bargaining Agreements"), complete copies of which have been made available to the Buyer, covering employees of the Division. (c) With respect to the Business, neither the Seller nor any of the Seller Subsidiaries has received any written notice of any unfair labor practice complaints or any other action, suit, complaint, charge, arbitration, inquiry, proceeding or investigation pending before the National Labor Relations Board or the Ontario Labour Relations Board or any other agency having jurisdiction thereof and, to the Seller's Knowledge, no such complaint has been threatened. Neither the Seller nor any Seller Subsidiary has received any written notice of any activities or proceedings of any labor union (or representatives thereof) to organize any non-union employees of the Division, or of any strikes, slowdowns, work stoppages, lockouts or threats thereof, by or with respect to any employees of the Division of the Seller and, within the 12 months prior to the date of this Agreement, no such proceedings or, to the Seller's Knowledge, activities are or were underway nor has the Seller or any of the Seller Subsidiaries been the subject of any strikes, slowdowns, work stoppages, lockouts or, to the Seller's Knowledge, threats thereof. With respect to the employees of the Division, except as set forth on the Corresponding Schedule, there are no material unsatisfied claims, grievances, arbitration proceedings or workers' compensation proceedings other than standard employee medical, temporary total, permanent partial and applications for increase in permanent partial disability benefits. Except as set forth on the Corresponding Schedule, neither the Seller nor any of the Seller Subsidiaries is a party to or otherwise bound by, any consent decree with, or order or citation by, any government agency relating to any employee of the Division or employment practices, wages, hours, and terms and conditions of employment with respect to the Business. 5.20 EMPLOYEE BENEFITS. (a) The Corresponding Schedule lists or describes all material Employee Benefit Plans maintained by the Seller. Each Employee Benefit Plan has been maintained in all material respects in accordance with its terms and with applicable law. The Corresponding Schedule sets forth all Employee Benefit Plans maintained by the Seller which are intended to be qualified within the meaning of Section 401 (a) of the Tax Code. (b) The Seller has delivered or made available to the Buyer a true and complete copy of: (i) each Employee Benefit Plan identified on the Corresponding Schedule to Section 5.20(a); 24 34 (ii) each current summary plan description as to each Employee Benefit Plan that is described in clause (i) and is subject to the reporting and disclosure requirements of ERISA. (c) The Seller shall, prior to the Closing, deliver or make available to the Buyer a true and complete copy of: (i) the most recent determination letters for Seller's Investment Plan (as defined in Section 10.6) and Seller's Savings Plan (as defined in Section 10.7) and documentation that demonstrates that Seller's RRSP (as defined in Section 10.8) is registered under applicable governmental requirements; (ii) the most recent Form 5500 that was filed on behalf of Seller's Investment Plan and Seller's Savings Plan; (iii) all insurance policies owned by the Seller or any Seller Subsidiary providing benefits or funding the benefits under an Employee Benefit Plan; and (iv) each material notice that was given by the Internal Revenue Service or the Department of Labor to the Seller or any Seller Subsidiary with respect to Seller's Investment Plan or Seller's Savings Plan during the prior three-year period, the subject or content of which remains outstanding as of the Closing. (d) Except as set forth on the Corresponding Schedule, there are no material actions, suits, investigations or claims pending or, to the Seller's Knowledge, threatened with respect to or affecting Division Employees under Seller's Investment Plan or Seller's Savings Plan, other than routine claims for benefits. (e) Neither Seller nor any of the Seller Subsidiaries makes, nor are any of them obligated to make, contributions or payments of withdrawal liability to any multi-employer plan (as defined under Section 3(37) of ERISA) covering current or former employees of the Division which could result in liability to the Buyer or any Buyer Subsidiary. 5.21 RESIDENCY OF SELLER SUBSIDIARIES; GST REGISTRATION. Neither Eaton Yale nor ETN Offshore are non-residents of Canada under the Income Tax Act (Canada), and Eaton Yale is registered for the purposes of the GST Legislation. 5.22 LIABILITIES. Except as set forth and adequately reserved for in the Financial Statements or as set forth on the Corresponding Schedule or on the Corresponding Schedules to 25 35 Sections 5.10, 5.12, 5.14 or 5.19(c), to the Seller's Knowledge, neither the Seller nor any of the Seller Subsidiaries have any outstanding claims, liabilities or indebtedness, fixed or contingent, or obligations of any nature, whether accrued, absolute, contingent, threatened or otherwise, whether due or to become due, with respect to the Business, other than (a) liabilities incurred in the ordinary course and conduct of the Business since April 30, 1999, which do not involve borrowings, and (b) claims, liabilities or indebtedness of the type not required to be disclosed in the Financial Statements or notes thereto in accordance with GAAP, but in no event in excess of $50,000. 5.23 EMPLOYEE SAFETY. Except as set forth on the Corresponding Schedule, during the past three years neither the Seller nor the Seller Subsidiaries, with respect to the Business, (a) is or has been subject to an investigation by the U.S. or Canadian Department of Labor or similar state, provincial or other foreign or local agencies over compliance with OSHA or any similar state, provincial, foreign or local statute and the rules and regulations promulgated thereunder ("Safety Laws"), or (b) has received or has paid any fine, penalty or citation relating to or arising out of a violation or alleged violation of any Safety Laws during the past three years. 5.24 CUSTOMER ASSETS; LOCATION OF ASSETS. (a) Except as disclosed on the Corresponding Schedule, no material Personal Property owned by a customer of the Business or owned by any other Third Party currently is located at Owned Real Property or Leased Real Property. To the Seller's Knowledge, there are no impediments to the ability of the Seller or any of the Seller Subsidiaries to use the Personal Property identified on the Corresponding Schedule in the manner in which it is currently being used in the Business. (b) Except as disclosed on the Corresponding Schedule, all Personal Property owned by the Seller or a Seller Subsidiary and included in the Transferred Assets is located at Owned Real Property or Leased Real Property, except for immaterial Personal Property the aggregate value of which is not in excess of $25,000. 5.25 YEAR 2000 COMPLIANCE. Except as disclosed on the Corresponding Schedule, to the Seller's Knowledge, all hardware, software and embedded systems ("Systems") required by Seller to operate the Business are currently "Year 2000 Compliant" or are projected to be Year 2000 Compliant by August 15, 1999, as shown on the Corresponding Schedule. For the purposes of this Agreement, "Year 2000 Compliant" means that the Systems will consistently and accurately process date information before, during and after January 1, 2000, and between dates before and after January 1, 2000. 5.26 DISCLAIMER; CROSS REFERENCES. (a) EXCEPT FOR REPRESENTATIONS AND WARRANTIES MADE BY THE SELLER IN ARTICLE 5 OF THIS AGREEMENT, THE SELLER HAS MADE AND MAKES NO REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, CONCERNING THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ALL 26 36 SUCH WARRANTIES BEING EXPRESSLY DISCLAIMED, AND THE BUYER HAS NOT RELIED ON ANY SUCH REPRESENTATIONS AND WARRANTIES, EXCEPT FOR THOSE MADE BY THE SELLER IN ARTICLE 5 OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE COVERED BY THE WARRANTIES PROVIDED BY ARTICLE 2 OF THE UNIFORM COMMERCIAL CODE, THE SALE OF GOODS ACT (ONTARIO), OR ANY SIMILAR LAWS OF ANY JURISDICTION. THIS PROVISION SHALL NOT IN ANY WAY AFFECT OR DIMINISH ANY AGREEMENT OR COVENANT CONTAINED IN ANY OTHER SECTION OF THIS AGREEMENT. (b) Information to be disclosed in any one Corresponding Schedule herein referred to may be supplied in any Corresponding Schedule by cross reference to any other Corresponding Schedule. ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE BUYER The Buyer makes the following representations and warranties to the Seller. 6.1 ORGANIZATION, EXISTENCE AND STANDING OF THE BUYER. Each of the Buyer and the Buyer Subsidiaries is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation and has full corporate power and authority to own or lease its assets, to carry on its business as it is now conducted and to consummate the transactions contemplated by this Agreement and the Related Agreements. 6.2 CORPORATE AUTHORITY. The entering into and the execution and delivery of this Agreement and the Related Agreements and the consummation of the transactions contemplated hereby and thereby (a) have been duly and validly authorized by requisite corporate action of the Buyer and prior to the Closing Date will have been duly and validly authorized by requisite corporate action of each of the Buyer Subsidiaries, and (b) constitutes the legal, valid, and binding obligation of each (to the extent a party to this Agreement and/or any of the Related Agreements) and no additional corporate or stockholder authorization or consent is or will be required. 6.3 NO BREACH OF CONTRACT, NO VIOLATIONS OF LAW, NO PRIOR APPROVAL. (a) Neither the execution and delivery of this Agreement or any Related Agreement nor compliance with their terms and provisions will conflict with, result in the breach or violation of, or constitute a default under, any of the terms, conditions, or provisions of (i) the Buyer's or Buyer Subsidiaries' Certificate of Incorporation or By-laws (or comparable charter documents); (ii) any agreement or instrument to which the Buyer or any Buyer Subsidiary is a party or by which the Buyer or any Buyer Subsidiary is bound; or (iii) any law applicable to the Buyer or any Buyer Subsidiary, other than, in the case of clauses (ii) and (iii) of this Section 6.3(a), conflicts, breaches, violations or defaults which would not, individually or in the aggregate, have a Material Adverse Effect. 27 37 (b) Other than the filing of a pre-merger notification report under the HSR Act and the Competition Act (Canada) and the Investment Canada Act, no filing with, or Permit, authorization, consent or approval of, any domestic or foreign government authority is required for the consummation by the Buyer of the transactions contemplated by this Agreement. 6.4 LITIGATION. There is no pending, or to the Buyer's knowledge, threatened claim, litigation, proceeding or order of any court or governmental agency or arbitrator or governmental investigation relating to the Buyer or any Buyer Subsidiary, their business or their assets which, if adversely determined, would, individually or in the aggregate, materially impair, hinder or otherwise materially and adversely affect the ability of the Buyer to effect the Closing, or to perform any of its material obligations under this Agreement or any of the Related Agreements. 6.5 FINDERS, BROKERS AND INVESTMENT BANKERS. No finder, broker or investment banker acting or who has acted on behalf of the Buyer or the Buyer Subsidiaries in connection with the transactions contemplated by this Agreement is entitled to receive any commission or finder's fee in connection with such transactions, and to the Buyer's Knowledge, no other Person is entitled to receive any commission or finder's fee from the Buyer or any Buyer Subsidiary in connection with such transactions. 6.6 FINANCING. The Buyer, on the Closing Date and on the Settlement Date, will have sufficient funds available to it to pay to the Seller and/or the Seller Subsidiaries, as the case may be, the Purchase Price and to otherwise satisfy all of its obligations under this Agreement and the Related Agreements. Buyer has received from BankBoston, N.A. a commitment letter representing the funds necessary to pay the Purchase Price and to otherwise satisfy all of Buyer's obligations under this Agreement and the Related Agreements. Buyer has delivered a copy of such commitment letter to Seller. 6.7 GST. The Buyer or a Buyer Subsidiary, as required, will be, as of the Closing Date, registered for the purposes of the GST Legislation and is acquiring under this Agreement ownership, possession or use of all or substantially all of the property that reasonably can be regarded as being necessary for the Buyer to be capable of carrying on the Business following the Closing. 6.8 DISCLAIMER. EXCEPT FOR REPRESENTATIONS AND WARRANTIES MADE BY THE BUYER IN ARTICLE 6 OF THIS AGREEMENT, THE BUYER HAS MADE AND MAKES NO REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, CONCERNING THE SUBJECT MATTER OF THIS AGREEMENT, AND THE SELLER HAS NOT RELIED ON ANY REPRESENTATIONS AND WARRANTIES EXCEPT FOR THOSE MADE BY THE BUYER IN ARTICLE 6 OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE COVERED BY THE WARRANTIES PROVIDED BY ARTICLE 2 OF THE UNIFORM COMMERCIAL CODE, THE SALE OF GOODS ACT (ONTARIO) OR ANY SIMILAR LAWS OF ANY JURISDICTION. THIS PROVISION SHALL NOT IN ANY WAY AFFECT OR DIMINISH ANY AGREEMENT OR COVENANT CONTAINED IN ANY OTHER SECTION OF THIS AGREEMENT. 28 38 ARTICLE 7 COVENANTS OF THE SELLER The Seller covenants and agrees with the Buyer as follows. 7.1 CONDUCT OF BUSINESS TO CLOSING DATE. Except upon the written consent of the Buyer, which consent shall not be unreasonably withheld or delayed, the Seller shall and shall cause the Seller Subsidiaries to, from and after the date hereof until the Closing Date, carry on the Business in substantially the same manner as it has heretofore been conducted, including, without limitation, doing the following: (a) MAINTAIN TRANSFERRED ASSETS. Consistent with the Seller's past practice, the Seller shall maintain and keep, and shall cause the Seller Subsidiaries to maintain and keep, the Transferred Assets in at least as good condition and repair, reasonable wear and tear excepted, as the condition and repair the Transferred Assets are in as of the date hereof. (b) DISPOSITION OF ASSETS. The Seller shall not, and shall not permit the Seller Subsidiaries to, sell, lease, pledge, mortgage or otherwise dispose of or encumber any of the Transferred Assets except for (i) the sale, lease, pledge, mortgage or disposal or encumbrance of any of the Transferred Assets, including Inventory, in a manner consistent with the Seller's past practice and in the ordinary course of business which would not, individually or in the aggregate, be material to the operation of the Business, (ii) the disposal of any obsolete, unusable or unsalable Inventory (as determined in accordance with the Seller's Accounting Principles) consistent with the Seller's past practice, or (iii) any sale, lease, pledge, mortgage or disposal or encumbrance of any of the Transferred Assets that would not have a Material Adverse Effect. (c) PERFORM CONTRACTS AND OTHER OBLIGATIONS. The Seller shall, and shall cause the Seller Subsidiaries to, perform all of its or their, as the case may be, material obligations under the Material Contracts and any and all other agreements relating to or affecting the Transferred Assets or the Business. (d) OTHER CONTRACTS. Except as set forth on the Corresponding Schedule, the Seller shall not, and shall not permit the Seller Subsidiaries to, with respect to the Business (i) enter into any Material Contract outside the ordinary course of business, (ii) modify or change any Material Contract, (iii) cancel any debts or waive any claims or rights where such cancellation or waiver would have a Material Adverse Effect, (iv) make any capital expenditure or commitment exceeding $150,000 in any one instance or $500,000 in the aggregate, other than as identified in the Division's 1999 Capital Expenditure Budget included as part of the Corresponding Schedule, which budget shall not be amended or modified, or (v) make any loan to, or enter into any business transaction, agreement, arrangement or understanding of any other nature with, any employee of the Business or any officer or director of the Seller or any of the Seller Subsidiaries or any Affiliate or associate of any such officer or director. 29 39 (e) WAGES OR SALARY INCREASES. The Seller shall not, and shall not permit the Seller Subsidiaries to (i) grant any increases in wages, salaries or benefits of any of the Seller's or the Seller Subsidiaries' employees, as the case may be, employed exclusively in the conduct of the Business, except increases in the ordinary course of business in accordance with the Seller's or the applicable Seller Subsidiary's existing policies and except for increases in wages and/or benefits as required by the Collective Bargaining Agreements, (ii) enter into any employment agreements with respect to any employees of the Business, (iii) pay or agree to pay any pension, retirement allowance or other employee benefit not required by any existing plan, agreement or arrangement to any officer or employee of the Business, whether past or present, or (iv) with respect to the employees of the Division, commit itself to any additional pension, profit-sharing, bonus, incentive, deferred compensation, group insurance, severance pay, retirement or other employee benefit plan, agreement or arrangement, or to any employment or consulting agreement with or for the benefit of any employee of the Division, or to terminate or amend any of such plans or any of such agreements in existence on the date of this Agreement. (f) MAINTAIN RELATIONSHIPS OF CUSTOMERS AND SUPPLIERS. The Seller shall, and shall cause the Seller Subsidiaries to, use its or their reasonable efforts to maintain satisfactory relationships with all of the existing customers and suppliers of the Business. (g) TRANSFER OF THE TRANSFERRED ASSETS. The Seller shall not, and shall not permit the Seller Subsidiaries to, take any action that would prevent the transfer of the Transferred Assets to the Buyer pursuant to the terms of this Agreement free and clear of all Liens, other than Assumed Liabilities, Real Property Permitted Exceptions and Personal Property Permitted Exceptions. (h) BOOKS AND RECORDS. The Seller shall, and shall cause the Seller Subsidiaries to, maintain their books, accounts and records with respect to the Business and the Transferred Assets in the usual, regular and ordinary manner, on a basis consistent with prior years, and comply with all laws, the enforcement of which, if the Seller or the Seller Subsidiaries were not in compliance, would have a Material Adverse Effect. (i) PERMITS. The Seller shall, and shall cause the Seller Subsidiaries to, keep and maintain all Permits in full force and effect, continue their business pursuant to such Permits and take all steps necessary to meet requirements on pending applications for Permits, except where the lapse of any such Permits would not have a Material Adverse Effect. 7.2 ACCESS BY THE BUYER TO PROPERTIES AND RECORDS; FURNISHING INFORMATION. (a) Following the date hereof, authorized representatives of the Buyer shall have reasonable access during normal business hours to all premises, properties, books, contracts and documents of the Seller and the Seller Subsidiaries relating to the Business, the Transferred Assets and the Assumed Liabilities. Such access shall be arranged through a representative designated in writing by the Seller and shall be coordinated in such a manner to not materially interfere with the Seller's or any Seller Subsidiary's operations. In order to assist the Buyer, the Seller's designated 30 40 representatives may attend all meetings held between the Buyer or its authorized representatives and any officers and employees or customers and suppliers of the Seller or any representatives thereof. At no time prior to the Closing shall the Buyer contact any of the Seller's or any of the Seller Subsidiaries' customers or suppliers or employees (other than the Seller's designated representatives) with respect to any matters related to the content of this Agreement or the transactions contemplated hereby, unless accompanied by a representative of the Seller or upon the written consent of the Seller. (b) Consistent with and without limiting Section 7.2(a), the Buyer's access to the premises, properties, books, contracts and documents of the Seller and the Seller Subsidiaries relating to the Business, the Transferred Assets and the Assumed Liabilities shall expressly include all reasonable access necessary to evaluate the environmental liabilities of the Business. Seller further expressly covenants to transfer upon Closing, all books, files and records, including any audits, site assessments, site investigation reports, and any other materials relating to environmental matters with respect to the Business, provided, however, Seller may retain copies of such books, files and records. (c) From and after the Closing Date, the Seller will make available to the Buyer, from time to time as the Buyer may reasonably request, copies of such of the records retained by the Seller or the Seller Subsidiaries relating to the Business, the Transferred Assets and the Assumed Liabilities as may be reasonably required to enable the Buyer to defend against or assert claims related to or arising from ownership of the Transferred Assets, the assumption of the Assumed Liabilities or the conduct of the Business by the Seller and the Seller Subsidiaries prior to the Closing and to handle tax and financial audits involving the Division or the Business thereof; provided, however, that the Buyer agrees to hold such records in confidence, except to the extent required to defend or assert such claims and to handle such audits, and to return the same to the Seller promptly upon the conclusion of their use by the Buyer for the purposes herein specified. 7.3 COMPLIANCE WITH CONDITIONS. The Seller shall use its reasonable efforts to cause the conditions in Article 14 to be satisfied at or prior to the Closing Date. 7.4 THIRD-PARTY CONSENTS. The Seller shall use its reasonable efforts to obtain, on or prior to the Closing Date, all consents and approvals of Third Parties. 7.5 NOTIFICATION TO THE BUYER OF DAMAGE OR DESTRUCTION OF TRANSFERRED ASSETS OR MATERIAL CHANGES. The Seller shall give the Buyer written notice promptly upon becoming aware of any damage or destruction of any material portion of the Transferred Assets. 7.6 TRANSFER OF WARRANTIES. In the event that any of the Transferred Assets are under any warranty or vendor's indemnification agreement from the manufacturer or the original seller thereof, the Buyer shall be entitled to the benefit of the warranty or vendor's indemnification agreement to the extent that the warranty or vendor's indemnification agreement is available to the transferee, and the Seller shall execute such instruments as may be required to transfer the warranty to the Buyer. 31 41 7.7 HSR/COMPETITION ACT FILINGS; OTHER GOVERNMENTAL FILINGS. (a) The Seller, within five business days following the date of this Agreement, or as the Buyer and the Seller may otherwise agree, will submit (i) to the United States Department of Justice and the Federal Trade Commission all of the requisite forms and information required of Seller and any of the Seller Subsidiaries and applicable to this transaction under the HSR Act and (ii) all filings required of Seller and any of the Seller Subsidiaries to be made under the Competition Act (Canada) to the Commissioner of Competition and/or other governmental authority under such Act. Following such submissions, the Seller shall respond promptly to any appropriate request by any of such agencies or authorities for additional information or data and shall take such other reasonable actions as may be required or necessary in order to comply with such laws. The Seller will request early termination of the applicable waiting period requirements under the HSR Act. (b) The Seller shall also comply with the laws of any country and province, including Canada, which are applicable to the transactions contemplated by this Agreement and pursuant to which governmental notification and/or approval of such transactions is required. The Seller and the Buyer shall cooperate in providing any requisite information and data regarding the Seller or the Buyer, as the case may be, and making such filings as may be required in any such jurisdictions in connection with obtaining any required governmental approval or providing any required notice and shall take such other reasonable actions as may be required or necessary in order to comply with such laws. 7.8 TRANSITIONAL USE OF TRADE NAMES, TRADEMARKS AND LOGOS. The Buyer and the Seller recognize that certain Inventory, labels and containers therefor and promotional material being sold to the Buyer under this Agreement (as well as Inventory manufactured by the Buyer after the Closing Date with tooling or other assets to the extent permitted by the last sentence of this paragraph) may bear the trade names "Eaton Corporation" or "Eaton," and may bear logos or marks associated therewith, which trade names, logos and marks are not being assigned or licensed to the Buyer. The Seller agrees that the Buyer shall be permitted to sell such Inventory and use such labels, containers and promotional material for a period not exceeding six months after the Closing Date. Thereafter, internal storage and material handling containers that currently bear such trade names, logos or marks may continue to be used only if such trade names, logos or marks are removed or covered so that they cannot be viewed. In no event shall the Buyer be entitled to the use of the trade names and untransferred logos and trademarks in advertising such Inventory. The Buyer shall remove the Seller's, any of the Seller Subsidiaries' and their Affiliate's trade names and untransferred logos and trademarks from signage no later than three months from the Closing Date and from tooling or other assets used in production no later than six months from the Closing Date. 7.9 NEGOTIATIONS WITH THIRD PARTIES. From the date hereof through the Closing Date or the earlier termination of this Agreement, neither the Seller nor any of the Seller Subsidiaries or any of their respective officers, directors, agents or employees will initiate or solicit proposals or conduct negotiations for the sale, transfer or other disposition of the Division with any prospective purchasers other than the Buyer; provided, however, that nothing contained in this Section 7.9 shall prohibit the Board of Directors of the Seller from furnishing information to or entering into discussions or negotiations with, any Person that makes an unsolicited bona fide proposal in writing, not subject 32 42 to any financing condition, to acquire the assets of the Division, if, and only to the extent that (a) the Board of Directors determines in good faith and upon written advice of outside counsel to the Seller that such action is required for the Board of Directors to comply with its fiduciary duties to shareholders imposed by law, (b) prior to furnishing such information to, or entering into discussions or negotiations with, such Person, the Seller provides written notice to the Buyer to the effect that it is furnishing information to, or entering into discussions or negotiations with, such Person, and (c) the Seller keeps the Buyer informed of the status (not the terms) of any such discussions or negotiations. 7.10 UPDATE OF SCHEDULES. The Seller shall promptly notify the Buyer, prior to the Closing Date, of any changes in the information contained in the Corresponding Schedules or Corresponding Exhibits or in any document or information supplied to the Buyer pursuant to a Corresponding Schedule. Such information shall be deemed to amend such Corresponding Schedules, and, to the extent the Seller first becomes aware of such information after the date of this Agreement, shall not be deemed a breach of this Agreement. 7.11 COVENANT NOT TO COMPETE. The Seller agrees that for a period of four years after the Closing Date, neither it, any of the Seller Subsidiaries, nor any Affiliate shall, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of any business whether in corporate, proprietorship or partnership form or otherwise as more than a five percent (5%) owner in such business where such business is competitive with the Business as conducted on or prior to the Closing Date (a "Competitive Business). The covenant contained in the immediately preceding sentence shall not be deemed to have been violated by any sale by the Seller, any of the Seller Subsidiaries or any Affiliate, of fasteners or retaining rings sold either (a) as a component of a larger product sold by such Seller, Seller Subsidiary or Affiliate or (b) as a replacement part for a component of a larger product sold by such Seller, Seller Subsidiary or Affiliate, so long as such fasteners or retaining rings are not manufactured by Seller, any of the Seller Subsidiaries or any Affiliate. The provisions of this Section 7.11 shall not prevent the Seller, any of the Seller Subsidiaries, or any Affiliate from acquiring a business engaged in a Competitive Business (an "Acquired Business"); provided that such Competitive Business constitutes less than 20% of the revenues of the Acquired Business. If Seller, any Seller Subsidiaries or any Affiliate acquires an Acquired Business, then Seller shall promptly notify Buyer of such transaction and afford Buyer the opportunity to make an offer to purchase the Competitive Business. Seller shall consider Buyer's offer for such Competitive Business in good faith, but shall not be under any obligation to accept such offer. The Seller specifically acknowledges and agrees that the remedy at law for any breach of this Section 7.11 will be inadequate and that the Buyer, in addition to any other relief available to it, shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damage. In the event that the provisions of this Section 7.11 should ever be deemed to exceed the limitation provided by applicable law, then the Parties agree that such provisions shall be reformed to set forth the maximum limitations permitted. 7.12 ASSIGNMENT OF CONFIDENTIALITY AGREEMENTS. At Closing, subject to the exceptions set forth below in this Section 7.12, the Seller shall assign to the Buyer all of the Seller's right, title and interest in each confidentiality agreement entered into by Seller or its Subsidiaries or Affiliates and each entity (other than Buyer or its Subsidiaries or Affiliates) to whom confidential information was 33 43 provided in connection with the sale of the Business (collectively, the "Sale Confidentiality Agreements"). Notwithstanding the foregoing, (i) the Seller shall not assign, and shall retain, all right, title and interest with respect to the provisions of Sections 11, 12, 13 and 14 of each of the Sale Confidentiality Agreements and (ii) both the Seller and the Buyer shall have the benefit of the provisions of Section 15 of each of the Sale Confidentiality Agreements. ARTICLE 8 COVENANTS OF THE BUYER The Buyer covenants and agrees with the Seller as follows. 8.1 COMPLIANCE WITH CONDITIONS. The Buyer shall use its reasonable efforts to cause the conditions in Article 13 to be satisfied at or prior to the Closing Date. 8.2 COOPERATION IN OBTAINING CONSENTS. The Buyer shall take all steps reasonably requested by the Seller to help secure the consents and approvals referred to in Section 7.4 hereof. 8.3 HSR/COMPETITION ACT FILINGS; OTHER GOVERNMENTAL FILINGS. (a) The Buyer, within five business days following the date of this Agreement, or as the Buyer and the Seller may otherwise agree, will submit (i) to the United States Department of Justice and the Federal Trade Commission all of the requisite forms and information required of Buyer and the Buyer Subsidiaries and applicable to this transaction under the HSR Act and (ii) all filings required of Buyer and the Buyer Subsidiaries to be made under the Competition Act (Canada) to the Commissioner of Competition and/or other governmental authority under such Act and the Investment Canada Act. Following such submissions, the Buyer shall respond promptly to any appropriate request by any of such agencies or authorities for additional information or data and shall take such other reasonable actions as may be required or necessary in order to comply with such laws. The Buyer will pay all filing fees in connection with filings and submissions under the Competition Act. Each Party will pay its own filing fees in connection with filings and submissions under the HSR Act. The Buyer will request early termination of the applicable waiting period requirements under the HSR Act. (b) The Buyer shall also comply with the laws of any country and province, including Canada, which are applicable to the transactions contemplated by this Agreement and pursuant to which governmental notification and/or approval of such transactions is required. The Seller and the Buyer shall cooperate in providing any requisite information and data regarding the Seller or the Buyer, as the case may be, and making such filings as may be required in any such jurisdictions in connection with obtaining any required governmental approval or providing any required notice and shall take such other reasonable actions as may be required or necessary in order to comply with such laws. 34 44 8.4 MAKE RECORDS AND PERSONNEL AVAILABLE. From and after the Closing Date, the Buyer shall make available to the Seller, from time to time as the Seller may reasonably request, employees of the Business and copies of such of the records transferred to the Buyer by the Seller pursuant to this Agreement as may be reasonably required to enable the Seller to defend against or assert claims related to or arising from ownership of the Transferred Assets or the conduct of the Business by the Seller and the Seller Subsidiaries prior to the Closing Date and to handle tax and financial audits involving the Division or the Business thereof; provided, however, that the Seller agrees to hold such records in confidence, except to the extent required to defend or assert such claims and to handle such audits, and to return the same to the Buyer promptly upon the conclusion of their use by the Seller for the purposes herein specified and the Seller shall reimburse the Buyer or any Buyer Subsidiary for reasonable expenses incurred by any employees of the Buyer or any Buyer Subsidiary who may be made available to the Seller in accordance with the foregoing. 8.5 BUYER QUALIFICATION. The Buyer and each Buyer Subsidiary shall be qualified under applicable Canadian or other foreign law to accept the portion of the Transferred Assets to be accepted by the Buyer or such Buyer Subsidiary. 8.6 LONDON SALES OFFICE. The Buyer shall establish office space in the United Kingdom for the sales personnel of the Business currently located in the United Kingdom at such location and upon such terms and conditions as Buyer shall determine in its sole discretion. The Buyer acknowledges that the Seller's current arrangements for such office space with respect to the Business shall terminate as of the Closing Date. 8.7 OPERATION COVENANT. (a) The Buyer shall within 12 months of the Closing Date (i) form the Engineered Components Division, consisting of the operations of the Seller's Engineered Fasteners Division in its Massillon Facility, Brunswick Facility and Hamilton Facility, together with the Buyer's operations at The Palnut Company ("Palnut"), under the direction of those senior managers of the Engineered Fasteners Division who execute employment agreements with a Buyer Subsidiary on or prior to the Closing Date and who do not thereafter terminate their respective employment agreements of their own accord at any time after the Closing or are terminated for cause under those agreements (the "Existing Management Team"), and reporting to the President of the Domestic Industrial Products Group of the Buyer and (ii) consolidate the operations of the respective sales offices located in Southfield, Michigan of Palnut and the Engineered Fasteners Division. Thereafter during the period expiring on the third anniversary of the Closing Date, the Buyer shall implement and/or maintain (A) the Engineered Components Division with headquarters at the Brunswick Facility, managed by the Existing Management Team and reporting to the President of the Domestic Industrial Products Group of the Buyer, (B) the consolidated Southfield, Michigan sales office, (C) the consolidation of accounts receivable, customer service, sales and marketing activities for the facilities of the Engineered Fasteners Division and Palnut into the Brunswick Facility, (D) operation of the facilities at the present locations in Massillon, Brunswick and Hamilton and (E) employment levels substantially consistent with operations as they existed on the Closing Date at the facilities identified in the preceding clause (D). 35 45 (b) The Buyer shall be relieved of its obligations under this Section in the event the Facilities fail to achieve 90% of the forecasted net sales set out in Chart B, Summary Pro Forma Financial Results, of the Tinnerman Engineered Fasteners Confidential Information Memorandum dated April 1999. (c) The Buyer agrees that, in the event that the Buyer materially breaches any of the covenants set out in this Section, the Buyer shall pay the amount of $2,500,000 (the "Damages Amount") into an account to be distributed, in a form and manner to be agreed upon jointly by the Buyer and the Seller in good faith, among employees who were employed at the Facilities and the Southfield, Michigan sales office on the Closing Date and who continued to be so employed as of the time of such breach or who were terminated without cause within 60 days prior to the time of such breach. The Damages Amount shall constitute liquidated damages to the reputation of the Seller and not a penalty, the parties hereby acknowledging and agreeing that the amount of the Seller's actual damages in the event of a breach by the Buyer of this Section would be difficult if not impossible to ascertain, and that the establishment of an account for the benefit of the employees described above in the amount set out herein constitutes both a reasonable estimate of the harm the Seller would suffer and an appropriate remedy therefor. The establishment of such account shall be the sole and exclusive remedy of the Seller with respect to any breach by the Buyer of its obligations under this Section. Without limiting the general applicability of Section 23.6 of this Agreement to the other terms and provisions of this Agreement, the provisions of Section 23.6 shall apply to the provisions of this Section. (d) If the Seller believes that the Buyer has breached any of the covenants set forth in this Section, then the Seller may give written notice thereof to the Buyer. Within 15 calendar days after receipt of such notice, the Buyer shall by written notice to the Seller either concede liability or deny liability. If the Buyer fails to give written notice denying liability within such 15-day period, the Buyer shall be deemed to have conceded liability. If the Parties are not able to resolve any dispute over a claim brought under this Section 8.7 within 15 days after the Seller receives written notice from the Buyer denying liability, the Parties shall submit the dispute to the dispute resolution procedure set forth in Article 22. In the event that it is determined that the Buyer has liability under this Section, the Parties shall negotiate in good faith to reach agreement with respect to the form and manner in which the Damages Amount shall be distributed to the employees described in paragraph (c) of this Section. If the Parties cannot reach such agreement within 15 days after the determination of the Buyer's liability, the Parties shall submit the dispute to the dispute resolution procedure set forth in Article 22. Within 10 calendar days after the Parties reach agreement with respect to the form and manner in which the Damages Amount shall be distributed or, in the event of a dispute, within 10 calendar days after resolution of such dispute, the Buyer shall pay the Damages Amount into the account described in paragraph (c) of this Section. 36 46 ARTICLE 9 MUTUAL COVENANTS 9.1 GST ELECTION. Eaton Yale and the Buyer agree to jointly elect under Section 167 of the GST Legislation to have Subsection 167(l.1) of the GST Legislation apply to the sale under this Agreement. The Buyer shall file the election in the manner and within the time prescribed by the GST Legislation. In the event that an election under Section 167 of the GST Legislation cannot be validly made, or Revenue Canada does not accept in whole or in part such an election, the Buyer (i) shall pay to Eaton Yale, in addition to any amounts payable by the Buyer under this Agreement, all goods and services tax payable pursuant to the GST Legislation on or in respect of the property and services supplied hereunder including, without limitation, such tax calculated on or in respect of the value of the consideration paid or payable by the Buyer under this Agreement, and (ii) shall indemnify and save harmless Eaton Yale from any penalties and interest which may be payable by or assessed against the Seller or Eaton Yale under the GST Legislation due to the supplies made under this Agreement not being eligible for the Section 167 election. 9.2 ELECTION REGARDING ACCOUNTS RECEIVABLE. Eaton Yale and the Buyer shall, as soon as possible after the Closing Date, jointly execute an election under Section 22 of the Income Tax Act (Canada) as to the sale of the Accounts Receivable sold by Eaton Yale, shall designate therein the face value of the Accounts Receivable sold by Eaton Yale and the applicable portion of the Purchase Price, consistent with the provisions of Section 4.4, as the consideration paid by the Buyer therefor and shall each file such election with Revenue Canada forthwith after execution thereof (and, in any event, with their respective Canadian income tax returns for the year of sale) to make such election. 9.3 TRANSITIONAL SERVICES AGREEMENT. At Closing, the Seller and the Buyer shall enter into a Transitional Services Agreement (if required) in substantially the form set forth on the Corresponding Exhibit, with such additions to Schedule A thereto as shall be mutually agreed and with such deletions to Schedule A thereto as Buyer shall notify Seller not less than 10 days prior to the Closing Date (the "Services Agreement"). The Services Agreement relates to the provision of certain services by the Seller for the Buyer on an interim basis following the Closing Date. 9.4 PAYMENTS RECEIVED. The Seller and the Buyer agree that, after the Closing Date, they shall hold and shall promptly transfer and deliver to the other, from time to time as and when received by them and in the currency received by them, any cash, checks with appropriate endorsements (using their best efforts not to convert such checks into cash), or other property that they may receive on or after the Closing Date which properly belongs to the other Party, including, without limitation, any payments of accounts receivable and insurance proceeds, and shall account to the other for all such receipts. From and after the Closing Date, the Buyer shall have the right and authority to endorse without recourse the name of the Seller or any of the Seller Subsidiaries on any check or any other evidences of indebtedness received by the Buyer on account of the Business and the Transferred Assets transferred to the Buyer under this Agreement. In the event of a dispute between the Parties regarding their respective obligations hereunder, the Parties shall cooperate and 37 47 act in good faith to promptly resolve such dispute and, in connection with such cooperation, allow each other reasonable access to the records of the other relating to such disputed item. 9.5 FURTHER ASSURANCES. From time to time after the Closing Date, the Buyer and the Seller shall, and the Seller shall cause the Seller Subsidiaries to, at its own expense, execute and deliver, or cause to be executed and delivered, all such other instruments, including instruments of conveyance, assignment and transfer and to make all filings with and to obtain all consents, approvals or authorizations of any governmental or regulatory authority or any other Person under any Permit and take all such other actions as such Party may reasonably be requested to take by the other Party to this Agreement, consistent with the terms of this Agreement, in order to effectuate better the provisions and purposes of this Agreement and the transactions contemplated by this Agreement. 9.6 CERTAIN TAX PAYMENTS AND RETURNS. Each of the Seller and the Buyer shall be responsible for the preparation and filing of any tax returns which it is required by law to file. If either Party receives a refund of taxes that is an asset of the other Party subsequent to the Closing, the receiving Party shall pay such refund to the other Party within two business days after receipt (reduced by the amount of income taxes, if any, imposed on such receiving Party on account of the refund). 9.7 COVENANT REGARDING PERSONNEL. (a) Except as contemplated by Section 10.1 of this Agreement, the Seller agrees that, for a period of two years after the Closing, it shall not, and shall cause the Seller Subsidiaries and Affiliates not to, without first obtaining the written consent of the Buyer, which consent may be withheld for any reason, directly or indirectly solicit or attempt to solicit any person who is employed by the Buyer or the Buyer Subsidiaries or Affiliates in the Business to leave his or her employer or to become an employee of the Seller or any of the Seller Subsidiaries or Affiliates. The foregoing shall not prohibit (i) the Seller or the Seller Subsidiaries or Affiliates from soliciting or employing any individual who has received notice of termination from, or ceases to be employed by, the Buyer or the Buyer Subsidiaries or Affiliates prior to the first time such individual discussed with any representative of the Seller or the Seller Subsidiaries or Affiliates employment by such party, and (ii) the Seller or the Seller Subsidiaries or Affiliates from employing an individual who responds to a general solicitation of employment by such party. (b) Except as contemplated by this Agreement, the Buyer agrees that, for a period of two years after the Closing, it shall not, and shall cause the Buyer Subsidiaries and Affiliates not to, without first obtaining the written consent of the Seller, which consent may be withheld for any reason, employ, or offer employment to any current or former employee of the Seller or any of the Seller Subsidiaries or Affiliates, including without limitation (i) any Division Employee who does not become a Transferred Employee for any reason, including, without limitation, because of his refusal of the Buyer's offer of employment pursuant to Section 10.1, or (ii) any former employee of the Business whose employment with the Seller or a Seller Subsidiary previously terminated for any reason, including without limitation, retirement under any pension plan of the Seller or a Seller Subsidiary on or prior to the Closing. Except with respect to current or former employees of the 38 48 Business, the foregoing sentence shall not prohibit (i) the Buyer or the Buyer Subsidiaries or Affiliates from soliciting or employing any individual who has received notice of termination from, or ceases to be employed by, the Seller or the Seller Subsidiaries or Affiliates prior to the first time such individual discussed with any representative of the Buyer or the Buyer Subsidiaries or Affiliates employment by such party, and (ii) the Buyer or the Buyer Subsidiaries or Affiliates from employing an individual who responds to a general solicitation of employment by such party. 9.8 SUPPLY AGREEMENT. For a period of 18 months after the Closing Date, the Buyer shall cause the Business to continue to sell to the Seller and its Affiliates any and all products presently supplied by the Business to other businesses of the Seller and its Affiliates. Such products shall be sold upon the same terms and conditions as presently apply and at the same prices presently charged by the Business for such products, except to the extent that (i) different prices are agreed upon by the Parties or (ii) the price of a particular product is increased to all customers. 9.9 ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASES. At Closing, the Seller and the Buyer shall enter into an Assignment and Assumption of Lease in the form set forth on the Corresponding Exhibit with respect to each lease for the Leased Real Property (collectively, the "Leased Real Property Assignment and Assumption Agreements"). 9.10 GUARANTEE OF PERFORMANCE. (a) The Buyer hereby irrevocably and unconditionally guarantees to the Seller the full, faithful and prompt performance by the Buyer Subsidiaries of all obligations, when due, which are, by this Agreement, obligations of (i) the Buyer Subsidiaries or (ii) the Buyer, but which have been assigned or transferred to the Buyer Subsidiaries, whether such obligations are in the nature of the payment of money, the providing of services or otherwise ("Buyer Obligations"). The obligations of the Buyer hereunder are direct and primary and shall not be discharged until all of the Buyer Obligations have been discharged by the Buyer Subsidiaries or the Buyer, and such obligations of the Buyer hereunder shall not be discharged, released or affected by any bankruptcy, insolvency, dissolution, liquidation, reorganization or similar circumstances of or relating to the Buyer Subsidiaries. (b) The Seller hereby irrevocably and unconditionally guarantees to the Buyer the full, faithful and prompt performance by the Seller Subsidiaries of all obligations, when due, which are, by this Agreement, obligations of (i) the Seller Subsidiaries or (ii) the Seller, but which have been assigned or transferred to the Seller Subsidiaries, whether such obligations are in the nature of the payment of money, the providing of services or otherwise ("Seller Obligations"). The obligations of the Seller hereunder are direct and primary and shall not be discharged until all of the Seller Obligations have been discharged by the Seller Subsidiaries or the Seller, and such obligations of the Seller hereunder shall not be discharged, released or affected by any bankruptcy, insolvency, dissolution, liquidation, reorganization or similar circumstances of or relating to the Seller Subsidiaries. 9.11 JOINT ENVIRONMENTAL INVESTIGATION. Promptly after the signing of this Agreement, the Buyer and the Seller shall retain a mutually agreeable environmental consulting and engineering firm 39 49 to conduct the site investigation at the Massillon Facility described in the Corresponding Exhibit to this Section 9.11 ("Supplemental Phase II"), and they shall jointly direct and share equally the cost thereof. The Parties further covenant that neither the consulting firm nor project manager selected for the Supplemental Phase II shall thereafter be engaged to conduct either any further site investigation or any remedial or other response activity at the Massillon Facility without the written concurrence of both Parties. ARTICLE 10 EMPLOYEES AND EMPLOYEE BENEFITS 10.1 OFFER OF EMPLOYMENT. The Buyer shall offer, and agrees to cause the Buyer Subsidiaries to offer, immediate employment (so that no period of unemployment shall occur between employment with the Seller or a Seller Subsidiary prior to the Closing and employment with the Buyer or a Buyer Subsidiary on and after the Closing) to all of the Division Employees, including, without limitation, the Inactive Employees, other than those Division Employees identified on the Corresponding Schedule, with such employment to commence on the Closing. Employment for Division Employees who are subject to the Collective Bargaining Agreements shall be offered on the terms and conditions of the Collective Bargaining Agreements. The Buyer shall become a signatory to, and shall assume all obligations of the Seller and the Seller Subsidiaries under, the Collective Bargaining Agreements. Employment for Division Employees who are not subject to a Collective Bargaining Agreement (the "Non-Union Division Employees") shall be offered on terms and conditions which are substantially similar in the aggregate (without taking into account the post-retirement welfare benefits provided by the Seller and the Seller Subsidiaries) to such terms and conditions provided for and on behalf of such Division Employees immediately prior to the Closing by the Seller or a Seller Subsidiary in accordance with the Seller's or a Seller Subsidiary's then established plans, programs, practices, and arrangements. Further, the employment terms and conditions described in the preceding sentence, except as otherwise provided in this Article 10, shall be continued on a comparable basis in all material respects for a period of at least three years following the Closing. The Division Employees whose employment is transferred on an uninterrupted basis from the Seller or a Seller Subsidiary to the Buyer or a Buyer Subsidiary as a result of the Closing and the acceptance of the Buyer's offer of employment by each such Division Employee shall be hereinafter referred to as "Transferred Employees." 10.2 SEVERANCE PAYMENT RESPONSIBILITIES. The Corresponding Schedule identifies or sets forth a description of the Seller's severance obligations, plans, programs and/or policies as related to the Non-Union Division Employees of the Business. As of and after the Closing, the Buyer shall assume all liabilities, responsibilities, and obligations for severance payments or other separation benefits to which any Non-Union Division Employee who becomes a Transferred Employee may be or become entitled or claim to be entitled as a result of the Buyer's acquisition of the Business, 40 50 including, without limitation, any such claim which might be made against either the Seller or any Seller Subsidiary or the Buyer or any Buyer Subsidiary at any time: (a) by such Transferred Employee because of the transfer of his employment from the Seller or any Seller Subsidiary to the Buyer or any Buyer Subsidiary; (b) because of any action(s) taken by the Buyer or the Buyer Subsidiaries as of or after the Closing, including, without limitation, any termination of such Transferred Employee's employment with the Buyer or the Buyer Subsidiaries, or any change which the Buyer or the Buyer Subsidiaries may make in such Transferred Employee's compensation, fringe benefit coverage, or employment position; or (c) by any such Transferred Employee or by any "qualified beneficiary" (as defined under COBRA) with respect to such Transferred Employee (a "Qualified Beneficiary") for any claim made for continuation of benefits pursuant to COBRA. The severance payments and separation benefits provided by the Buyer to any Transferred Employee as of and after the Closing shall be substantially similar in the aggregate to the payments and benefits that would have been provided to such Transferred Employee under the obligations, plans, programs and policies described in the Corresponding Schedule. If any Transferred Employee claims to be, or becomes, entitled to any severance pay benefits, or other separation benefits or payments of any sort, from the Seller or a Seller Subsidiary or otherwise, as a result of the Buyer's acquisition of the Business, the Buyer agrees to, and shall, indemnify and hold harmless the Seller and the Seller Subsidiaries from and against any and all expenses, liabilities, obligations, and costs of any sort associated therewith. 10.3 WELFARE BENEFIT RESPONSIBILITIES. (a) The Plans, programs, practices and arrangements for welfare and/or fringe benefits provided by the Seller or a Seller Subsidiary to or with respect to the Division Employees and/or Qualified Beneficiaries immediately prior to the Closing are listed on the Corresponding Schedule (the "Seller Welfare Plans"). Except as otherwise provided pursuant to the terms of a Collective Bargaining Agreement, the Buyer shall establish and maintain a program of welfare and fringe benefits to satisfy its obligations as provided in Section 10.1 above (the "Buyer Welfare Plans"), for the Eligible Individuals (as defined below) commencing on the Closing, as follows: (1) the medical, dental and health benefits provided to Eligible Individuals shall be substantially similar in the aggregate (without taking into account the post-retirement welfare benefits provided by the Seller and the Seller Subsidiaries) to those provided under the Seller Welfare Plans and shall be provided without evidence of insurability or any pre-existing physical or mental condition restrictions, subject to Section 10.3(g) below, other than any such restrictions in effect for any Eligible Individual immediately prior to the Closing under the Seller Welfare Plans and without any increase in the contribution required to be paid by such Eligible Individual based upon the contribution schedules under the Seller Welfare Plans immediately prior to the Closing; and (2) welfare and fringe benefits other than those described in clause (1), above, shall be provided to the Eligible Individuals on a basis that is substantially similar in the aggregate (without taking into account the post-retirement 41 51 welfare benefits provided by the Seller and the Seller Subsidiaries) to the benefits provided under the Seller Welfare Plans immediately prior to the Closing. Any Eligible Individual's period of employment with the Seller and/or any Seller Subsidiary, or any predecessor employer thereof, and any and all periods of any Eligible Individual's coverage under, and/or participation in, the Seller Welfare Plans shall be deemed to be employment with the Buyer, and coverage under and/or participation in, the Buyer Welfare Plans, respectively, for all purposes of establishing such Eligible Individual's eligibility for participation and benefit entitlement under the Buyer Welfare Plans. The extent to which an Eligible Individual (either as an individual or as a family member) has satisfied in whole or in part any Seller Welfare Plan annual deductible, or has paid any out-of-pocket expenses pursuant to any Seller Welfare Plan co-insurance provision, shall be counted toward the satisfaction of any applicable deductible or out-of-pocket expense maximum, respectively, under any of the Buyer Welfare Plans. Such provision of welfare benefits by the Buyer shall be applicable to the payment of any otherwise eligible benefit claim which is incurred on or after the Closing, except as may otherwise be provided in the following Section 10.3(b). For the purpose of this Article 10, the term "Eligible Individuals" shall mean (i) the Transferred Employees, (ii) any Qualified Beneficiary, and (iii) the dependents and/or other beneficiaries of the Transferred Employees, who were eligible for any such welfare benefit coverage under and pursuant to the Seller Welfare Plans immediately prior to the Closing, or who would have become so eligible on or after the Closing in accordance with the eligibility and participation provisions of the Seller Welfare Plans. To assist the Buyer and the Buyer Subsidiaries in satisfying the requirements of this Section 10.3(a) as to medical, dental and health benefits, the Seller shall, or shall cause a Seller Subsidiary to, provide the Buyer and the Buyer Subsidiary with access to the applicable Seller Welfare Plans during the Welfare Transition Period (as defined below) such that the provision of such benefits by the Buyer for the Eligible Individuals shall be provided through the applicable Seller Welfare Plans, provided that the Buyer pays the Seller the monthly Coverage Cost (as defined below) for such benefits. For purposes of this Section 10.3(a): (i) the term "Welfare Transition Period" means the period calendar months beginning on the Closing and ending on the last day of the calendar month for which the Coverage Cost has been paid to the Seller except that in no event shall the applicable Seller Welfare Plans pay benefits with respect to claims Incurred (as defined below) after December 31, 1999; and (ii) the term "Coverage Cost" is the amount determined by Seller in good faith to be the actual claims Incurred on or after the Closing and paid during a given month in connection with providing the coverage to the Eligible Individuals, plus 8% to cover administrative costs. For any month in the Transition Period, Seller shall provide the Buyer with a written statement of the Coverage Cost for such month and, within five (5) business days after receipt of such written statement, the Buyer shall pay Seller the Coverage Cost indicated thereon. Subject to the requirement that the Seller and the Seller Subsidiaries shall administer the Seller Welfare Plans in good faith in accordance with their terms, Buyer agrees to, and shall, indemnify and hold harmless the Seller and the Seller Subsidiaries from and against any and all expenses, liabilities, obligations and costs of any sort associated therewith involving any claim or claim dispute with respect to the coverage of any Eligible Individual during the Welfare Transition Period, whether asserted by the Eligible Individual or any third party, which is or relates to a claim that is Incurred on or after the Closing. For purposes of the preceding sentence, a claim is "Incurred" at the time the goods and materials are actually provided to or the services are performed for the individual. Any amounts paid or payable from the Buyer to the Seller under this Section 10.3(a) shall not be subject to Section 19.3 or Section 19.10 and shall be disregarded entirely in applying such Sections. 42 52 (b) Notwithstanding the preceding Section 10.3(a), the Seller shall retain all liabilities, responsibilities, and obligations under the applicable Seller Welfare Plans on the basis of the eligibility and benefit entitlement provisions of such Seller Welfare Plans as in effect immediately prior to the Closing, with respect to any Eligible Individual for the provision of: (i) life, accidental death and dismemberment, and/or business travel accident insurance benefits which may become payable with respect to any qualified death or accident of such Eligible Individual which occurs prior to the Closing; (ii) salary continuation or other short-term disability benefits which may become payable with respect to any qualified disability of such Eligible Individual which commenced prior to the Closing, but only for such benefits payable for any period of such qualified disability, which period occurred prior to the Closing; (iii) long-term disability benefits payable with respect to any qualified disability of such Eligible Individual which commenced prior to the Closing and continues thereafter on an uninterrupted basis, provided that the claim for such benefits was filed and properly approved under the applicable Seller Welfare Plan prior to the Closing; and (iv) hospital, medical, and/or dental care benefits which may become payable with respect to any goods, supplies and/or services which are actually provided to the Eligible Individual prior to the Closing. (c) The Seller and the Buyer agree that except as otherwise specifically provided pursuant to Section 10.3(a), the preceding Section 10.3(b) and the following Section 10.3(d): (i) welfare benefit coverage of the Eligible Individuals under the Buyer Welfare Plans pursuant to this Section 10.3 shall for all purposes, including, without limitation, the Buyer's provision of welfare benefit continuation coverage pursuant to COBRA, commence as of the Closing, and coverage and eligibility of the Eligible Individuals for welfare benefit coverage or payments under any applicable Seller Welfare Plan, including, without limitation, COBRA continuation coverage, shall cease as of the day immediately prior to the Closing; and (ii) on and after the Closing no welfare benefit coverage of any kind shall be provided, and no welfare benefits of any kind shall be paid, for or on behalf of any Eligible Individual under any Seller Welfare Plan. (d) The Seller and/or the Seller Subsidiaries shall retain all responsibility, obligation and liability with respect to the provision of post-retirement welfare benefits provided under the Seller Welfare Plans to individuals who, prior to the Closing, retired from employment with the Division and/or any former Division facility or operation on a basis entitling them to such benefits, and the dependents and beneficiaries of such individuals. The Seller shall assume responsibility and retain 43 53 liability for post-retirement welfare benefit coverage for Future Division Retirees (as defined below) as follows: (i) Future Division Retirees (and their dependents and beneficiaries as of the Closing) shall be provided with post-retirement welfare benefits under the terms and conditions of the applicable Seller Welfare Plan as in effect, from time to time, and subject to any changes or modifications made subsequent to the Closing, as if continuous and uninterrupted employment ending with retirement from the Buyer or a Buyer Subsidiary were employment with and retirement from Seller or a Seller Subsidiary, except as provided in clause (ii) below; and (ii) solely for purposes of determining any required contribution levels by Future Division Retirees for post-retirement welfare benefit coverage under the Seller Welfare Plan, service or employment with the Buyer or a Buyer Subsidiary shall be disregarded. For purposes of this Section 10.3(d) the term "Future Division Retirees" means a Non-Union Division Employee who both: (i) becomes a Transferred Employee; and (ii) after the Closing, retires from employment with the Buyer or a Buyer Subsidiary in a Qualifying Retirement. For purposes of this Section 10.3(d), a "Qualifying Retirement" means, after treating the individual's continuous and uninterrupted employment with the Buyer or a Buyer Subsidiary and his/her retirement circumstances with the Buyer or a Buyer Subsidiary as if, in each case, it were employment and retirement circumstances with the Seller or a Seller Subsidiary, either: (i) the individual actually retires from employment with the Buyer or a Buyer Subsidiary during the period after the Closing and ending on the fifth anniversary of the day before the Closing under circumstances which, if such continuous and uninterrupted employment, retirement and retirement circumstance occurred with Seller or a Seller Subsidiary, the individual would have met the eligibility requirements for post-retirement welfare benefit coverage under Seller's Welfare Plans (and the rules and regulations thereunder); or (ii) the individual retires after the fifth anniversary of the day before the Closing, but would have been eligible as described in clause (i) above had the individual's actual retirement date occurred on or before such fifth anniversary (taking into account the individual's service and age at such fifth anniversary and whether the individual's subsequent actual retirement was voluntary or involuntary). (e) With respect to the post-retirement welfare benefits payable to or with respect to any current or former Division Employee who is or was subject to a Collective Bargaining Agreement, the Buyer and/or the Buyer Subsidiaries shall assume and bear all responsibilities, obligations and liabilities of the Seller and any Seller Subsidiary with respect thereto and, from and after the Closing, the Buyer and the Buyer Subsidiary shall be bound by and subject to the applicable requirements of collective bargaining with respect thereto. 44 54 (f) Any individual who is eligible for welfare benefit coverage under any welfare plan maintained by the Buyer or a Buyer Subsidiary, without regard to whether such individual is actually covered thereunder, shall not be eligible for post-retirement welfare benefit coverage under the Seller's Welfare Plans while he/she is so eligible under the Buyer or the Buyer Subsidiary welfare plan. (g) The Buyer and the Buyer Subsidiaries shall use their best efforts to obtain insurance coverage consistent with the evidence of insurability and the pre-existing condition requirements of the second sentence of Section 10.3(a) ("Insurability/Pre-Existing Condition Coverage"). In the event that the Buyer and the Buyer Subsidiaries cannot, after using the best efforts described in the preceding sentence, obtain insurance coverage that includes the Insurability/Pre-Existing Condition Coverage for one or more Eligible Individuals on a basis such that the aggregate premium for the entire group of Eligible Individuals is acceptable to the Buyer, the Buyer shall promptly notify the Seller of this circumstance. Upon receipt of the notice described in the preceding sentence, the Seller shall promptly take reasonable steps to assist the Buyer in identifying alternative opportunities for obtaining insurance and/or HMO coverage for the group of Eligible Individuals that includes the Insurability/Pre-Existing Condition coverage. In the event that one or more of such alternative opportunities presented by the Seller to the Buyer provide coverage on a basis that is consistent with the Insurability/Pre-Existing Condition Coverage requirement of Section 10.3(a), the Buyer shall accept any such alternative coverage (at its expense), but only if the projected aggregate annual premium for the entire group of Eligible Individuals does not exceed the projected aggregate annual premium for the group coverage for the Eligible Individuals as quoted with any legally permissible exclusions from and/or exceptions to the required Insurability/Pre-Existing Condition Coverage, by not more than fifteen percent (15%) or such greater percentage as is acceptable to the Buyer. If the group coverage that includes the Insurability/Pre-Existing Condition Coverage is not mandated or accepted by the Buyer under the preceding sentence, the Seller shall, under the Seller Welfare Plans, provide coverage (for affected Eligible Individuals) for that portion of the coverage otherwise required to be provided by the Buyer and/or a Buyer Subsidiary for the Insurability/Pre-Existing Condition Coverage not available under the Buyer and/or the Buyer Subsidiary Welfare Plans based upon a legally permissible exclusion from or exception to the Buyer's insurance or HMO coverage in place for the group of Eligible Individuals, subject to the following: (i) The Buyer shall reimburse to the Seller the full amount of the first$85,000 of claims paid under the Seller Welfare Plan as to each affected Eligible Individual (i.e., determined separately with respect to each such individual and not in the aggregate) during any twelve-month period pursuant to the foregoing; and (ii) For claims paid under the Seller Welfare Plan as to each affected Eligible Individual (i.e., determined separately with respect to each such individual and not in the aggregate) during such twelve-month period in excess of the amount described in clause (i) above, the Buyer shall reimburse to the Seller: (A) sixty percent (60%) of the next $100,000 of claims paid as to the individual during such period (i.e., sixty percent (60%) of claims paid as to the individual that exceed $85,000 by no more than $100,000; and (B) fifty percent (50%) of all remaining claims paid as to the individual during such period (i.e., fifty percent (50%) of claims paid as to the individual in excess of $185,000. 45 55 The Seller shall determine the claims paid for purposes of determining the foregoing reimbursement obligation of the Buyer in good faith and shall provide the Buyer with a detailed written statement of such determination at such times and such frequency as is determined by the Seller, but no less frequently than quarterly. Within ten (10) business days following receipt of such written statement, the Buyer shall pay to the Seller the amount shown on such statement. Any such payment shall not be subject to Section 19.3 or Section 19.10 and shall be disregarded entirely in applying such Sections. 10.4 SELLER'S RESPONSIBILITIES AND OBLIGATIONS AS TO CERTAIN PENSIONS. (a) The Seller and/or the Seller Subsidiaries shall retain all responsibility, obligation and liability with respect to the Pension Plan for Eaton Corporation Employees ("Seller's U.S. Pension Plan"), the Eaton Corporation Pension Plan For Salaried Employees of Certain Divisions and Plants of Eaton Yale Ltd. ("Seller's Canadian Salaried Pension Plan") and the Eaton Yale Ltd. Pension Plan DF for Hourly-Rate Employees of the Engineered Fasteners Division ("Seller's Canadian Hourly Pension Plan") (all such plans collectively referred to as "Seller's Pension Plans"). (b) With respect to Transferred Employees who, immediately prior to the Closing, are accruing (or most recently have accrued) benefits under Seller's Canadian Salaried Pension Plan or under Appendix A of Seller's U.S. Pension Plan ("Transferred Participants"), the benefits payable (and the terms and conditions related thereto) with respect to each such Transferred Participant under Seller's Canadian Salaried Pension Plan or under Appendix A of Seller's U.S. Pension Plan, as the case may be, shall be determined and paid pursuant to the terms thereof; provided, however, that except as provided in the next following sentence: (i) continuous and uninterrupted employment with the Buyer and/or a Buyer Subsidiary from the Closing through the date of the individual's termination of employment with the Buyer and the Buyer Subsidiaries (his "Buyer Termination Date") shall be treated as if it were employment for the Seller and/or a Seller Subsidiary for purposes of determining the Transferred Participant's level of vesting and eligibility for an early retirement opportunity thereunder conditioned upon the attainment of a specified level of service and/or a specified age during employment and for purposes of applying pension plan provisions regarding the commencement and suspension of benefits; and (ii) each such Transferred Participant's accrued retirement benefit under the Seller's Pension Plan immediately prior to the Closing shall, for the period from the Closing through the individual's Buyer Termination Date, be indexed to increase at the Index Rate as defined below. The provisions of clause (i) and (ii) of the preceding sentence shall not apply to a Transferred Participant claiming a retirement benefit prior to termination of employment with the Buyer and the Buyer Subsidiaries if eligibility for such benefit otherwise would require termination of employment with the Seller and the Seller Subsidiaries. For purposes of this Article 10, the term "Index Rate" means the lesser of: 4% per annum; or the applicable maximum index rate permitted (i.e., the U.S. Consumer Price Index and the Canadian Average Industrial Wage). (c) With respect to Transferred Employees who, immediately prior to the Closing are accruing (or most recently have accrued) benefits under Seller's Canadian Hourly Pension Plan ("Transferred Canadian Hourly Participants"), the benefits payable (and the terms and conditions related thereto) with respect to each such Transferred Canadian Hourly Participant thereunder shall 46 56 be determined and paid pursuant to the terms thereof, provided, however, that except as provided in the next following sentence, continuous and uninterrupted employment with the Buyer and/or a Buyer Subsidiary from the Closing through his Buyer Termination Date shall be treated as if it were employment for the Seller and/or a Seller Subsidiary for purposes of determining the Transferred Participant's level of vesting and eligibility for an early retirement opportunity thereunder that is conditioned upon the attainment of a specified level of service and/or a specified age during employment, and for purposes of applying pension plan provisions regarding the commencement and suspension of benefits. The employment credit provision described in the preceding sentence shall not apply to a Transferred Canadian Hourly Participant claiming a retirement benefit prior to termination of employment with the Buyer and the Buyer Subsidiaries if eligibility for such benefit otherwise would require termination of employment with the Seller and the Seller Subsidiaries. (d) With respect to Division Employees who immediately prior to the Closing are accruing (or have most recently accrued) benefits under the Appendix or other portion of the Seller's U.S. Pension Plan consisting of the plan which previously separately existed as the Eaton Corporation Pension Plan A-3 For Hourly-Rate Employees of the Engineered Fasteners Operations Massillon Division, the benefits payable (and the terms and conditions related thereto) shall be determined and paid pursuant to the terms thereof. (e) In no event shall any Transferred Employee or Inactive Employee who becomes an active employee of the Buyer or a Buyer Subsidiary receive under any Seller Pension Plan any service credit for benefit accrual purposes for any service with the Buyer and/or a Buyer Subsidiary. 10.5 BUYER'S RESPONSIBILITIES AND OBLIGATIONS AS TO CERTAIN PENSIONS. (a) As of the Closing, and on or before December 31, 1999, the Buyer shall or shall cause a Buyer Subsidiary, to establish defined contribution plans or amend an existing defined contribution plan ("Buyer's DC Plans") to cover the Transferred Employees and any Inactive Employee who becomes an active employee of the Buyer or a Buyer Subsidiary other than any such person who is subject to a Collective Bargaining Agreement (the "Non-Union DC Participants"). The Buyer's DC Plans shall provide the Non-Union DC Participants with credit for service with the Seller or a Seller Subsidiary for all purposes for which service is a criterion. The Buyer's DC Plans shall also provide each Non-Union DC Participant with a mandatory employer contribution for each Allocation Period (as determined under Section 10.5(b) below) equal to the individual Non-Union DC Participant's compensation (measured by wages subject to income tax withholding) for such Allocation Period multiplied by his/her Required Allocation Percentage (as defined below) for such Allocation Period. The mandatory contribution described in the preceding sentence for an Allocation Period: shall not be subject to any additional terms and/or conditions including, without limitation, terms and/or condition relating to the profitability of the Buyer and/or the Buyer Subsidiaries or the individual's level of hours or service during the Allocation Period or employment status as of the end of the Allocation Period; and shall be contributed to the applicable Buyer's DC Plan not later than the time prescribed by law for allowing a tax deduction for the taxable year of the Buyer or the Buyer Subsidiary, as the case may be, in which or with which such Allocation Period ends. Any payment 47 57 required to be made by the Buyer under this Section 10.3(a) shall not be subject to Section 19.3 or 19.10 and shall be disregarded entirely in applying such Sections. (b) For purposes of this Section 10.5, the Allocation Periods, taken together, shall span the five-year period (without gaps or overlap) commencing on the Closing and ending on the fifth anniversary of the day before the Closing, with the number of Allocation Periods and duration of each Allocation Period determined pursuant to the following: (i) the first Allocation Period shall commence on the Closing; (ii) the last Allocation Period shall end on the fifth anniversary of the day before the Closing, and (iii) except as specifically provided in clauses (i) and (ii) above, the beginning and end of each Allocation Period shall correspond to the beginning and end of each plan year of the applicable Buyer's DC Plan. (c) Each Non-Union DC Participant's Required Allocation Percentage for an Allocation Period shall equal his/her individual Defined Benefit Equivalency Percentage minus the percentage of the Non-Union DC Participant's compensation (measured by wages subject to income tax withholding) for the Allocation Period otherwise contributed and allocated to the account of the Non-Union DC Participant as an employer contribution with respect to the Allocation Period (disregarding for this purpose, elective deferrals and matching contributions) under the Buyer's DC Plans or any other tax-exempt defined contribution plan of the Buyer or a Buyer Subsidiary. (d) Each Non-Union DC Participant's individual Defined Benefit Equivalency Percentage will be set forth on the schedule of the actual Defined Benefit Equivalency Percentage provided by the Seller to the Buyer prior to the Closing. (e) In the event that the mandatory contribution for a Non-Union DC Participant for an Allocation Period under Section 10.5(a), either standing alone or in combination with any other contributions, would exceed any contribution limit, discrimination rule or qualification requirement imposed by the applicable tax or revenue laws on any such contributions, the mandatory contribution for such Allocation Period shall be reduced by such excess, and such excess shall be paid to the affected Non-Union DC Participant in cash not later than the date the mandatory contribution would otherwise be contributed to the applicable Buyer DC Plan. (f) In addition to the foregoing requirements, the Buyer's DC Plan covering the Non-Union DC Participants who, prior to the Closing, participated in Seller's Canadian Hourly Pension Plan, shall, at least until the fifth anniversary of the day before the Closing, be designed, administered and maintained in a manner such that its existence and administration as a "registered pension plan" will not directly or indirectly cause the partial or full termination of the Seller's Canadian Hourly Pension Plan. Further, in the event that the Buyer or any Buyer Subsidiary takes any action or refrains from taking any action which, during the period through the fifth anniversary of the day before the Closing, directly or indirectly causes the Ontario Superintendent of Financial Services to require the partial or full wind up of Seller's Canadian Hourly Pension Plan or Seller's Canadian Salaried Pension Plan, the Buyer agrees to, and shall, indemnify and hold harmless the Seller and the Seller Subsidiaries from and against any and all expenses, liabilities, obligations and costs of any sort associated with any such partial or full wind up (including, without limitation, the present value of any acceleration of amounts not otherwise due as of the date preceding such partial or full wind-up) other than expenses, liabilities, obligations and costs that: (1) otherwise would have 48 58 been paid or incurred in the normal course of plan operation or administration; (2) result from the requirement under the Ontario Act (or regulations under the Ontario Act) to separately deal with surplus plan assets; or (3) include or are associated with plan underfunding to the extent any such underfunding exists independent of such wind up; provided, however, that the Buyer's indemnification obligation under this sentence shall be reduced by fifty percent (50%) if such obligation first arises more than three years after the Closing. (g) The Buyer shall notify the Seller at the end of each calendar year quarter following the Closing of the names of any Transferred Employees whose employment with the Buyer and the Buyer Subsidiaries has been terminated for any reason during the calendar year quarter immediately preceding such date, and shall provide to the Seller the reason for and the date of such termination, and such other information as the Seller requires to administer such individual's benefit interests under Seller's Pension Plans. (h) Not later than 180 consecutive calendar days immediately following the Closing: (i) the Buyer shall apply for a determination by the Internal Revenue Service of the United States ("IRS") that Buyer's DC Plan(s) applicable to U.S. Non-Union DC Participants (as established or amended pursuant to Section 10.5) and any related trusts qualify under Sections 401(a) and 501(a), respectively, of the Tax Code, and any regulations issued under or pursuant to the Tax Code; and (ii) the Buyer shall apply for registration of Buyer's DC Plan(s) applicable to Canadian Non-Union DC Participants with the Canadian Department of National Revenue ("Revenue Canada") and the Financial Services Commission of Ontario ("FSCO") to establish registration thereof under the Canada Income Tax Act (the "Canada Act") and the Pension Benefits Act of Ontario ("Ontario Act") and the applicable regulations under both such Acts; and the Buyer agrees to act reasonably, promptly and in consultation with the Seller to revise and/or amend any of Buyer's DC Plans as may be required by the IRS, Revenue Canada and/or the FSCO in accordance with applicable governmental requirements for the purpose of obtaining any such qualification or registration. Copies of such filings by the Buyer or a Buyer Subsidiary (with appropriate deletions of confidential information not relevant to Seller's concern for the Transferred Employees) shall be furnished by the Buyer to the Seller when first made, and a copy of the U.S. determination letter and the Canadian acceptances of registration shall be furnished by the Buyer to the Seller within a reasonable period of time following the receipt of each such letter and acceptances by the Buyer or a Buyer Subsidiary. (i) Notwithstanding any other provisions of this Agreement, the Buyer hereby agrees that, through the fifth anniversary of the day before the Closing, Buyer's DC Plans shall not be terminated or suspended with respect to coverage thereunder of the Transferred Pension Participants, nor shall any amendment of a Buyer's DC Plan be made which contradicts this Section 10.5 or otherwise effectively decreases the total value of benefits to be provided under either such Plan for any Non-Union DC Participant during such five year period, except as may be required by the 49 59 applicable governmental agency or by law or regulation to ensure continued compliance with the Tax Code, ERISA, the Ontario Act or the Canada Act. (j) To the extent that the aggregate amount contributed to all of Buyer's DC Plans for an Allocation Period or otherwise paid pursuant to Section 10.5(e) above for such Allocation Period (expressed as each such Non-Union DC Participant's compensation (measured by wages subject to income tax withholding) for the Allocation Period multiplied by his/her Defined Benefit Equivalency Percentage, without reduction under 10.5(c) above) exceeds the contribution threshold set forth on the Corresponding Schedule (the "Contribution Threshold"), the Seller shall, at the time described below, pay to the Buyer the amount of such excess. After actual payment by the Buyer and/or a Buyer Subsidiary of the aggregate amounts described in the preceding sentence for an Allocation Period, the Buyer shall provide the Seller with a detailed written statement explaining the calculation of the individual and aggregate amount of such payments. Within thirty (30) days following the Seller's receipt of the written statement described in the preceding sentence, the Seller shall reimburse to the Buyer the amount determined under the first sentence of this Section 10.5(j) for such Allocation Period. Any payment required to be made by the Seller under this Section 10.5(j) shall not be subject to Section 19.3 or Section 19.10 and shall be disregarded entirely in applying such Sections. 10.6 TRANSFER OF SHARE PURCHASE AND INVESTMENT PLAN RESPONSIBILITIES. (a) As soon as is reasonably practicable after the Closing Date, and effective as of the Closing, the Buyer shall or shall cause a Buyer Subsidiary to establish a new defined contribution plan or amend an existing defined contribution plan ("Buyer's Investment Plan") for the purpose of covering each Division Employee and each former employee (and, if applicable, the spouse and beneficiaries of such former employee) of the Business who, immediately prior to the Closing, is eligible to be a participant in or has an account under ("Investment Plan Participant") the Eaton Corporation Share Purchase and Investment Plan ("Seller's Investment Plan"). Buyer's Investment Plan shall be designed to enable it to accept a transfer of assets and liabilities from the Seller's Investment Plan in accordance with the applicable ERISA and Tax Code requirements. The Buyer's Investment Plan will recognize service with the Seller and the Seller Subsidiaries for all purposes for which service is a criterion in the Buyer's Investment Plan. As soon as practicable after the Closing Date, the Seller shall cause the Seller's Investment Plan to transfer and the Buyer shall cause the Buyer's Investment Plan to accept a transfer of all assets and liabilities associated with the Investment Plan Participants, with earnings and/or losses credited to the account balances of such Investment Plan Participants through a date that precedes the date of transfer by no more than five business days. The amount transferred under the preceding sentence shall include elective contributions and matching contributions accrued under the Seller's Investment Plan through the day before the Closing. With respect to the portion of an Investment Plan Participant's accounts consisting, as of the day before the transfer, of plan loans and/or investment in Eaton Corporation common stock, the transfer contemplated by this Section 10.6 shall be made in the form of an in kind transfer by the Seller's Investment Plan to the Buyer's Investment Plan. With respect to Eaton Corporation common stock transferred in kind under the preceding sentence: (i) Buyer shall cause the Buyer's Investment Plan to allow the Investment Plan Participants, for a period of eighteen (18) months after such transfer, and on at least four (4) occasions during such period, to direct that all or 50 60 a portion of the amounts invested in their respective accounts in Eaton Corporation common stock be invested in an alternative investment otherwise available under the Buyer's Investment Plan; (ii) as soon as practicable after the end of the eighteen month period described in clause (i) above, the Buyer's Investment Plan shall require that any Eaton Corporation common stock remaining in the Investment Plan Participant accounts at the end of such period shall be liquidated and the proceeds reinvested in an alternative investment otherwise available under the Buyer's Investment Plan selected by the Investment Plan Participant or, in the absence of a selection, the available default investment alternative identified by the Seller; and (iii) to the extent that either the Buyer or any Buyer Subsidiary is found liable for breach of a fiduciary duty under ERISA with respect to the receipt and/or holding of the Eaton Corporation common stock by the Buyer's Investment Plan or with respect to the foregoing provisions of this sentence or a claim to the effect that such a breach has occurred is made: (A) Seller agrees to, and shall, defend, indemnify and hold harmless the Buyer and the Buyer Subsidiaries and their respective officers, directors, employees and agents and the trustee of Buyer's Investment Plan from and against any and all claims, expenses, liabilities, obligations and costs related thereto (including, without limitation, attorneys fees and expenses); and (B) the Seller's indemnification obligation under this sentence shall not be subject to Section 19.3 or Section 19.10 and shall be disregarded entirely in applying such Sections. After the transfer date, the Investment Plan Participants shall only be eligible to receive benefits from, and in accordance with, the Buyer's Investment Plan. (b) Not later than December 31, 1999, the Buyer shall or shall cause the Buyer Subsidiaries to apply for a determination by the IRS that Buyer's Investment Plan (as established or amended pursuant to this Section 10.6) qualifies under Sections 401(a) and 501(a), respectively, of the Tax Code, and any regulations issued under or pursuant to the Tax Code. The Buyer further agrees to act reasonably, promptly and in consultation with Seller to revise and/or amend the Buyer's Investment Plan as may be required by IRS in accordance with applicable governmental requirements for the purpose of obtaining any such qualification. Copies of such filings by the Buyer or a Buyer Subsidiary (with appropriate deletions of confidential information not relevant to Seller's concern for the Transferred Employees) shall be furnished by the Buyer to the Seller when first made, and a copy of the determination letter shall be furnished by the Buyer to the Seller within a reasonable period of time following the receipt of such letter by the Buyer or a Buyer Subsidiary. The Buyer and the Seller acknowledge that the transfer of assets and liabilities, respectively, from the Seller's Investment Plan to the Buyer's Investment Plan, as provided for in this Section 10.6 may occur prior to the Buyer's receipt of a favorable determination letter from the IRS with respect to the tax qualification of the Buyer's Investment Plan pursuant to Section 401(a) and Section 501(a), respectively, of the Tax Code. Accordingly, the Buyer hereby represents and warrants that the Buyer's Investment Plan, as established and maintained by the Buyer, will receive such favorable determination letter, effective retroactively to the Closing, and the Buyer agrees to indemnify the Seller for any liabilities which the Seller may incur as a result of such transfer of assets and/or liabilities to the Buyer's Investment Plan, if the Buyer's Investment Plan is determined by the IRS not to be a tax-qualified Plan. 51 61 10.7 TRANSFER OF SAVINGS PLAN RESPONSIBILITIES. (a) As soon as is reasonably practicable after the Closing Date, and effective as of the Closing, the Buyer shall or shall cause a Buyer Subsidiary to establish a new defined contribution plan or amend an existing defined contribution plan ("Buyer's Savings Plan") for the purpose of covering each Division Employee and each former employee (and, if applicable, the spouse and beneficiaries of such former employee) of the Business who, immediately prior to the Closing, is eligible to be a participant in or has an account under ("Savings Plan Participant") the Eaton Corporation 401(k) Savings Plan and Trust ("Seller's Savings Plan"). Buyer's Savings Plan shall be designed to enable it to accept a transfer of assets and liabilities from the Seller's Savings Plan in accordance with the applicable ERISA and Tax Code requirements. The Buyer's Savings Plan will recognize service with the Seller and the Seller Subsidiaries for all purposes for which service is a criterion in the Buyer's Savings Plan. As soon as practicable after the Closing Date, the Seller shall cause the Seller's Savings Plan to transfer and the Buyer shall cause the Buyer's Savings Plan to accept a transfer of all assets and liabilities associated with the Savings Plan Participants, with earnings and/or losses credited to the account balances of such Savings Plan Participants through a date that precedes the date of transfer by no more than five business days. The amount transferred under the preceding sentence shall include elective contributions and matching contributions accrued under the Seller's Savings Plan through the day before the Closing. With respect to the portion of a Savings Plan Participant's accounts consisting, as of the day before the Closing, of plan loans, the transfer contemplated by this Section 10.7 shall be made in the form of an in kind transfer by the Seller's Savings Plan to the Buyer's Savings Plan. After the transfer date, the Savings Plan Participants shall only be eligible to receive benefits from, and in accordance with, the Buyer's Savings Plan. (b) Not later than December 31, 1999, the Buyer shall or shall cause the Buyer Subsidiaries to apply for a determination by the IRS that Buyer's Savings Plan (as established or amended pursuant to this Section 10.7) qualifies under Sections 401(a) and 501(a), respectively, of the Tax Code, and any regulations issued under or pursuant to the Tax Code. The Buyer further agrees to act reasonably, promptly and in consultation with Seller to revise and/or amend the Buyer's Savings Plan as may be required by IRS in accordance with applicable governmental requirements for the purpose of obtaining any such qualification. Copies of such filings by the Buyer or a Buyer Subsidiary (with appropriate deletions of confidential information not relevant to Seller's concern for the Transferred Employees) shall be furnished by the Buyer to the Seller when first made, and a copy of the determination letter shall be furnished by the Buyer to the Seller within a reasonable period of time following the receipt of such letter by the Buyer or a Buyer Subsidiary. The Buyer and the Seller acknowledge that the transfer of assets and liabilities, respectively, from the Seller's Savings Plan to the Buyer's Savings Plan, as provided for in this Section 10.7 may occur prior to the Buyer's receipt of a favorable determination letter from the IRS with respect to the tax qualification of the Buyer's Savings Plan pursuant to Section 401(a) and Section 501(a), respectively, of the Tax Code. Accordingly, the Buyer hereby represents and warrants that the Buyer's Savings Plan, as established and maintained by the Buyer, will receive such favorable determination letter, effective retroactively to the Closing, and the Buyer agrees to indemnify the Seller for any liabilities which the Seller may incur as a result of such transfer of assets and/or liabilities to the Buyer's Savings Plan, if the Buyer's Savings Plan is determined by the IRS not to be a tax-qualified Plan. 52 62 (c) Notwithstanding any other provision of this Agreement, the provisions of this Section 10.7 shall be subject to the applicable requirements regarding collective bargaining. 10.8 ALLOCATION OF CANADIAN SAVINGS PLAN RESPONSIBILITIES. (a) Effective as of the day before the Closing, the Seller shall cause each Division Employee who is eligible to have an account as of such date ("RRSP Participant") under the Eaton Yale Ltd. Group Registered Retirement Savings Plan ("Seller's RRSP") to have a fully nonforfeitable right to such account. (b) As soon as is reasonably practicable after the Closing Date, the Buyer shall or shall cause a Buyer Subsidiary to establish a new group registered retirement savings plan ("Buyer's RRSP") covering the Transferee Canadian Participants and the Transferred Hourly Participants. The Seller and the Buyer shall make reasonable efforts to cause the RRSP Participants, at their option, to transfer their individual account balances to the new accounts that the Buyer shall cause to be established on their behalf under Buyer's RRSP. Buyer's RRSP will recognize service with the Seller and the Seller Subsidiaries for all purposes for which service is a criterion in Buyer's RRSP, and Buyer or a Buyer Subsidiary shall continue a plan providing a similar deferral opportunity for a period of at least three years following the Closing. 10.9 INCENTIVE COMPENSATION. The Corresponding Schedule identifies or sets forth a description of the cash incentive compensation and/or cash bonuses related to the Transferred Employees for 1999 under the Seller's or a Seller Subsidiary's plans, policies, programs or arrangements immediately prior to the Closing, excluding any related deferral arrangements ("Seller's 1999 Incentive Plans"). As of the Closing, the Buyer shall or shall cause a Buyer Subsidiary to establish and implement plans that mirror the Seller's 1999 Incentive Plans, and all obligations, responsibilities and liabilities with respect thereto shall be assumed and/or accepted by the Buyer and/or a Buyer Subsidiary, in a manner such that the Buyer and/or a Buyer Subsidiary shall provide the Transferred Employees with cash incentive compensation and/or cash bonuses for 1999 at least equal to the amounts that would have been paid for 1999 under the Seller's 1999 Incentive Plans, assuming that the Seller's 1999 Incentive Plans remained in effect through the end of 1999 and the transactions contemplated by this Agreement had not occurred. Nothing contained in the preceding sentence shall in any way bind or constrain the Buyer or any Buyer Subsidiary as to incentive compensation for any period beginning after December 31, 1999. Commencing with January 1, 2000 and for the then remaining balance of the three-year period following the Closing, the Buyer and/or a Buyer Subsidiary shall provide to those members of the Existing Management Team (as defined in Section 8.7(a)) who, immediately prior to the Closing, participate in Seller's 1999 Incentive Plan, an incentive plan designed, established and maintained by the Buyer and/or a Buyer Subsidiary for the purpose of providing some form of meaningful (as reasonably determined by the Buyer) incentive compensation to such individuals. 10.10 FOREIGN EMPLOYMENT LIABILITIES. With respect to the letter agreement between Seller or a Seller Subsidiary and Nigel Ware dated May 13, 1997, the Buyer and/or a Buyer Subsidiary shall, as of the Closing, assume the contractual obligations thereunder, except that the Buyer and/or the Buyer Subsidiary shall have no obligation whatsoever with respect to: paragraphs 8, 9 or 10 of 53 63 such letter agreement other than the obligations of the Buyer and/or the Buyer Subsidiary arising pursuant to Section 10.1; or any claim or obligation that does not specifically arise under the contractual provisions assumed by the Buyer. 10.11 VACATION RESPONSIBILITIES. The Buyer shall be liable, responsible, and obligated for the payment of all vacation benefits, as determined in accordance with the Seller's vacation practices in effect on the day before the Closing for Division Employees, and which have not been paid by the Seller prior to the Closing, to the Transferred Employees. On and after the Closing, the Buyer shall provide each Non-Union Division Employee who becomes a Transferred Employee, on a going-forward basis, with an annual paid vacation entitlement at least equal to the annual paid vacation entitlement available under the Seller's vacation practices as in effect on the day before the Closing, based upon the Transferred Employee's status and level of service with the Seller and/or a Seller Subsidiary on such day. 10.12 RETAINED LIABILITY AND SUCCESSOR LIABILITY. With respect to any pre-Closing liability of Seller or any Seller Subsidiary under any Employee Benefit Plan or under the letter agreement referred to in Section 10.10 which is retained by the Seller and/or Seller Subsidiary and is not assumed by the Buyer and/or a Buyer Subsidiary under this Agreement, such liability shall be deemed a Retained Liability and, notwithstanding the potential liability of Buyer and/or a Buyer Subsidiary for any such Retained Liability under a successor liability theory or otherwise, such Retained Liability shall be subject to the indemnification provisions of Article 19. 10.13 REIMBURSEMENT FOR OTHER PARTY'S LIABILITIES. Notwithstanding any other provisions of this Agreement, in the event that either the Seller (or the Seller Subsidiaries) or the Buyer (or the Buyer Subsidiaries) shall be required, by operation of law or regulation or by judicial or quasi-judicial determination or by the operation of any contract or other agreement of any kind with any insurance company or other Person, to pay or discharge directly, or indirectly through any representative or benefit trust or other fund or otherwise, any liability, responsibility, or obligation for the provision of any benefit or other payment (including any benefit premium payment or other direct or indirect cost with respect to any benefit coverage) which is the liability, responsibility, and/or obligation of the other Party pursuant to this Article 10, the Party responsible for such payment agrees to reimburse promptly the other Party, or any appropriate representative or benefit trust or other fund of such Party as may be determined thereby, in full for any and all such payments or discharges upon the presentation of written evidence thereof. 10.14 NO THIRD-PARTY BENEFICIARIES. Neither the Buyer nor the Seller intend that this Article 10 create any rights or interests, except as between the Buyer, the Buyer Subsidiaries, the Seller and the Seller Subsidiaries, and no present or future employees (or any dependents or beneficiaries of such employees) of either Party, or any of their Affiliates (including the Buyer Subsidiaries and the Seller Subsidiaries) will be treated or deemed as Third-Party beneficiaries in or under this Agreement. 54 64 ARTICLE 11 CERTAIN REAL ESTATE MATTERS 11.1 TITLE COMMITMENT; TITLE POLICY. (a) As soon as practicable following the date of this Agreement, the Seller shall cause (i) Land America National Commercial Services - Lawyers Title (the "Title Company") to issue and deliver to the Buyer its commitment for an ALTA Owner's Policy of Title Insurance (Form B-1992) with respect to the Massillon Facility and its commitment for an ALTA Leasehold Policy of Title Insurance with respect to the Brunswick Facility (collectively the "U.S. Title Policies"), together with a copy of all recorded documents referred to in the U.S. Title Policies, committing the Title Company to issue the U.S. Title Policies at Closing, insuring the Buyer as the holder of a fee simple title to the Massillon Facility and a leasehold interest in the Brunswick Facility, subject only to the Real Property Permitted Exceptions, in an amount equal to the portion of the Purchase Price allocated to each such Facility, and (ii) the Seller's Canadian counsel to deliver to the Buyer its opinion (the "Canadian Title Opinion") as to title to the Hamilton Facility, which opinion shall be addressed to the Buyer, its counsel and such other parties as may reasonably be requested by the Buyer and shall provide that the Seller or the Seller Subsidiaries, as the case may be, has good title in fee simple to the Hamilton Facility, subject only to the Real Property Permitted Exceptions. (b) Subject to Article 20, the cost and expense of the U.S. Title Policy and the Canadian Title Opinion and any transfer or recording fees or taxes, shall be shared equally by the Seller and the Buyer. 11.2 OBJECTIONS. The Buyer shall have ten days after receipt of all of the documents referred to in Section 11.1 to give the Seller written notice of any objections to the conditions or exceptions shown thereon other than Real Property Permitted Exceptions. Failure to object to any additional condition or exception within said period shall constitute an approval of such condition or exception. If the Buyer gives such notice, the Seller shall have the obligation, prior to the Closing, to use its reasonable efforts to remedy or remove the objectionable condition or exception, or to provide the Buyer with evidence reasonably satisfactory to the Buyer that such condition or exception shall be removed or remedied prior to or concurrently with the Closing. If the Seller cannot so remedy or remove such condition or exception prior to or concurrently with the Closing and such condition or exception, individually or in the aggregate, would have an adverse effect on the value of the Transferred Assets in excess of an amount equal to five percent (5%) of the Purchase Price, the Buyer shall have the right to either waive its objection to such condition or exception and proceed towards the Closing or terminate this Agreement without liability. 55 65 ARTICLE 12 ENVIRONMENTAL MATTERS 12.1 ALLOCATION OF ENVIRONMENTAL LIABILITIES. Subject to and in accordance with this Article 12 and Section 3.2(i), liability for Environmental Conditions and for Pre-Closing Environmental Conditions shall be allocated as follows: (a) BUYER'S RESPONSIBILITY. The Buyer shall be responsible for and shall perform or pay as due all obligations or liabilities, including any loss, cost or expense of any nature whatsoever relating to or arising from: (i) Any Environmental Conditions on, in or under any Real Property that are not Pre-Closing Environmental Conditions; (ii) Subject to Paragraph (b) of this Section 12.1, any Pre-Closing Environmental Conditions, to the following extent: (A) the first $500,000 in the aggregate from the Closing Date necessary to spend to remediate or correct any Pre-Closing Environmental Conditions; and (B) one-half (i.e., 50%) of any and all loss, cost or expense in excess of the sum of the $500,000 payable by Buyer under Clause (A) above plus $500,000 payable by Seller under Paragraph (b) of this Section 12.1 necessary to remediate or correct any Pre-Closing Environmental Condition; and (iii) Any Environmental Condition associated with the 80 Glow Avenue property in Hamilton, Ontario. (b) SELLER'S RESPONSIBILITY. The Seller shall be responsible for and shall pay as due: (i) The following sums in excess of the Buyer's initial contribution under Clause (a)(ii)(A) above: (A) the next $500,000 aggregate from the Closing Date necessary to remediate or correct any Pre-Closing Environmental Condition that is required to be investigated or remediated by a regulatory authority consistent with requirements of Environmental Law ("Required Cleanup"); (B) the remaining one-half (i.e., 50%) of any and all loss cost or expense that is necessary to remediate or correct any Pre-Closing Environmental Conditions that give rise to a Required Cleanup and that is in excess of the sum of the Buyer's $500,000 initial contribution under Clause (A) of Subparagraph (a)(ii) of this Section 12.1 and the Seller's contribution under Clause (A) of this Subparagraph (b)(i); and 56 66 (ii) Any and all loss, cost or expense for any Retained Liability under Section 3.2(i); provided, however, that notwithstanding any other provision of this Agreement, Seller shall have no liability under this Agreement with respect to (A) 80 Glow Avenue, Hamilton, Ontario and (B) any claims for personal injury or property damage (including economic loss) arising from alleged migration of Regulated Substances from any Real Property, even though the alleged migration may be the subject of a Required Cleanup subject to the cost-sharing provisions of this Section 12.1. (c) Those portions of any loss, cost or expense relating to or arising from Environmental Conditions or Pre-Closing Environmental Conditions that are allocated to the Buyer pursuant to this Section 12.1 are hereinafter referred to as the "Buyer's Responsibility." Those portions of any loss, cost or expense relating to or arising from Environmental Conditions or Pre-Closing Environmental Conditions that are allocated to the Seller pursuant to this Section 12.1 are hereinafter referred to as the "Seller's Responsibility." 12.2 SELLER'S ENVIRONMENTAL INDEMNIFICATION. Subject to the terms, conditions and limitations of this Article 12, the Seller will indemnify, defend and hold harmless the Buyer and its affiliates, officers, directors, employees and agents from and against any liabilities, costs, damages, penalties, fines, claims, judgments or proceedings, including necessary and reasonable legal fees and costs of investigation (collectively "Damages"), arising from: (a) breach of any representation or warranty in Section 5.12, provided that the Buyer shall have given the Seller notice of such breach during the relevant survival period stated in Section 18.1, without regard to Section 18.2; or (b) any Seller's Responsibility, as defined in Section 12.1(c); provided, however, that if the cost to remediate or correct any Pre-Closing Environmental Conditions in the aggregate is reasonably anticipated to trigger the Seller's Responsibility, Seller shall have full control in dealing and negotiation with any Third Parties, including any regulatory authorities, in order to resolve all matters associated with the Pre-Closing Environmental Condition. (c) For the purposes of determining whether the proviso regarding Seller's control in Subsection (b) of this Section 12.2 is triggered, the parties shall elicit from the consultant retained pursuant to Section 9.11 recommendations with respect to the identification, type and cost of any remedial or other measure that the Supplemental Phase II indicates would be necessary to fulfill requirements of Environmental Laws in effect and applicable as of the Closing. The Parties shall, within 30 days of their receipt of this recommendations, confer and reach agreement as to whether (and, if so, which of) the consultant's recommendations shall be implemented. Failure of the Parties to reach agreement within this 30-day period regarding which, if any, of the consultant's recommendations shall be implemented will give rise to an irrebuttable presumption that the Seller's Responsibility will be triggered solely for purposes of the control proviso of Subsection 12.2(b) hereof, and Seller will have the right to control. Notwithstanding the foregoing, the Seller shall not be liable to and shall not indemnify any party or otherwise be responsible for any Damages under this Article 12 to the extent the same result from 57 67 actions undertaken voluntarily rather than mandated by legal process or are caused, contributed to, or exacerbated by the post-Closing actions or omissions of the Buyer or the Buyer Subsidiaries, and the Buyer will be responsible for that portion of any Damages attributable to such post-Closing acts or omissions. 12.3 BUYER'S ENVIRONMENTAL INDEMNIFICATION. Subject to the terms, conditions and limitations of this Article 12, the Buyer will indemnify, defend and hold harmless the Seller and any Seller Subsidiary and their respective affiliates, officers, directors, employees and agents from and against any Damages arising from: (a) exercise by the Buyer of its right of access under Section 7.2(b) relating to evaluation of any potential or suspected Environmental Condition; or (b) any Buyer's Responsibility, as defined in Section 12.1(c). Notwithstanding the foregoing, the Buyer shall not be liable to and shall not indemnify any party or otherwise be responsible for any Damages under this Article 12 to the extent that the same are caused, contributed to or exacerbated by the post-Closing actions or omissions of the Seller or the Seller Subsidiaries, and the Seller will be responsible for that portion of any damages attributable to such acts or omissions. 12.4 RELEASE. THE BUYER EXPRESSLY WAIVES AND RELEASES THE SELLER AND THE SELLER SUBSIDIARIES FROM, AND COVENANTS NOT TO SUE THE SELLER OR ANY OF THE SELLER SUBSIDIARIES FOR, ANY CLAIMS, WHETHER PURSUANT TO, OR AS PERMITTED OR PROVIDED BY, THE ENVIRONMENTAL LAWS (EXPRESSLY INCLUDING, BUT NOT LIMITED TO, CERCLA, RCRA, CWA, SWDA, CAA, TSCA, AND EPCRA) OR OTHERWISE WHICH THE BUYER OR ANY BUYER SUBSIDIARY, OR ANY SUCCESSOR IN INTEREST TO THE BUYER WITH RESPECT TO THE REAL PROPERTY, MAY HAVE IN CONNECTION WITH THE RELEASE OR PRESENCE OF ANY REGULATED SUBSTANCE AFTER THE CLOSING DATE. After the Closing Date, the remedies of the Buyer and the Seller provided for under Sections 12.1, 12.2 and 12.3 shall be the exclusive remedies of the Parties with respect to the matters covered in this Article 12. 12.5 NOTICE OF CLAIM. The Parties agree that they will each promptly, but in no event later than 30 calendar days from the date of their discovery of facts or circumstances that are reasonably likely to give rise to a demand for indemnification pursuant to Section 12.2 or Section 12.3, as the case may be, notify the other in writing of such facts and potential claim. Any claim made pursuant to this Article 12 shall cite with particularity the nature of the claim, the specific basis for believing it is subject to indemnification under this Article (including, in the case of a Pre-Closing Environmental Condition, the basis for believing the condition constitutes a violation of Environmental Law in effect as of the Closing), and the estimated total amount of Damages that will be incurred with respect thereto. If any legal proceedings are instituted or any claim is asserted in writing by, or on behalf of, a Third Party in respect of which either Party, including any Subsidiary, believes it may be entitled to indemnity hereunder, that Party shall give written notice thereof within 30 days of service of process after institution of the legal proceedings or within 30 days after the 58 68 assertion of a claim in writing by, or on behalf of, the Third Party asserting the claim. A delay in giving notice required by the preceding two sentences shall relieve the other Party of liability only to the extent that it suffers actual prejudice because of the delay. After notification, the Party notified must within 60 days notify the other that it accepts responsibility for the matters set forth in the notice, or the Party so notified will be deemed to have declined to accept responsibility for such matters. 12.6 ACCEPTANCE OF RESPONSIBILITY. If the Party notified accepts responsibility for any Third Party claim under this Article 12: (a) that Party may in its sole discretion and at its own expense assume control of, and be responsible for, the defense or settlement of the claim; (b) if the Party notified assumes control, the other Party may at its own expense hire counsel to monitor the claim; (c) the Party notified shall not, without the prior written consent of the other Party, which consent will not be unreasonably withheld, settle the claim or consent to entry of any judgment relating thereto which does not include as a term thereof the giving by the claimant to the other Party of a release from all liability in respect to the claim; and (d) if a claim involves only an injunction or equitable relief, the Party giving notice shall have the right to be represented, at its own expense, by counsel of its choice in connection with the defense of the claim, and the Party notified will not, without the prior written consent of the other Party, which consent will not be unreasonably withheld, settle the claim or consent to entry of any judgment relating thereto. 12.7 PARTY DECLINES RESPONSIBILITY. Prior to the expiration of the 60-day period under Section 12.5, and if the Party notified does not within that time period accept responsibility for any Third Party claim under this Article 12 or declines to assume control: (a) the Party giving notice may engage counsel to defend, settle or otherwise dispose of such claim; (b) the Party notified may at its own expense hire counsel to monitor the claim; (c) the Party receiving notice may notify the other Party at a subsequent time that it is assuming responsibility for the claim, at which time the provisions of Section 12.6 become applicable; and (d) the right of either Party to contest the right of the other Party to indemnification under this Agreement will respect to the proceeding or claim shall not be extinguished. 12.8 COOPERATION. The Parties will cooperate fully with each other in connection with the defense, negotiation or settlement of any Third Party claim under this Article 12, provided, however, 59 69 that in no event shall either Party have any right to privileged correspondence, material or information of the other Party. Further, the Buyer agrees with respect to any claim to provide the Seller written notice at least 30 days prior to undertaking or commencing any investigation or testing that is intended, or could reasonably be expected, to lead to discovery of any Pre-Closing Environmental Condition. The undertaking and the scope of any such investigation or testing shall be subject to the prior approval of the Seller, which approval shall not be unreasonably withheld, or Seller shall have no liability or responsibility for any Pre-Closing Environmental Condition thus discovered or disclosed. 12.9 THE SELLER'S INDEMNITY AND THE BUYER'S RE-SALE OF REAL PROPERTY. With respect to any matter for which the Seller is to indemnify the Buyer under Section 12.2 that involves removal, remediation or cleanup of Regulated Substances, the Seller's Responsibility shall be limited to curing the breach or contributing to resolution of the Pre-Closing Environmental Condition under, and only to the extent required by, the Environmental Laws in effect and applicable at the Closing. The Buyer acknowledges and agrees that if a subsequent purchaser or a change in law or land use requires additional cleanup or work at the Real Property beyond that which may already have been initiated or completed by the Seller, the Buyer will have the sole responsibility to satisfy those additional requirements. Notwithstanding anything contained in this Agreement to the contrary, the Seller will have no obligation or liability with regard to any such additional cleanup or work or to any such purchaser under this Article 12. 12.10 NO CONSEQUENTIAL DAMAGES. Notwithstanding anything contained herein to the contrary, in no event will either Party be liable to the other for consequential, special or incidental Damages such as, by way of example and not of limitation, reduction in market value of the Real Property, loss of profits, loss of business opportunity or interruption-of-business losses. 12.11 ACCESS TO THE REAL PROPERTY AND DOCUMENTS. If the Seller and its representatives and agents request, the Buyer or any Buyer Subsidiary shall provide to the Seller access to the Real Property and the books, records and employees of the Buyer or any Buyer Subsidiary relating to the Business to the extent reasonably necessary to assist the Seller in investigating, assessing, remediating, defending or settling any claim regarding any matter for which the Buyer notifies the Seller under Section 12.5, provided that such access will be sought in such manner so as not to interfere unreasonably with the operation of the Buyer's or any Buyer Subsidiary's business. 12.12 THE SELLER'S PURSUIT OF THIRD PARTIES. If the Seller remediates, or incurs any Damages with respect to, a matter for which a Third Party may be responsible or liable, the Buyer and the Buyer Subsidiaries agree to cooperate with the Seller in pursuing any claim against such Third Party and will use reasonable efforts to assist the Seller in legally asserting such claim and in recovering the Seller's Damages against such Third Party including, but not limited to, acting as the real party in interest and assigning the Buyer's or the Buyer Subsidiary's rights or any cause of action against any such Third Party relating to such claim or the proceeds thereof to the Seller. 12.13 LIMITATIONS. In addition to the limitations and conditions on indemnification stated in this Article 12, the limitations and conditions stated in Sections 19.7, 19.8, 19.9 and 19.10 shall 60 70 apply to indemnification under this Article 12. No other Sections of Article 19 shall apply to environmental matters addressed by Section 5.12 or this Article 12. 12.14 AGENCY CONTACT. (a) The Buyer agrees that it will not engage in any contact, whether written, verbal, or in person, with any governmental agency or agency representative regarding any condition that it believes may constitute a matter for which it may be entitled to indemnity under Section 12.2, unless: (i) the contact is required under any Environmental Law; (ii) a governmental agency or agency representative contacts the Buyer regarding that matter; or (iii) the Seller has approved the contact. (b) If the Buyer believes it is entitled to contact a governmental agency or agency representative regarding any condition that it believes may constitute a matter for which it may be entitled to indemnity under Section 12.2, it shall notify the Seller as soon as it believes it will make the contact, and the Seller shall have ten days from receipt of the Buyer's notice in which to approve the contact and advise the Buyer if the Seller wishes to participate in the contact. The Seller's failure to approve or disapprove the contact within ten days of receipt of the Buyer's notice of the proposed contact shall be deemed to be approval of the contact. (c) Except as provided herein, the Seller will make all reports to governmental agencies or other reports necessary or desirable in connection with any condition or circumstance with respect to which the Buyer asserts any claim for indemnity under Section 12.2. 12.15 SURVIVAL. The rights and obligations of the Parties set forth in this Article 12 shall survive the Closing as set forth in Section 18.1 without regard to Section 18.2. ARTICLE 13 CONDITIONS TO OBLIGATIONS OF THE BUYER The obligations of the Buyer under this Agreement are subject to the satisfaction at or prior to the Closing Date of the following conditions, any of which may be waived in whole or in part by the Buyer in its sole discretion by delivery of a written notice to that effect to the Seller, which shall constitute a release by the Buyer with respect to such condition. 13.1 HSR/COMPETITION ACT COMPLIANCE. All applicable governmental pre-merger filing requirements under the HSR Act shall have been satisfied and the applicable waiting period requirements under the HSR Act shall have been terminated early or shall have expired. All filings 61 71 required to be made under the Competition Act (Canada) shall have been made. The applicable waiting periods under the Competition Act shall have expired or (i) the Buyer shall have been advised in writing by the Commissioner of Competition that he has determined not to take any action or any proceeding, including making an application for an order under Section 92 of the Competition Act, in respect of this transaction; or (ii) an advance ruling certificate shall have been issued under Section 102 of the Competition Act in respect of this transaction. 13.2 NO LITIGATION. At the Closing Date, no litigation, proceeding, investigation, or inquiry shall be pending or threatened to enjoin or prevent the consummation of the transactions contemplated by this Agreement, or involving any of the Transferred Assets which, if sustained, would have a Material Adverse Effect on the Buyer's right to retain the Transferred Assets or to conduct the Business as it is currently conducted. 13.3 NO CASUALTY. Prior to the Closing Date, there shall not have occurred any single uninsured casualty in or to any of the Transferred Assets as a result of which the monetary amount of damage or destruction totals $1,000,000 or a lesser amount if such damage or destruction has a Material Adverse Effect, unless the Seller agrees to replace the damaged or destroyed Transferred Assets or unless the Parties mutually agree to an adjustment in the Purchase Price. 13.4 RETAIL SALES TAX CERTIFICATE. On or prior to the Closing, the Seller shall deliver to the Buyer a certificate issued by the Minister of Finance pursuant to Section 6 of the Retail Sales Tax Act (Ontario) to the effect that each of Eaton Yale and ETN Offshore has paid all taxes collectable or payable under such Act or has otherwise entered into arrangements satisfactory to such Minister to pay any such taxes. 13.5 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Seller contained herein shall, if qualified by materiality, be true and correct and, if not so qualified, be true and correct in all material respects at and as of the Closing as if made as of the Closing, in each case, except for any violations thereof which, individually or in the aggregate, would not have an adverse effect on the value of the Transferred Assets in excess of an amount equal to five percent (5%) of the Purchase Price; provided, that representations and warranties that are made as of a specific date need be true in all material respects only as of such date and that representations and warranties with Corresponding Schedules amended pursuant to Section 7.10 need be true in all material respects subject to any such amendment, in each case, except for any violations thereof which, individually or in the aggregate, would not have an adverse effect on the value of the Transferred Assets in excess of an amount equal to five percent (5%) of the Purchase Price. The Seller shall furnish the Buyer with an appropriate closing certificate, dated the Closing Date, to that effect. 13.6 PERFORMANCE BY THE SELLER. All of the covenants and agreements required by this Agreement to have been performed and complied with by the Seller, if qualified by materiality, shall 62 72 have been performed and complied with and, if not so qualified, shall have been performed and complied with by the Seller in all material respects prior to or on the Closing Date, in each case except where such nonperformance or noncompliance, individually or in the aggregate, would not have an adverse effect on the value of the Transferred Assets in excess of an amount equal to five percent (5%) of the Purchase Price. The Seller shall have delivered to the Buyer an appropriate certificate to that effect dated the Closing Date. 13.7 STATUTORY PROHIBITION. No written or published statute, rule, regulation or order shall have been enacted, entered or deemed applicable by any domestic or foreign government or governmental or administrative agency or court which would make the transaction contemplated by this Agreement illegal. 13.8 NO MATERIAL ADVERSE CHANGE. There shall have not been any adverse change in the financial condition or property of the Division or in the Business as such is currently conducted, the effect of which is materially adverse to the value of the Transferred Assets taken as a whole or materially adverse to the Business, the condition (financial or otherwise) or results of operations of the Business in each case taken as a whole. 13.9 REAL ESTATE MATTERS. The provisions in Section 11.2 shall have been satisfied by the Seller or waived by the Buyer. 13.10 LANDLORD CONSENT. The landlord for the Brunswick Facility shall have given its consent to the assignment to the Buyer or a Buyer Subsidiary of the Seller's interest as tenant under the lease for the Brunswick Facility dated March 29, 1994, as amended (the "Brunswick Landlord Consent"). ARTICLE 14 CONDITIONS TO OBLIGATIONS OF THE SELLER The obligations of the Seller under this Agreement are subject to the satisfaction at or prior to the Closing Date of the following conditions, any of which may be waived in whole or in part by the Seller in its sole discretion by delivery of a written notice to that effect to the Buyer, which shall constitute a release by the Seller with respect to such condition. 14.1 HSR/COMPETITION ACT COMPLIANCE. All applicable governmental pre-merger filing requirements under the HSR Act shall have been satisfied and the applicable waiting period requirements under the HSR Act shall have been terminated early or shall have expired. All filings required to be made under the Competition Act (Canada) shall have been made. The applicable waiting periods under the Competition Act shall have expired or (i) the Buyer shall have been advised in writing by the Commissioner of Competition that he has determined not to take any action or any proceeding, including making an 63 73 application for an order under Section 92 of the Competition Act in respect of this transaction; or (ii) an advance ruling certificate shall have been issued under Section 102 of the Competition Act in respect of this transaction. 14.2 NO LITIGATION. At the Closing Date, no litigation, proceeding, investigation, or inquiry shall be pending or threatened to enjoin or prevent the consummation of the transactions contemplated by this Agreement. 14.3 TRUTH OF REPRESENTATION AND WARRANTIES. The representations and warranties of the Buyer contained herein shall, if qualified by materiality, be true and correct and, if not so qualified, be true and correct in all material respects at and as of the Closing as if made as of the Closing, in each case, except for any violations thereof which, taken as a whole, would not reasonably be likely to have a Material Adverse Effect; provided, that representations and warranties that are made as of a specific date need be true in all material respects only as of such date, except for any violations thereof which, taken as a whole, would not reasonably be likely to have a Material Adverse Effect. The Buyer shall furnish the Seller with an appropriate closing certificate, dated the Closing Date, to that effect. 14.4 PERFORMANCE BY THE BUYER. All of the covenants and agreements required by this Agreement to have been performed and complied with by the Buyer, if qualified by materiality, shall have been performed and complied with and, if not so qualified, shall have been performed and complied with by the Buyer in all material respects prior to or on the Closing Date, in each case, except where such nonperformance or noncompliance, taken as a whole, would not reasonably be likely to have a Material Adverse Effect. The Buyer shall have delivered to the Seller an appropriate certificate to that effect dated the Closing Date. 14.5 STATUTORY PROHIBITION. No written or published statute, rule, regulation or order shall have been enacted, entered or deemed applicable by any domestic or foreign government or governmental or administrative agency or court which would make the transaction contemplated by this Agreement illegal. 14.6 LANDLORD CONSENT. The landlord for the Brunswick Facility shall have given the Brunswick Landlord Consent. ARTICLE 15 CLOSING 15.1 THE CLOSING DATE. The Closing shall take place at the offices of the Seller, at Eaton Center, Cleveland, Ohio, at 10:00 a.m. on August 2, 1999 (but effective as of 12:01 a.m., Cleveland, Ohio local time on August 1, 1999), or, if the conditions specified in Articles 13 and 14 have not been fulfilled or waived by such date, on the last business day of the month in which the fulfillment 64 74 or waiver of such conditions occurs or at such other place or on such other day as the Buyer and the Seller shall agree upon in writing. Such date is herein called the "Closing Date." If all of the conditions specified in Articles 13 and 14 shall have been fulfilled or waived in writing by the Buyer or by the Seller, as the case may be, on or by the Closing Date, then, on the Closing Date, the Buyer and the Seller shall make the following deliveries. 15.2 DELIVERIES BY THE BUYER. Subject to the terms and conditions of this Agreement, at the Closing, the Buyer shall deliver or cause to be delivered to the Seller: (a) the Purchase Price required by Section 4.1 of this Agreement; (b) the Assumption Agreement; (c) the Services Agreement; (d) the Leased Real Property Assignment and Assumption Agreements; (e) the Buyer Guaranty; (f) the certificates referred to in Section 14.3 and Section 14.4; and (g) any other documents required to be delivered by Buyer under this Agreement or any Related Agreement. 15.3 DELIVERIES BY THE SELLER. Subject to the terms and conditions of this Agreement, at the Closing, the Seller shall deliver or cause to be delivered to the Buyer: (a) a general assignment and bill of sale in the form set forth on the Corresponding Exhibit; (b) assignments of the Seller's ownership rights to each of the Proprietary Rights in form mutually satisfactory to counsel for the Buyer and the Seller hereunder and in recordable form to the extent necessary to assign such rights; (c) a limited warranty deed of transfer for the Massillon Facility and a transfer deed for the Hamilton Facility, in each case subject to the Real Property Permitted Exceptions and each in form acceptable for filing with and recording in the records of the appropriate office or land registry office of the township, county, state or province where such real estate is located, and such other documents required to be delivered by the Seller under Article 11; (d) the Services Agreement; (e) the Brunswick Landlord Consent; 65 75 (f) the Leased Real Property Assignment and Assumption Agreements; (g) the certificates referred to in Section 13.5 and Section 13.6; (h) separate assignments or other appropriate instruments of transfer to the Buyer of any of the Transferred Assets not appropriately transferred by the documents referred to in clauses (a) through (h) above; and (i) any other documents required to be delivered by Seller under this Agreement or any Related Agreement. 15.4 RIGHTS TO POSSESSION. The Buyer's right to possession of the Transferred Assets shall commence at the close of business on the Closing Date, and the Buyer or the Buyer Subsidiaries shall take possession of the Transferred Assets at the places they are located on the Closing Date. ARTICLE 16 SALES AND TRANSFER TAXES The Seller and the Buyer shall share equally all sales, use, transfer and documentary taxes and recording and filing fees, if any, including, without limitation, all provincial land transfer taxes, provincial sales taxes, other than Canadian Goods and Services Taxes under Part IX of the Excise Tax Act (Canada), and any other charges applicable to the transfer of the Transferred Assets and the assumption of the Assumed Liabilities provided for by this Agreement. The Buyer's and the Seller's respective obligations with respect to the GST Legislation are set forth in Section 9.1. ARTICLE 17 BULK SALES The Buyer hereby waives compliance by the Seller with any applicable bulk sales or bulk transfer law applicable in any jurisdiction where the Transferred Assets are located, and the Seller hereby agrees that the provisions of Section 19.1 shall apply to any losses, damages, costs, charges or expenses which the Buyer may sustain as a consequence of the Seller not complying with such bulk sales or bulk transfer laws. ARTICLE 18 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS 18.1 SURVIVAL. The representations, warranties, covenants and agreements contained in this Agreement shall survive the Closing only for the applicable period set forth in this Article 18. All 66 76 of the representations and warranties of the Seller and the Buyer contained in this Agreement and all unasserted claims and causes of action with respect thereto shall terminate upon expiration of the eighteenth month following the Closing Date, except that: (a) the representations and warranties in Section 5.11 (Tax Matters), shall terminate upon the expiration of the applicable statute of limitations; (b) the representations and warranties in Section 5.12 (Environmental Matters) shall terminate upon the expiration of 36 months following the Closing Date; and (c) the representations and warranties in Section 5.1 (Organization, Existence and Standing of the Seller), Section 5.2 (Corporate Authority), Section 5.6(a) (Owned Real Property), Section 5.7 (Title to Personal Property), Section 6.1 (Organization, Existence and Standing of the Buyer), and Section 6.2 (Corporate Authority) shall survive indefinitely. The covenants and agreements contained in this Agreement which do not have specific time periods of applicability shall survive the Closing Date indefinitely. Covenants and agreements contained in this Agreement which have specific time periods of applicability shall survive the Closing Date for the periods set forth therein. 18.2 NOTICE OF CLAIM. No party shall have an obligation to indemnify the other for breach of any representation, warranty, covenant or agreement unless notice of a claim for indemnification with respect to such breach has been submitted to the Indemnifying Party (as defined in Section 19.4) in accordance with Article 19 prior to the end of the applicable survival period. ARTICLE 19 INDEMNIFICATION 19.1 INDEMNIFICATION OF THE BUYER. Subject to Article 12, Article 18 and to compliance with Sections 19.3, 19.4, 19.10 and 19.11 of this Agreement, the Seller agrees to indemnify the Buyer and the Buyer Subsidiaries against any loss, cost, liability or expense (including, without limitation, costs and expenses of investigation and litigation and, to the extent permitted by law, actual attorney's fees) (collectively, "Indemnified Losses") incurred by the Buyer or any Buyer Subsidiary by reason of (a) any breach of any representation, warranty, covenant or agreement of the Seller (other than any such breach relating to matters addressed in Section 5.12 or Article 12), or in any certificate or other closing document furnished by the Seller, pursuant to this Agreement, (b) the provision contained in Article 17, or (c) the assertion against the Buyer or any Buyer Subsidiary of any of the Retained Liabilities or liabilities retained or assumed by the Seller under Article 10. 19.2 INDEMNIFICATION OF THE SELLER. Subject to Article 12, Article 18 and to compliance with Sections 19.3, 19.4, 19.10 and 19.11 of this Agreement, the Buyer agrees to indemnify the Seller and the Seller Subsidiaries against any Indemnified Losses incurred by the Seller or any Seller Subsidiary by reason of (a) any breach of any representation, warranty, covenant or agreement of the 67 77 Buyer, or in any certificate or other closing document furnished by the Buyer, pursuant to this Agreement, or (b) the assertion against the Seller or any Seller Subsidiary of any of the Assumed Liabilities (other than those relating to any Environmental Condition) or liabilities assumed by the Buyer under Article 10. 19.3 ELIGIBLE CLAIM, THRESHOLD AMOUNT, PAYMENT. A Party may bring a claim seeking indemnification (the "Indemnified Party") under the terms and provisions of this Article 19 only if such claim exceeds $25,000 (an "Eligible Claim"). Further, a Party may bring an Eligible Claim seeking indemnification under the terms and provisions of this Article 19 only if such Eligible Claim, either alone or when aggregated with other Eligible Claims for indemnification by such party, exceeds 2% of the Purchase Price, as adjusted pursuant to Section 4.3 (the "Threshold Amount"). Until such time as a Party can bring an Eligible Claim or Eligible Claims in the aggregate amount in excess of the Threshold Amount, no right to indemnification under this Article 19 shall arise. In the event that a Party brings an Eligible Claim or Eligible Claims for an amount in excess of the Threshold Amount, such Party shall be entitled to indemnification for the full amount of all Indemnified Losses up to the maximum amount referred to in Section 19.10. 19.4 PROCEDURES FOR CLAIMS. Subject to Section 19.3, any Indemnified Party shall provide written notice of any Eligible Claim to the Party from which it seeks indemnification (the "Indemnifying Party") within 30 days of such Party becoming aware of the existence of such Eligible Claim stating the amount claimed to be due and payable or an estimate of the claim if contingent or unliquidated, the basis of the claim and the provision or provisions of this Agreement under which such claim is asserted. Within 30 calendar days after receipt of such notice, the Indemnifying Party shall by written notice to the Indemnified Party either (a) concede liability in whole as to the amount claimed in such notice, (b) deny liability in whole as to such amount, or (c) concede liability in part and deny liability in part. If the Parties are not able to resolve any dispute over a claim brought under this Article 19 within 30 days after the Indemnified Party receives written notice from the Indemnifying Party denying liability in whole or in part, the Parties shall submit the dispute to the dispute resolution procedure set forth in Article 22. 19.5 THIRD-PARTY CLAIMS. (a) An Indemnifying Party shall have the right, exercisable by written notice to the Indemnified Party within 30 days of receipt of written notice from the Indemnified Party of the commencement of or assertion of any lawsuit filed or instituted against the Indemnified Party asserting any claim for which the Indemnifying Party may be responsible under this Agreement (each, a "Third Party Claim"), to assume and conduct the defense of each Third Party Claim with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Party; provided, however, that such Third Party Claim involves (and continues to involve) solely monetary damages (the "Litigation Condition"). (b) If the Indemnifying Party does not assume the defense of such Third Party Claim in accordance with this Section 19.5, the Indemnified Party may continue to defend the Third Party Claim. If the Indemnifying Party has assumed the defense of a Third Party Claim as provided in this Section 19.5, the Indemnifying Party shall not be liable for any legal expenses subsequently incurred 68 78 by the Indemnified Party in connection with the defense thereof; provided, however, that if (i) the Litigation Condition ceases to be met, or (ii) the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within 30 calendar days (or such shorter period as may be required to defend diligently such Third Party Claim) after receiving written notice from the Indemnified Party that the Indemnified Party believes the Indemnifying Party has failed to take such steps, the Indemnified Party may assume its own defense, and the Indemnifying Party shall be liable for all reasonable costs or expenses paid or incurred in connection therewith. (c) Without the Indemnified Party's prior written consent or authorization, which consent or authorization will not be unreasonably withheld, the Indemnifying Party shall not consent to a settlement of, or the entry of any judgment arising from, any Third Party Claim which does not include as a term thereof the giving by the claimant to the Indemnified Party of a release from all liability in respect of such Third Party Claim. If the Indemnifying Party does not assume the defense of any such Third Party Claim or litigation resulting from such claim in accordance with the terms of this Section 19, the Indemnified Party may defend against such claim or litigation in such manner as it may deem appropriate, including settling such claim or litigation, after giving notice of the same to the Indemnifying Party, on such terms as the Indemnified Party may deem appropriate. If the Indemnifying Party seeks to question the manner in which the Indemnified Party defended such Third Party Claim or litigation resulting from such claim or the amount of or nature of any such settlement, the Indemnifying Party shall have the burden to prove by a preponderance of the evidence that the Indemnified Party did not defend such claim in a reasonably prudent manner. 19.6 EXCLUSIVE REMEDY. Except as otherwise expressly provided for in this Agreement, following the Closing, the indemnification provided by this Article 19 shall be the exclusive remedy for the Buyer or the Seller, as the case may be, with respect to this Agreement (other than those matters addressed by Article 12) and the transactions contemplated by this Agreement, except claims for fraud or intentional misrepresentation shall not be limited by the provisions in this Article 19. 19.7 PAYMENT OF AMOUNTS. If any amount is determined to be due and owing to a Party as a result of any occurrence which gives rise to indemnification obligations under this Section 19, such amount shall be paid by the Indemnifying Party to the Indemnified Party in immediately available funds. All indemnification payments under this Article 19 (or under Article 12 as set forth therein) shall be deemed adjustments to the Purchase Price. 19.8 TAX AND/OR INSURANCE OFFSET. The amount of any Indemnified Losses suffered by an Indemnified Party shall be reduced by the net effect of any tax-related benefits or insurance coverage which may be realized by such Party following the date of such Indemnified Losses in respect of or as a result of such Indemnified Losses or the facts or circumstances relating thereto. Notwithstanding the foregoing, it is understood and agreed that the determination of the net tax effect and/or insurance coverage benefit of any Indemnified Losses, if any, shall not delay payment or indemnification of such Indemnified Losses by the Indemnifying Party. All Indemnified Losses shall be paid or reimbursed promptly upon determination; the Indemnified Party shall reimburse the Indemnifying Party for the net tax effect benefit of such Indemnified Losses, if any, upon the date 69 79 of filing of the tax return with respect to which such tax benefit is realizable or upon the date of recovery of any insurance proceeds. 19.9 NO INDEMNIFICATION FOR KNOWN BREACHES OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any provision to the contrary contained in this Agreement, including Article 12 hereof, in the event that the Seller proves that the Buyer had actual knowledge, on or before the Closing Date, of the specific facts upon which a claim for indemnification by the Buyer is based, then the Seller shall have no liability for any Indemnified Losses resulting from or arising out of such claim. 19.10 MAXIMUM AMOUNT OF ANY INDEMNIFICATION. Notwithstanding anything in this agreement to the contrary, no party shall be required to indemnify the other for claims with respect to which indemnification (on a cumulative basis) under this Article 19 would otherwise be available in excess of an amount equal to 25% of the Purchase Price, as adjusted pursuant to Section 4.3. 19.11 INDEMNIFICATION WITH RESPECT TO CERTAIN LIABILITIES. Notwithstanding anything in this Article 19 to the contrary, claims by the Buyer against the Seller or any Seller Subsidiary in respect of the Retained Liabilities, the Seller's liabilities under Article 10 or Article 17, whether any of the foregoing liabilities are directly or indirectly related to any representation or warranty herein, and claims by the Seller or any Seller Subsidiary in respect of the Assumed Liabilities, or the Buyer's liabilities under Article 10, whether any of the foregoing liabilities are directly or indirectly related to any representation or warranty herein, shall not be subject to any of the limitations on indemnification set forth in Sections 19.3 or 19.10, including, without limitation, those limitations relating to Eligible Claims, the Threshold Amount or the maximum amount of indemnification. ARTICLE 20 TERMINATION 20.1 GROUNDS. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and the transactions contemplated hereby abandoned only under one of the following circumstances: (a) At any time (by written notice delivered to the other Party) prior to the Closing: (i) By the Buyer (upon action by its Board of Directors) if any of the conditions set forth in Article 13 of this Agreement has become incapable of fulfillment on or before the Termination Date; (ii) By the Seller (upon action by its Board of Directors) if any of the conditions set forth in Article 14 of this Agreement has become incapable of fulfillment on or before the Termination Date; 70 80 (iii) By the Seller or the Buyer if the Closing has not occurred on or prior to the Termination Date, unless the absence of such occurrence shall be due to the delay or failure of the Party seeking to terminate this Agreement (or its Subsidiaries or Affiliates) to perform in all material respects each of its obligations under this Agreement required to be performed by it at or prior to the Closing; provided, however, that if the Closing has not occurred by the Termination Date solely due to the failure of the conditions set forth in Section 13.1 or 14.1 to be satisfied, then either of the Parties may extend the Termination Date for such period of time as necessary to satisfy such conditions, provided that such extension shall in no event exceed 180 days after the date hereof without the prior written consent of each of the parties; (iv) By either the Buyer or the Seller, if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action, in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and through no failure, delay or fault of or breach by the terminating Party (or its Subsidiaries or Affiliates), and such order, decree, ruling or other action shall have become final and nonappealable; or (v) By the Buyer at any time if the Seller amends any of the Corresponding Schedules pursuant to Section 7.10 and such amendment reflects information that would have or has had a Material Adverse Effect. (b) At any time by the mutual written consent of both the Buyer and the Seller. 20.2 EFFECT. (a) If any of the conditions to the obligations of the Buyer in Article 13 or of the Seller in Article 14 have not been satisfied prior to the Termination Date, the Buyer or the Seller, as the case may be, shall have the right either (i) to terminate this Agreement pursuant to, and with liability allocated as set forth in, this Article 20, or (ii) to waive and release their respective conditions and to proceed with the Closing and the consummation of the transactions contemplated by this Agreement without liability or further obligation with respect to the nonfulfillment of such condition. (b) In the event that this Agreement is terminated as permitted by Section 20.1, all obligations of the Seller and the Buyer hereunder shall terminate without liability or further obligations, except as provided in Section 20.3. (c) Notwithstanding the foregoing, any confidentiality agreement entered into by the Parties, and any other agreements between the Parties that do not expressly provide for their termination, shall survive the termination of this Agreement. 20.3 LETTER OF CREDIT. Contemporaneously with execution of this Agreement, the Buyer will cause BankBoston, N.A. to issue a letter of credit in favor of the Seller in the amount of 71 81 $4,000,000. Such letter of credit will be in form and substance reasonably satisfactory to the Seller. If the conditions set forth in Article 13 have been satisfied and the Closing has failed to occur within the time required under this Agreement because the Buyer has failed to perform its obligations under this Agreement, then the Seller shall have the right to draw upon the letter of credit. In such event, the amount drawn on the letter of credit shall be retained by the Seller as liquidated damages, and not as a penalty, the parties hereby acknowledging and agreeing that the amount of the Seller's actual damages in such circumstances would be difficult, if not impossible, to ascertain, that the amount of the letter of credit constitutes a reasonable estimate thereof and that other than the right of termination set forth in Sections 20.1(a)(ii) or 20.1(a)(iii) hereof, such liquidated damages shall be the sole and exclusive remedy of the Seller with respect thereto. ARTICLE 21 EXPENSES Subject to Article 20, Section 9.1, Section 11.1(b), and Article 16, whether or not the transactions contemplated hereby are consummated, each of the Parties will, except in the case of any breach of the terms and provisions of this Agreement for which either the Buyer or the Seller, as the case may be, may be entitled to indemnification under Article 19 hereof, pay its respective expenses, income and other taxes and costs (including, without limitation, the reasonable commissions, fees, disbursements and expenses of its investment bankers, attorneys, accountants and consultants) incurred by it in negotiating, preparing, closing and carrying out this Agreement and the Related Agreements and the transactions contemplated hereby and thereby. ARTICLE 22 DISPUTE RESOLUTION 22.1 NOTICE OF DISPUTE. In the event of a dispute between the Parties arising out of or related to this Agreement (except for matters to be resolved by the Independent Accountant), either Party may invoke the procedures specified in this Article 22 by giving written notice to the other Party. Such written notice will describe briefly the nature of the dispute, the approximate amount of any monetary claim and shall identify an individual with authority to settle the dispute on behalf of that Party. The Party receiving such notice shall have ten days within which to designate an individual with authority to settle the dispute on its behalf and to notify the other Party of its designation (the individuals so designated shall be referred to as the "Authorized Individuals"). The Authorized Individuals shall be elected officers of the Parties if the amount claimed exceeds $5,000,000. 22.2 INVESTIGATION; ADR. The Authorized Individuals shall make whatever investigation each deems appropriate and promptly thereafter, but no later than 30 days from the date of the original notice invoking these procedures, shall commence discussions concerning resolution of the dispute. If the dispute has not been resolved within 60 days from the date of the original notice 72 82 invoking these procedures, the Parties shall submit the matter to alternative dispute resolution ("ADR") in accordance with the following mini-trial procedure. 22.3 SELECTION OF NEUTRAL. The Parties shall have ten days from expiration of the periods referred to in this Section 22.3 or the agreement of the Parties to submit the matter to ADR, whichever occurs first, within which to agree upon a mutually acceptable person not then or previously affiliated in any manner with either Party (the "Neutral"). If no Neutral has been selected within that time period, either Party may request the Center for Public Resources, or if the Buyer has previously objected to the use of the Center for Public Resources, the American Arbitration Association, to supply within ten days a list of at least three potential Neutrals with qualifications as specified in the request, or as agreed to jointly by the Parties. Within seven days of receipt of the list, the Parties shall rank the proposed candidates independently, exchange rankings (ranked numerically with one being the most desired) and select as the Neutral the individual who receives the highest combined ranking who is available to serve. If two or more individuals have the highest ranking and the Parties do not agree within five days as to whom to select, the organization that provided the list of individuals shall select the Neutral from among those individuals with the highest ranking. 22.4 PREHEARING CONFERENCE. Within 30 days after appointment of the Neutral, the Parties agree to meet with the Neutral for a prehearing conference. At such conference, the Parties shall arrange for the exchange of information in the possession of the other Party, including certain limited depositions where appropriate, and the stipulation of uncontested facts. The Parties shall establish the extent of and schedule for the production of relevant documents, sworn depositions and the identification of witnesses. Should a dispute arise over the extent of document production, appropriate witnesses or the scheduling of any activity, including the hearing location and date, the Neutral shall make a final determination after hearing each Party's position. At such prehearing conference, or at a later scheduled conference as agreed to by both Parties, the location and date for the hearing shall be set which shall not, unless both Parties agree, be more than 120 days from the date of the initial prehearing conference. 22.5 WRITTEN SUMMARY OF POSITION. One week prior to the scheduled hearing, each Party shall deliver to the Neutral and to the other Party a written summary of its views on the matter in dispute. The summary shall be no longer than twenty double-spaced pages unless the Parties agree otherwise. 22.6 HEARING. At the hearing each Party shall be represented by the Authorized Individuals and also by counsel. Each Party shall have an agreed-upon time, not to exceed four hours, in order to present its case. The Authorized Individuals shall hear the presentation but shall not participate in them. The Neutral will be permitted to ask questions during the presentation by each side and the Authorized Individuals may ask questions after the conclusion of the other Party's presentation. At the conclusion of such presentations, the Authorized Individuals, without counsel, shall meet with the Neutral to discuss the case in order to reach a resolution. If no settlement is reached, the Neutral will orally summarize the dispute, the strengths and weaknesses of both Parties' positions and give his opinion as to how much the Party seeking recovery or other relief would receive if the matter 73 83 were resolved through litigation. There shall be no stenographic, visual or audio record made of the hearing. 22.7 COMMITMENT TO ADR. The Parties agree to participate in the ADR to its conclusion as designated by the Neutral and not to terminate negotiations concerning resolution of the matters in dispute until at least two weeks thereafter. Each Party agrees not to commence a lawsuit or seek other remedies prior to the conclusion of the two-week post-hearing negotiation period; provided, however, that notwithstanding anything to the contrary in this Article 22 or elsewhere in this Agreement, either Party may commence litigation on any date after which the commencement of litigation would be barred by an applicable statute of limitations or in order to request equitable relief to prevent irreparable harm or other injury for which equitable relief is appropriate. In such event, the Parties agree (except as prohibited by court order) to continue to participate in the ADR to its conclusion. 22.8 FEES. The fees of, and reasonable costs incurred by, the Neutral shall be shared equally by the Parties. The Neutral shall be disqualified as a witness, consultant, expert or counsel for any Party with respect to the matters in dispute and any related matters. 22.9 CONFIDENTIALITY. The ADR is a compromise negotiation for purposes of the Federal Rules of Evidence and state rules of evidence. The entire procedure is confidential. All conduct, statements, promises, offers, views and opinions, whether oral or written, made in the course of the ADR by any of the Parties, their agents, employees, representatives or other invitees to the ADR and by the Neutral, who is the Parties' joint agent for purposes of these compromise negotiations, are confidential and shall, in addition and where appropriate, be deemed to be work product and privileged. Such conduct, statements, promises, offers, views and opinions shall not be discoverable or admissible for any purposes, except impeachment, in any litigation or other proceeding involving the Parties and shall not be disclosed to anyone not an agent, employee, expert, witness, or representative for any of the Parties. Evidence otherwise discoverable or admissible is not excluded from discovery or admission as a result of its use in the ADR, and the Parties may request any discovery to which they would otherwise be entitled without regard to the documents, depositions or other discovery that occurred as part of the ADR. ARTICLE 23 MISCELLANEOUS 23.1 NOTICES. Any notice, request, instruction, consent or other document to be given hereunder by either Party to the other Party shall be in writing and will be deemed duly given (i) when personally delivered, (ii) upon receipt of a telephonic facsimile transmission with a confirmed telephonic transmission answer back, (iii) three days after having been deposited in the United States mail, certified or registered, return receipt requested, postage prepaid, or (iv) one business day after having been dispatched by a nationally recognized overnight courier service, addressed to such Party 74 84 at the following address (or at such other address or number as is given in writing by either Party to the other) as follows: If to the Buyer: TransTechnology Corporation 150 Allen Road Liberty Corner, New Jersey 07938 Attention: General Counsel Facsimile No.: (908) 903-0209 If to the Seller: Eaton Corporation 1111 Superior Avenue Cleveland, Ohio 44114 Attention: Office of the Secretary Facsimile No.: (216) 479-7103 23.2 WAIVER. None of the terms or conditions of this Agreement may be waived except in writing, specifically so stating, at any time by the Party which is entitled to the benefits thereof. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of such provision at any time in the future or a waiver of any other provision hereof. 23.3 CAPTIONS. The captions set forth in this Agreement are for convenience only and shall not be considered as part of this Agreement, nor affect in any way the meaning of the terms and provisions hereof. 23.4 SUCCESSORS AND ASSIGNS. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the Parties hereto; provided, however, that this Agreement may not be assigned by any Party without the express written consent of the other Party hereto, except that either Party may assign all or part of its rights and obligations under this Agreement to one or more Subsidiaries of such Party, but any such assignment will not release such Party of any of its obligations. Effective as of the Closing, the Buyer and the Buyer Subsidiaries may pledge, assign and grant to the Buyer's institutional lenders, for the benefit of such lenders, a continuing security interest and lien on all of the Buyer's or the Buyers Subsidiaries' right, title and interest in and to this Agreement as security for the payment and performance of all obligations of the Buyer or Buyer Subsidiaries to such lenders by reason of borrowings or the guaranty of such borrowings, subject to any defense, claim or right of offset the Seller may have against the Buyer. 23.5 ENFORCEABILITY. If any provision of this Agreement as applied to any Party or to any circumstance shall be adjudged by a court to be invalid or unenforceable, the same shall in no way affect any other provision of this Agreement, the application of such provision in any other circumstances, or the validity or enforceability of this Agreement. The Parties intend this Agreement to be enforced as written. If any such provision, or part thereof, however, is held to be unenforceable because of the duration thereof or the area covered thereby, the Seller and the Buyer agree that the court making such determination shall have the power to reduce the duration and/or area of such provision, and/or to delete the specific words or phrases, and in its amended form such provision 75 85 shall then be enforceable and shall be enforced. If any provision of this Agreement shall otherwise finally be determined to be unlawful, then such provision shall be deemed to be severed from this Agreement and every other provision of this Agreement shall remain in full force and effect. 23.6 NO THIRD-PARTY BENEFICIARIES OR RIGHT TO RELY. Notwithstanding anything to the contrary in this Agreement, (a) nothing in this Agreement is intended to or shall create for or grant to any Third Party (including without limitation to any former, current or future employees or officers of any Party, any Subsidiary or any labor union) any rights whatever, as a Third Party beneficiary or otherwise, (b) no Third Party is entitled to rely on any of the representations, warranties, covenants or agreements contained herein, and (c) no Party hereto shall incur any liability or obligation to any Third Party because of any reliance by such Third Party on any representation, warranty, covenant or agreement herein. 23.7 COUNTERPARTS. This Agreement may be executed in more than one counterpart, each of which shall for all purposes be deemed to be an original and all of which shall constitute one and the same agreement. A signature to this Agreement delivered by telecopy or other artificial means shall be deemed valid. 23.8 GOVERNING LAW. This Agreement shall in all respects be interpreted, construed and governed by and in accordance with the local laws of the State of Ohio, without regard to principles of conflict of laws. 23.9 TIME OF ESSENCE. Time shall be of the essence with respect to this Agreement. 23.10 NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the Parties hereto to express their mutual intent, and no rule of strict construction will be applied against either Party. 23.11 PUBLIC ANNOUNCEMENTS. The Buyer and the Seller shall agree on the terms of the press releases to be issued upon the execution of this Agreement and shall consult with each other before issuing any other press releases with respect to this Agreement and the transactions contemplated hereby, including without limitation, any termination of this Agreement for any reason. 23.12 CURRENCY/METHOD OF PAYMENT. Unless otherwise specifically provided herein, (a) all references to amounts of money shall be to lawful money of the United States, and (b) all payments of money to be made by the Buyer or the Seller, as the case may be, shall be made in immediately available funds. 23.13 SUBSEQUENT LEGAL FEES. In the event any action or proceeding is initiated to enforce any of the terms and provisions of this Agreement, the Party prevailing in said action shall be entitled to its reasonable attorney's fees and costs. 23.14 EXCLUSIVE JURISDICTION AND CONSENT TO SERVICE OF PROCESS. The Parties agree that any legal action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, shall be instituted in a federal or state court sitting in Cuyahoga County, Ohio, 76 86 which shall be the exclusive jurisdiction and venue of said legal proceedings and each Party hereto waives any objection which such Party may now or hereafter have to the laying of venue of any such action, suit or proceeding, and irrevocably submits to the jurisdiction of any such court in any such action, suit or proceeding. Any and all service of process and any other notice in any such action, suit or proceeding shall be effective against such Party when transmitted in accordance with the notice provision herein. Nothing contained herein shall be deemed to affect the right of any Party hereto to serve process in any manner permitted by law. 23.15 MISCELLANEOUS. As used in this Agreement, the Corresponding Schedules, the Corresponding Exhibits and the Related Agreements and as required by the context: the singular and plural shall be deemed to include each other and each gender, to include all genders; the terms herein, hereof, and hereunder or other similar terms refer to this Agreement or the Related Agreements, in which they appear as a whole and not only to the particular sentence, paragraph, subsection or section in which any such term is used except as expressly more specifically limited; and words and phrases defined in this Agreement have the same meaning in the Corresponding Schedules, Corresponding Exhibits and Related Agreements unless specifically provided to the contrary in any thereof. 23.16 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including all Corresponding Schedules and Corresponding Exhibits hereto, together with the Related Agreements and the Confidentiality Agreement dated April 28, 1999 between the Seller and the Buyer, constitute the sole understanding of the Parties with respect to the matters contemplated hereby and thereby and supersedes and renders null and void all other prior agreements and understandings, oral or written, between the Parties with respect to such matters. No amendment, modification or alteration of the terms or provisions of this Agreement, including all Corresponding Schedules and Corresponding Exhibits hereto, shall be binding unless the same shall be in writing, specifically so stating, and duly executed by the Party against whom such would apply. 77 87 IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be duly executed and delivered by its duly authorized representatives as of the date first written above. EATON CORPORATION BY: /s/ Robert J. McCloskey -------------------------------- Name: Robert J. McCloskey ------------------------------ Title: Senior Vice President and ----------------------------- Group Executive - Automotive AND BY: /s/ E. R. Franklin ---------------------------- Name: Earl R. Franklin ------------------------------ Title: Secretary ----------------------------- TRANSTECHNOLOGY CORPORATION BY: /s/ Michael J. Berthelot -------------------------------- Name: Michael J. Berthelot ------------------------------ Title: Chairman, President & Chief Executive Officer ----------------------------- 88 AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT This Amendment No. 1 to Asset Purchase Agreement (the "Agreement") is made this 31st day of August, 1999, between Eaton Corporation, an Ohio corporation (the "Seller"), and TransTechnology Corporation, a Delaware corporation (the "Buyer") and amends, supplements and modifies that certain Asset Purchase Agreement dated as of July 9, 1999 between the parties hereto, (the "Purchase Agreement"). Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Purchase Agreement. 1. A new Section 9.12 shall be added to the Purchase Agreement which will read in its entirety as follows: 9.12 FICA AND UNEMPLOYMENT TAXES. Buyer agrees to be a successor for purposes of payroll tax reporting and filings and thus carryover the cumulative FICA and unemployment tax balances withheld from the Transferred Employees (as defined in Section 10.1) pursuant to applicable provisions of the Tax Code. Seller agrees to (1) provide accurate data with respect to such tax balances to Buyer suitable for proper tax filings and (2) indemnify Buyer for any loss, cost, liability or expense (including, without limitation, costs and expenses of investigation and litigation and, to the extent permitted by law, actual attorney's fees) incurred as a result of any inaccurate data provided by Seller with respect to such tax balances. The indemnification provided pursuant to this Section 9.12 is subject to the provisions of Article 19, except that it will not be subject to any of the limitations on indemnification set forth in Sections 19.3 or 19.10, including, without limitation, those limitations relating to Eligible Claims, the Threshold Amount or the maximum amount of indemnification 2. Section 10.6(a) of the Purchase Agreement shall be amended by deleting the following language in the first sentence of this Section: "and each former employee (and, if applicable, the spouse and beneficiaries of such former employee)". 3. Section 10.6(a) of the Purchase Agreement shall be further amended by adding the following new sentence after the existing third sentence of this Section: "In addition, the Buyer's Investment Plan shall provide the Investment Plan Participants with immediate eligibility as of the Closing Date." 4. Section 15.1 of the Purchase Agreement shall be amended and restated in its entirety to read as follows: 89 "15.1 THE CLOSING DATE. The Closing shall take place at the offices of the Seller, at Eaton Center, Cleveland, Ohio, at 10:00 a.m. on the last business day of the month in which the fulfillment or waiver of the conditions specified in Articles 13 and 14 occurs or at such other place or on such other day as the Buyer and the Seller shall agree upon in writing (the "Closing Date"). The Closing shall be effective as of the close of business on the Closing Date. If all of the conditions specified in Articles 13 and 14 shall have been fulfilled or waived in writing by the Buyer or by the Seller, as the case may be, on or by the Closing Date, then, on the Closing Date, the Buyer and the Seller shall make the following deliveries." 5. Except as specifically provided herein, all terms, provisions and conditions of the Purchase Agreement remain in full force and effect. 6. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same document. This Agreement, once executed, may be delivered to either party through the use of facsimile transmission. Any and all signatures of the parties appearing on any facsimile copies of the signature page of this Agreement shall be deemed, unless otherwise proved, the lawful and valid signature of the executing party. IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date first above written. EATON CORPORATION By: /s/ R.J. McCloskey ------------------------------- Name: R.J. McCloskey ----------------------------- Title: Senior Vice President ---------------------------- AND BY: /s/ E. R. Franklin ------------------------------- Name: E. R. Franklin ----------------------------- Title: Secretary --------------------------- TRANSTECHNOLOGY CORPORATION By: /s/ Gerald C. Harvey ------------------------------- Name: Gerald C. Harvey ----------------------------- Title: Vice President, Secretary and General Counsel ---------------------------- 2 90 AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT This Amendment No. 2 to Asset Purchase Agreement (the "Agreement") is made this 31st day of August, 1999, between Eaton Corporation, an Ohio corporation (the "Seller"), and TransTechnology Corporation, a Delaware corporation (the "Buyer") and amends, supplements and modifies that certain Asset Purchase Agreement dated as of July 9, 1999 between the parties hereto, (the "Purchase Agreement"). Capitalized terms used but not otherwise defined herein have the meanings ascribed to them in the Purchase Agreement. 1. Section 10.7(a) shall be amended by deleting the second to last sentence of such Section and replacing it with the following new sentences: With respect to the portion of a Savings Plan Participant's accounts consisting, as of the day before the transfer, of plan loans and/or investment in Eaton Corporation common stock, the transfer contemplated by this Section 10.7 shall be made in the form of an in kind transfer by the Seller's Savings Plan to the Buyer's Savings Plan. With respect to Eaton Corporation common stock transferred in kind under the preceding sentence: (i) Buyer shall cause the Buyer's Savings Plan to allow the Savings Plan Participants, for a period of eighteen (18) months after such transfer, and on at least four (4) occasions during such period, to direct that all or a portion of the amounts invested in their respective accounts in Eaton Corporation common stock be invested in an alternative investment otherwise available under the Buyer's Savings Plan; (ii) as soon as practicable after the end of the eighteen month period described in clause (i) above, the Buyer's Savings Plan shall require that any Eaton Corporation common stock remaining in the Savings Plan Participant accounts at the end of such period shall be liquidated and the proceeds reinvested in an alternative investment otherwise available under the Buyer's Savings Plan selected by the Savings Plan Participants or, in the absence of a selection, the available default investment alternative identified by the Seller; and (iii) to the extent that either the Buyer or any Buyer Subsidiary is found liable for breach of a fiduciary duty under ERISA with respect to the receipt and/or holding of the Eaton Corporation common stock by the Buyer's Savings Plan or with respect to the foregoing provisions of this sentence or a claim to the effect that such a breach has occurred is made: (A) Seller agrees to, and shall, defend, indemnify and hold harmless the Buyer and the Buyer Subsidiaries and their respective officers, directors, employees and agents and the trustee of Buyer's Savings Plan from and against any and all claims, expenses, liabilities, obligations and costs related thereto (including, without limitation, attorneys fees and expenses); and (B) the Seller's indemnification obligation under this sentence shall not be subject to Section 19.3 or Section 19.10 and shall be disregarded entirely in applying such Sections. 91 2. A new Section 10.15 shall be added to the Purchase Agreement which shall read in its entirety as follows: 10.15 RETIREMENT PLAN TRANSFER. Buyer and Seller agree to enter into an agreement providing that, subject to actuarial approval and agreement which will not be unreasonably withheld, the assets and liabilities associated with the Seller Plan Participants under the Seller Plan shall be transferred to a new defined benefit plan established by the Buyer (the "Buyer Plan"), with the assets so transferred measured by the greater of: (a) the amount required to be transferred under Code Section 414(1) (determined using the assumptions used by the Pension Benefit Guaranty Corporation with respect to plan terminations occurring on the day before the Closing, such assumptions being deemed reasonable under Tax Code Regulation Section 1.414(1)-1(b)(9)); or (b) the projected benefit obligation with respect to the Seller Plan Participants, determined using the assumptions used by the Seller's actuaries for financial statement purposes, except that the discount rate that would otherwise be used for such purposes (the reported yield of the Merrill Lynch AAA-AA Corporate Bond Index (15+ years)) shall be updated to be the discount rate in effect as of the last day of the month coincident with or preceding the Closing Date, rounded to the nearest one-quarter percent. For purposes of this Section 10.15; (a) the term "Seller Plan" means the Pension Plan for Eaton Corporation Employees; and (b) the term "Seller Plan Participants" means each Division Employee, Division Retiree, former division employee with deferred vested benefits and any other person entitled to benefits with respect to any of the foregoing individuals who, immediately prior to the Closing Date are accruing or most recently had accrued benefits under the portion of the Seller Plan which previously separately existed as the Eaton Corporation Pension Plan A-3 for Hourly Rate Employees of the Engineered Fasteners Operations Massillon Division ("Massillon Appendix") or are eligible to become or may become participants or beneficiaries under the Massillon Appendix. The agreement contemplated by this Section 10.15 shall also provide that for individuals who both (a) would be Seller Plan Participants but for the fact that they had terminated employment prior to the Closing Date without vested benefits; and (b) become employed by the Buyer or a Buyer Subsidiary within one year after the Closing Date with the right under the applicable plan terms to have his/her lost credited service reinstated, the liability for such individuals for such lost credited service and corresponding amount of assets (determined in a manner consistent with the foregoing methodology) shall be transferred from the Seller Plan to the Buyer Plan in an adjusting transfer. 2 92 3. Except as specifically provided herein, all terms, provisions and conditions of the Purchase Agreement remain in full force and effect. 4. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same document. This Agreement, once executed, may be delivered to either party through the use of facsimile transmission. Any and all signatures of the parties appearing on any facsimile copies of the signature page of this Agreement shall be deemed, unless otherwise proved, the lawful and valid signature of the executing party. IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date first above written. EATON CORPORATION By: /s/ David S. Barrie --------------------------------- Name: David S. Barrie ------------------------------- Title: Attorney-in-Fact ------------------------------ AND BY: /s/ William F. Hogsett ----------------------------- Name: William F. Hogsett ------------------------------- Title: Attorney-in-Fact ------------------------------ TRANSTECHNOLOGY CORPORATION By: /s/ Gerald C. Harvey --------------------------------- Name: Gerald C. Harvey ------------------------------- Title: Vice President, Secretary and General Counsel ------------------------------ 3 EX-10.27 3 EXHIBIT 10.27 1 SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 30, 1995 and amended and restated as of July 24, 1998 and further amended and restated as of August 31, 1999 among TRANSTECHNOLOGY CORPORATION, TRANSTECHNOLOGY SEEGER-ORBIS GMBH, TRANSTECHNOLOGY (GB) LIMITED, THE LENDERS REFERRED TO HEREIN, BANKBOSTON, N.A., acting through its London Branch, as Sterling Fronting Bank, BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank, ABN AMRO BANK N.V., as Syndication Agent THE FIRST NATIONAL BANK OF CHICAGO, as Documentation Agent and BANKBOSTON, N.A. as Administrative Agent and Issuing Bank Arranged by: BANCBOSTON ROBERTSON STEPHENS INC. 2 ii TABLE OF CONTENTS
1. DEFINITIONS AND RULES OF INTERPRETATION.......................................................1 1.1. Definitions..........................................................................1 1.2. Rules of Interpretation..............................................................26 2. THE REVOLVING CREDIT FACILITY.................................................................27 2.1. Commitment to Lend...................................................................27 2.2. Revolving Credit Commitment Fee......................................................27 2.3. Reduction of Total Revolving Credit Commitment.......................................28 2.4. The Revolving Credit Notes...........................................................28 2.5. Interest on Revolving Credit Loans...................................................28 2.6. Requests for Revolving Credit Loans..................................................29 2.7. Conversion Options...................................................................29 2.7.1. Conversion to Different Type of Revolving Credit Loan....................29 2.7.2. Continuation of Type of Revolving Credit Loan............................30 2.7.3. Eurocurrency Rate Loans..................................................30 2.8 Funds for Revolving Credit Loans.....................................................30 2.9. Maturity of Revolving Credit Loans...................................................31 2.10. Mandatory Repayments of Revolving Credit Loans......................................31 2.11. Optional Repayments of Revolving Credit Loans.......................................31 3. INTERNATIONAL CREDIT FACILITY.................................................................32 3.1. DM Facility Loans...................................................................32 3.2. Mandatory Repayments of DM Facility Loans...........................................32 3.3. Sterling Facility Loans.............................................................32 3.4. Mandatory Repayments of Sterling Facility Loans.....................................33 3.5. Interest on International Facility Loans............................................33 3.6. Requests for DM Eurocurrency Loans..................................................34 3.7. Requests for Sterling Eurocurrency Loans............................................34 3.8. Evidence of DM Facility Loans.......................................................35 3.9. Evidence of Sterling Facility Loans.................................................35 3.10. Maturity of DM Facility Loans.......................................................35 3.11. Maturity of Sterling Facility Loans.................................................35 3.12. Optional Repayment of International Facility Loans..................................36 3.13. DM Facility Commitment Fee..........................................................36 3.14. Sterling Facility Commitment Fee....................................................37 4. THE TERM LOAN..................................................................................37 4.1. Commitment to Lend..................................................................37 4.2. The Term Notes......................................................................37 4.3. Schedule of Installment Payments of Principal of Term Loan..........................38 4.4. Optional Prepayment of Term Loan....................................................38 4.5. Interest on Term Loan...............................................................38 4.5.1 Interest Rates............................................................38 4.5.2 Notification by TransTechnology...........................................39 4.5.3. Amounts, etc..............................................................39 4.6. Mandatory Prepayments from Asset Sales or New Debt..................................39 4.7. Mandatory Prepayments from New Equity...............................................40 4.8. Mandatory Prepayments from Excess Cash Flow.........................................40
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4.9. Application of Mandatory Prepayments................................................40 5. LETTERS OF CREDIT..............................................................................40 5.1. Letter of Credit Commitments........................................................40 5.1.1. Commitment to Issue Letters of Credit....................................40 5.1.2. Letter of Credit Applications............................................41 5.1.3. Terms of Letters of Credit...............................................41 5.1.4. Reimbursement Obligations of Lenders.....................................41 5.1.5. Participations of Lenders................................................42 5.2. Reimbursement Obligation of TransTechnology.........................................42 5.3. Letter of Credit Payments...........................................................43 5.4. Obligations Absolute................................................................43 5.5. Reliance by Issuing Bank............................................................44 5.6. Letter of Credit Fee................................................................44 5.7. Resignation of Issuing Bank.........................................................45 6. CERTAIN GENERAL PROVISIONS.....................................................................45 6.1. Closing Fee.........................................................................45 6.2. Administrative Agent's Fee..........................................................45 6.3. Payment Provisions..................................................................46 6.3.1. Currency of Account......................................................46 6.3.2. Application of Interest Payments.........................................46 6.3.3. Judgment Currency........................................................46 6.3.4. Time of Payment..........................................................47 6.3.5. Payments by Administrative Agent.........................................47 6.3.6. No Offset, etc...........................................................47 6.4. Computations........................................................................48 6.5. Inability to Determine Eurocurrency Rate............................................48 6.6. Illegality..........................................................................49 6.7. Additional Costs, etc...............................................................49 6.8. Capital Adequacy....................................................................51 6.9. Certificate.........................................................................52 6.10. Indemnity...........................................................................52 6.11. Interest After Default..............................................................52 6.11.1. Overdue Amounts.........................................................52 6.11.2. Amounts Not Overdue.....................................................52 6.12. Fronting Bank Provisions............................................................53 6.12.1. Fronting Fee............................................................53 6.12.2. Indemnities.............................................................53 6.12.3. Resignation of Fronting Bank............................................54 6.12.4. Notice to Lenders.......................................................55 6.13. Limits on Number of Separate Eurocurrency Rate Loans................................55 7. COLLATERAL SECURITY AND GUARANTIES.............................................................55 7.1. Security of Borrowers...............................................................55 7.2. Guaranties and Security of Subsidiaries.............................................56 7.3. Pledges of Stock....................................................................56 7.4. Guarantees and Pledges of Assets of Foreign Subsidiaries............................56 8. REPRESENTATIONS AND WARRANTIES.................................................................57 8.1. Corporate Authority.................................................................57
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8.1.1. Incorporation; Good Standing.............................................57 8.1.2. Authorization............................................................57 8.1.3. Enforceability...........................................................57 8.2. Governmental Approvals..............................................................58 8.3. Title to Properties; Leases.........................................................58 8.4. Financial Statements and Projections................................................58 8.4.1. Financial Statements.....................................................58 8.4.2. Projections..............................................................58 8.5. No Material Changes, etc............................................................59 8.6. Franchises, Patents, Copyrights, etc................................................59 8.7. Litigation..........................................................................59 8.8. No Materially Adverse Contracts, etc................................................60 8.9. Compliance with Other Instruments, Laws, etc........................................60 8.10. Tax Status..........................................................................60 8.11. No Event of Default.................................................................60 8.12. Holding Company and Investment Company Acts.........................................60 8.13. Absence of Financing Statements, etc................................................61 8.14. Perfection of Security Interest.....................................................61 8.15. Certain Transactions................................................................61 8.16. Employee Benefit Plans..............................................................61 8.16.1. In General..............................................................61 8.16.2. Terminability of Welfare Plans..........................................62 8.16.3. Guaranteed Pension Plans................................................62 8.16.4. Multiemployer Plans.....................................................62 8.16.5. Compliance with Employment Benefit Laws.................................63 8.17. Use of Proceeds.....................................................................63 8.18. Environmental Compliance............................................................63 8.19. Subsidiaries, etc...................................................................64 8.20. Bank Accounts.......................................................................64 8.21. Year 2000 Compliance................................................................65 9. AFFIRMATIVE COVENANTS OF THE BORROWERS.........................................................65 9.1. Punctual Payment....................................................................65 9.2. Maintenance of Offices..............................................................65 9.3. Records and Accounts................................................................66 9.4. Financial Statements, Certificates and Information..................................66 9.5. Notices.............................................................................67 9.5.1. Defaults.................................................................67 9.5.2. Environmental Events.....................................................68 9.5.3. Notification of Claims against Collateral................................68 9.5.4. Notice of Litigation and Judgments.......................................68 9.6. Corporate Existence; Maintenance of Properties......................................69 9.7. Insurance...........................................................................69 9.8. Taxes...............................................................................69 9.9. Inspection of Properties and Books, etc.............................................70 9.9.1. General..................................................................70 9.9.2. Environmental Assessments................................................70 9.9.3. Communications with Accountants..........................................71 9.10. Compliance with Laws, Contracts, Licenses, and Permits..............................71 9.11. Employee Benefit Plans..............................................................71
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9.12. Use of Proceeds.....................................................................72 9.13. Additional Mortgaged Property.......................................................72 9.14. Bank Accounts.......................................................................72 9.15. Interest Rate Protection............................................................72 9.16. Further Assurances..................................................................73 10. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS...................................................73 10.1. Restrictions on Indebtedness........................................................73 10.2. Restrictions on Liens...............................................................74 10.3. Restrictions on Investments.........................................................76 10.4. Distributions.......................................................................77 10.5. Merger, Consolidation and Disposition of Assets.....................................77 10.5.1. Mergers and Acquisitions................................................77 10.5.2. Disposition of Assets...................................................78 10.6. Sale and Leaseback..................................................................78 10.7. Compliance with Environmental Laws..................................................78 10.8. Subordinated Debt...................................................................79 10.10. Bank Accounts......................................................................80 10.11. Operating Leases...................................................................80 10.12. SO OHG Partnership Agreement.......................................................80 10.13. Maintenance of Business............................................................80 11. FINANCIAL COVENANTS OF THE BORROWERS..........................................................80 11.1. Consolidated EBITDA to Consolidated Total Interest Expense..........................80 11.2. Fixed Charge Coverage Ratio.........................................................81 11.3. Leverage Ratio......................................................................81 11.4. Senior Leverage Ratio...............................................................82 11.5. Minimum Net Worth...................................................................82 11.6. Capital Expenditures................................................................83 12. CLOSING CONDITIONS............................................................................83 12.1. Loan Documents......................................................................83 12.2. Certified Copies of Charter Documents...............................................84 12.3. Corporate Action....................................................................84 12.4. Incumbency Certificate..............................................................84 12.5. Validity of Liens...................................................................84 12.6. Perfection Certificates and UCC Search Results......................................84 12.7. Surveys.............................................................................85 12.8. Title Insurance, etc................................................................85 12.9. Certificates of Insurance...........................................................85 12.10. Bank Agency Agreements.............................................................85 12.11. Hazardous Waste Assessments........................................................85 12.12. Solvency Certificate...............................................................86 12.13. Opinions of Counsel................................................................86 12.14. Payment of Fees....................................................................86 12.15. Senior Subordinated Loans..........................................................86 12.16. Tinnerman Acquisition..............................................................86 12.17. Disbursement Instructions..........................................................86 12.18. Minimum EBITDA.....................................................................87
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12.19. Maximum Leverage Ratio.............................................................87 12.20. Compliance Certificate.............................................................87 13. CONDITIONS TO ALL BORROWINGS..................................................................87 13.1. Representations True; No Event of Default...........................................87 13.2. No Legal Impediment.................................................................88 13.4. Proceedings and Documents...........................................................88 14. EVENTS OF DEFAULT; ACCELERATION; ETC..........................................................88 14.1. Events of Default and Acceleration..................................................88 14.2. Termination of Commitment...........................................................92 14.3. Remedies............................................................................92 14.4. Distribution of Collateral Proceeds.................................................92 15. SETOFF........................................................................................93 16. THE AGENTS....................................................................................94 16.1. Authorization.......................................................................94 16.2. Employees and Agents................................................................95 16.3. No Liability........................................................................95 16.4. No Representations..................................................................95 16.5. Payments............................................................................96 16.5.1. Payments to Administrative Agent........................................96 16.5.2. Distribution by Administrative Agent....................................96 16.5.3. Delinquent Lenders......................................................96 16.6. Holders of Notes....................................................................97 16.7. Indemnity...........................................................................97 16.8. Agents as Lenders...................................................................98 16.9. Resignation of Administrative Agent.................................................98 16.10. Duties of Certain Agents...........................................................98 17. EXPENSES......................................................................................98 18. INDEMNIFICATION...............................................................................99 19. SURVIVAL OF COVENANTS, ETC....................................................................100 20. ASSIGNMENT AND PARTICIPATION..................................................................100 20.1. Conditions to Assignment............................................................100 20.2. Certain Representations and Warranties; Limitations; Covenants.................................................................................101 20.3. Register............................................................................102 20.4. New Notes...........................................................................103 20.5. Participations......................................................................103 20.6. Disclosure..........................................................................104 20.7. Assignee or Participant Affiliated with TransTechnology.............................104 20.8. Miscellaneous Assignment Provisions.................................................104 20.9. Assignment by the Borrowers.........................................................105 20.10. Syndication........................................................................105
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21. NOTICES, ETC..................................................................................105 22. GOVERNING LAW.................................................................................106 23. HEADINGS......................................................................................107 24. COUNTERPARTS..................................................................................107 25. ENTIRE AGREEMENT, ETC.........................................................................107 26. WAIVER OF JURY TRIAL..........................................................................107 27. CONSENTS, AMENDMENTS, WAIVERS, ETC............................................................107 27.1. Voting Procedures...................................................................107 27.2. Borrowers' Consent Not Required for Certain Amendments..............................109 27.3. Course of Dealing...................................................................109 28. SEVERABILITY..................................................................................109 29.1. Sharing of Information with Section 20 Subsidiary...................................110 29.2. Confidentiality.....................................................................110 29.3. Prior Notification..................................................................110 29.4. Other...............................................................................111 30. TRANSITIONAL ARRANGEMENTS.....................................................................111 30.1. Prior Credit Agreement Superseded...................................................111 30.2. Interest and Fees Under Prior Credit Agreement......................................111
8 List of Schedules and Exhibits ------------------------------ Exhibits - -------- Exhibit A - Form of Revolving Credit Note Exhibit B - Form of Loan Request Exhibit C - Form of Term Note Exhibit D - Compliance Certificate Exhibit E - Form of Assignment and Acceptance Schedules - --------- Schedule 1 The Lenders; Revolving Credit Commitments Schedule 4.3 Term Loan Amortization Schedule 8.3 Title to Properties Schedule 8.7 Litigation Schedule 8.10 Tax Compliance Schedule 8.16.5 Compliance with Employee Benefit Laws Schedule 8.18 Environmental Compliance Schedule 8.19 Subsidiaries Schedule 8.20 Bank Accounts Schedule 10.1 Existing Indebtedness Schedule 10.2 Existing Liens Schedule 10.3 Existing Investments Schedule 10.5.2 Disposable Assets 9 SECOND AMENDED AND RESTATED CREDIT AGREEMENT This SECOND AMENDED AND RESTATED CREDIT AGREEMENT is made as of June 30, 1995, amended and restated as of July 24, 1998, and further amended and restated as of August 31, 1999, by and among TRANSTECHNOLOGY CORPORATION, a Delaware corporation having its principal place of business at 150 Allen Road, Liberty Corner, New Jersey 07938, USA ("TRANSTECHNOLOGY"), TRANSTECHNOLOGY SEEGER-ORBIS GMBH, a German limited liability company having its principal place of business at Konigstein, Germany ("GMBH"), TRANSTECHNOLOGY (GB) LIMITED, an English limited liability company (registered no. 3062174) having its registered office at P.O. Box 6, Ferncliffe Road, Bingley, West Yorkshire BD16 2PL, England, formerly known as Anderton International Limited ("LIMITED"), BANKBOSTON, N.A. ("BANKBOSTON") and the other lending institutions listed on SCHEDULE 1 (BankBoston and such other institutions, collectively, the "LENDERS"), BANKBOSTON, N.A., acting through its London Branch, as Sterling Fronting Bank (the "STERLING FRONTING BANK"), BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank (the "DM FRONTING BANK"), BANKBOSTON, N.A., as issuing bank (in such capacity, the "ISSUING BANK"), ABN AMRO BANK N.V., as Syndication Agent (the "SYNDICATION AGENT"), THE FIRST NATIONAL BANK OF CHICAGO, as Documentation Agent (the "DOCUMENTATION AGENT"), and BANKBOSTON, N.A., as Administrative Agent for the Lenders, the Sterling Fronting Bank, the DM Fronting Bank and the Issuing Bank (in such capacity, the "ADMINISTRATIVE AGENT"). WHEREAS, pursuant to the Amended and Restated Credit Agreement dated as of June 30, 1995, as amended and restated as of July 24, 1998 (as further amended, the "PRIOR CREDIT AGREEMENT"), by and among the Borrowers, the Lenders (as defined therein) and BankBoston, as Administrative Agent, the Lenders party thereto made loans to the Borrowers to make certain acquisitions and for general corporate purposes; and WHEREAS, the Borrowers have requested, among other things, to amend and restate the Prior Credit Agreement, and the Lenders and the Administrative Agent are willing to amend the Prior Credit Agreement on the terms and conditions set forth herein; NOW, THEREFORE, the Borrowers, the Lenders and the Administrative Agent agree that on the Closing Date the Prior Credit Agreement and all Schedules and Exhibits thereto are hereby amended and restated in their entirety as set forth herein and in the Schedules and Exhibits hereto and shall remain in full force and effect only as set forth herein. 10 -2- 1. DEFINITIONS AND RULES OF INTERPRETATION. ---------------------------------------- 1.1. DEFINITIONS. The following terms shall have the meanings set forth in this ss.1 or elsewhere in the provisions of this Credit Agreement referred to below: ACQUISITION CLOSING DATE. The date of completion of any Approved Acquisition. ACQUISITION DOCUMENTS. As to any Approved Acquisition, the purchase and sale agreement with respect to such acquisition, and any other related documents to be executed and/or delivered in connection therewith. ADMINISTRATIVE AGENT'S HEAD OFFICE. The Administrative Agent's head office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Administrative Agent may designate from time to time. ADMINISTRATIVE AGENT'S SPECIAL COUNSEL. Bingham Dana LLP, or such other counsel as may be approved by the Administrative Agent. AFFILIATE. With respect to any Person, any other Person that would be considered to be an affiliate of such Person under Rule 144(a) of the Rules and Regulations of the Securities and Exchange Commission, as in effect on the date hereof, if such Person were issuing securities. AGENTS. Collectively, the Documentation Agent, the Syndication Agent and the Administrative Agent. APPLICABLE MARGIN. (a) From the Closing Date until the date immediately preceding the first Reset Date after the Closing Date, the Applicable Margin with respect to Base Rate Loans shall be 1.50%, the Applicable Margin with respect to Eurocurrency Rate Loans shall be 3.00%, and the Commitment Fee Rate shall be 0.50%. Subject to paragraphs (b) and (c) below, for each period commencing on a Reset Date (beginning with the first Reset Date following the Closing Date) through the date immediately preceding the next Reset Date (each such period, a "RATE SETTING PERIOD"), the Applicable Margin shall be the applicable percentage set forth in the chart below (the "INITIAL PRICING GRID"), based upon the Leverage Ratio as determined for the Reference Period ended on the last day of the fiscal quarter ended immediately preceding the commencement of the applicable Rate Setting Period: 11 -3-
@@ - ------------------------------------------------------------------------------------------- Applicable Margin ----------------- Leverage Ratio Base Rate Eurocurrency Commitment -------------- --------- ------------ ---------- Loans Rate Loans Fee Rate ----- ---------- -------- - ------------------------------------------------------------------------------------------- 2.50:1 or lower 0.25% 1.75% 0.375% - ------------------------------------------------------------------------------------------- 3.00:1 or lower, but higher 0.50% 2.00% 0.375% than 2.50:1 - ------------------------------------------------------------------------------------------- 3.50:1 or lower, but higher 0.75% 2.25% 0.375% than 3.00:1 - ------------------------------------------------------------------------------------------- 4.00:1 or lower, but higher 1.00% 2.50% 0.500% than 3.50:1 - ------------------------------------------------------------------------------------------- 4.50:1 or lower, but higher 1.25% 2.75% 0.500% than 4.00:1 - ------------------------------------------------------------------------------------------- Higher than 4.50:1 1.50% 3.00% 0.500% - ------------------------------------------------------------------------------------------- @@
(b) Notwithstanding the foregoing but subject to paragraph (c) below, in the event that the Placing Date occurs on or before the ninetieth (90th) day following the Closing Date, then and for each Rate Setting Period commencing thereafter the Applicable Margin shall be the applicable percentage set forth in the chart below, based upon the Leverage Ratio as determined for the Reference Period ended on the last day of the fiscal quarter ended immediately preceding the commencement of the applicable Rate Selling Period:
@@ ---------------------------------------------------------------------- Applicable Margin ----------------- Leverage Ratio Base Rate Eurocurrency -------------- --------- ------------ Loans Rate Loans ----- ---------- ---------------------------------------------------------------------- 2.50:1 or lower 0.00% 1.50% ---------------------------------------------------------------------- 3.00:1 or lower, but higher 0.25% 1.75% than 2.50:1 ---------------------------------------------------------------------- 3.50:1 or lower, but higher 0.50% 2.00% than 3.00:1 ---------------------------------------------------------------------- 4.00:1 or lower, but higher 0.75% 2.25% than 3.50:1 ---------------------------------------------------------------------- 4.50:1 or lower, but higher 1.00% 2.50% than 4.00:1 ---------------------------------------------------------------------- Higher than 4.50:1 1.25% 2.75% ---------------------------------------------------------------------- @@
(c) If no Compliance Certificate is delivered when required by ss.9.4(c), then, for the period commencing on the next Reset Date following the date on which such delivery was required through the date immediately following the date of actual delivery to the Administrative Agent of such Compliance Certificate, the Commitment Fee Rate shall be set at the highest applicable rate set forth in the Initial Pricing Grid above, and the Applicable Margin shall be set at the highest applicable margin set forth in the applicable chart above. 12 -4- APPROVED ACQUISITION. The Tinnerman Acquisition and any other acquisition by any member of the TransTechnology Group of the shares or of substantially all of the assets of a corporation or business, as the case may be, whose operations are substantially concentrated in the Business (such corporation or business, the "TARGET"), PROVIDED THAT either (i) audited financial statements for the Target are available for its most recently ended fiscal year and have been delivered to the Administrative Agent and each of the Lenders, and the aggregate consideration payable by the applicable member of the TransTechnology Group either (A) does not, when aggregated with the amount of Indebtedness being assumed by any members of the TransTechnology Group or remaining outstanding after the Acquisition Closing Date with respect thereto, exceed $30,000,000 on such Acquisition Closing Date, or (B) is payable in shares of capital stock of TransTechnology, or (ii) such acquisition is approved in writing prior to the closing date thereof by the Majority Lenders, and PROVIDED FURTHER that in each case, each of the following conditions, if applicable, are either fulfilled or are waived in writing by the Majority Lenders: (a) the acquisition of the Target is to be concluded pursuant to negotiated agreements with the Target or its owners or other controlling interests and approved by the Target's board of directors or other governing body, and not as a result of a hostile tender or otherwise without the Target's acquiescence; (b) upon completion of the proposed acquisition, the assets of the Target shall be subject to no lien, encumbrance, mortgage, pledge, charge, restriction or other security other than liens which would be Permitted Liens hereunder and lessor's interests under the Capitalized Leases of the Target being assumed by the purchaser; (c) no Default or Event of Default shall have occurred and be continuing at the time of completion of the proposed acquisition, and no Default or Event of Default would result therefrom; (d) without limiting the requirement in clause (c) above, (i) upon completion of the proposed acquisition TransTechnology and its Subsidiaries (including the Target from and after the proposed date of completion of such acquisition) shall be in compliance with the financial covenants set forth in section 11 following acquisition of the Target assuming total outstanding amounts of and interest rates on the Loans, to be the same as those in effect on the applicable Acquisition Closing Date after completion of such acquisition, and (ii) in the event that the total consideration payable in connection with such acquisition exceeds $15,000,000, TransTechnology shall have delivered to the Administrative Agent prior to the applicable Acquisition Closing Date PRO FORMA financial statements in form and substance satisfactory to the Administrative Agent evidencing such compliance, certified by the principal financial or accounting officer of TransTechnology; 13 -5- (e) the Administrative Agent shall have received documentation (including, without limitation, legal opinions and other documentation similar to that required to be delivered in connection with the completion of this Credit Agreement) satisfactory to it in its sole discretion granting first priority liens in its favor, on behalf of the Lenders, on the assets and, if applicable, the shares of the Target and on the assets and, if applicable, the shares of any member of the TransTechnology Group acquiring the Target's assets or shares, as the case may be; (f) if the Target's assets include any freehold interests in real property, the Administrative Agent shall have received Phase One environmental site assessments and appraisals of such real property in form and substance reasonably satisfactory to the Administrative Agent; (g) upon completion of any proposed acquisition by purchase of the shares or other equity interests of the Target, the Target shall either be merged with and into TransTechnology or one of its Subsidiaries, with TransTechnology or such Subsidiary as the surviving entity, or, if the Target continues in existence as a Subsidiary of TransTechnology or one of its Subsidiaries, it shall do so in compliance with and subject to the conditions set forth herein; (h) the Target's operating income, determined in accordance with generally accepted accounting principles, for the twelve (12) months immediately preceding the proposed Acquisition Closing Date shall be greater than zero; and (i) the Administrative Agent and the Lenders shall have received reasonably detailed written notice of the proposed acquisition at least fifteen (15) Business Days' prior to the proposed Acquisition Closing Date. ARRANGER. BancBoston Robertson Stephens Inc. ASSIGNMENT AND ACCEPTANCE. See ss.ss.20.1.1 and 20.1.2. BALANCE SHEET DATE. March 31, 1999. BANKBOSTON. See the preamble to this Credit Agreement. BASE RATE. With respect to amounts denominated in Dollars, the Dollar Base Rate; with respect to amounts denominated in Deutschmarks, the DM Base Rate; and with respect to amounts denominated in Sterling, the Sterling Base Rate, with each of the Dollar Base Rate, DM Base Rate and Sterling Base Rate being referred to herein as a "Base Rate". 14 -6- BASE RATE LOANS. Any Revolving Credit Loans, any International Facility Loans and any portion of the Term Loan bearing interest calculated by reference to a Base Rate. BORROWERS. TransTechnology, GmbH and Limited, collectively, and each individually being referred to as a "Borrower". BRAZILIAN PLEDGE AGREEMENT. The Pledge of Quotas dated as of December 31, 1995, made by GmbH (as managing general partner of SO OHG) and Joao Scivoletto in favor of the Administrative Agent with respect to the share capital of the Brazilian Subsidiary, as amended and in effect from time to time. BRAZILIAN SUBSIDIARY. Seeger-Reno Industria e Commercio Ltda., a Brazilian corporation. BUSINESS. The businesses engaged in by TransTechnology and its Subsidiaries at the Closing Date, and businesses reasonably related or incidental thereto. BUSINESS DAY. Any day (other than a Saturday or Sunday) on which banking institutions in Boston, Massachusetts, are open for the transaction of banking business and, in the case of Eurocurrency Rate Loans, DM Loans and Sterling Loans, also a day which is a Eurocurrency Business Day. CANADIAN SECURITY DOCUMENTS. The General Security Agreement, the Confirmation Security Agreement with respect to certain intellectual property rights, and the Mortgage over all of the Real Estate of TransTechnology Canada, each dated of even date herewith and made by TransTechnology Canada in favor of the Administrative Agent, and each as amended and in effect from time to time. CAPITAL ASSETS. Fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as patents, copyrights, trademarks, franchises and good will); PROVIDED that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with generally accepted accounting principles. CAPITAL EXPENDITURES. As to any Person, amounts paid or indebtedness incurred by such Person in connection with the purchase or lease by such Person of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with generally accepted accounting principles. CAPITALIZED LEASES. Leases (unless otherwise stated, under which TransTechnology or any of its Subsidiaries is the lessee or obligor), the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with generally accepted accounting principles. CERCLA. See Section 8.18. 15 -7- CHARGES OVER SHARES. The Charge over Shares, dated June 30, 1995, from TTSO Inc. in favor of the Administrative Agent with respect to 65% of the share capital of Limited, the Charge over Shares, dated June 30, 1995, from Limited in favor of the Administrative Agent with respect to the entire share capital of Anderton (Predecessors) Limited, and the Charge Over Shares, dated July 19, 1999, from Limited in favor of the Administrative Agent with respect to the entire share capital of Ellison Holdings plc, each as amended and in effect from time to time. CLOSING DATE. The first date on which the conditions set forth in ss.12 have been satisfied and the Term Loan or any Revolving Credit Loan or International Facility Loan is to be made or any Letter of Credit is to be issued hereunder. CODE. The Internal Revenue Code of 1986. COLLATERAL. All of the property, rights and interests of TransTechnology and its Subsidiaries that are or are intended to be subject to the security interests and mortgages created by the Security Documents. COLLATERAL ASSIGNMENT OF ACQUISITION AGREEMENT. Any assignment of rights under any acquisition agreement by TransTechnology or any of its Subsidiaries in favor of the Administrative Agent, for the benefit of the Lenders, in each case in form and substance satisfactory to the Lenders and the Administrative Agent. COLLATERAL INSTRUMENT. Letters of credit, guarantees, indemnities and performance bonds in form and substance satisfactory to a Fronting Bank issued or to be issued by such Fronting Bank to or for the account of either GmbH or Limited, as the case may be, pursuant to section 3.1 and section 3.3, respectively. COMMITMENT. As to any Lender, such Lender's Revolving Credit Commitment, Term Commitment or commitment to participate in the International Facility Loans, as the case may be. COMMITMENT FEE RATE. For each Rate Setting Period, the rate per annum set forth in the Initial Pricing Grid under the column headed "Commitment Fee Rate" with respect to the Leverage Ratio applicable to such Rate Setting Period. COMMITMENT PERCENTAGE. With respect to each Lender, the percentage set forth on SCHEDULE 1 hereto as such Lender's percentage of (a) the aggregate Revolving Credit Commitments of all of the Lenders, and (b) the Term Loan. COMPLIANCE CERTIFICATE. The certificate delivered pursuant to section 9.4(c). CONSOLIDATED OR Consolidated. With reference to any term defined herein, shall mean that term as applied to the accounts of TransTechnology and its Subsidiaries, consolidated in accordance with generally accepted accounting principles. CONSOLIDATED ADJUSTED EBITDA. With respect to any Reference Period, Earnings Before Interest and Taxes for such Reference Period, before provision for 16 -8- any depreciation and amortization PLUS, to the extent that during such Reference Period any Approved Acquisition shall have been completed, the Earnings Before Interests and Taxes, before provision for any depreciation or amortization, attributable to the operations of the applicable Target during the period prior to the applicable Acquisition Closing Date included in such Reference Period, but only to the extent evidenced by audited financial statements of the Target or as otherwise approved in writing by the Administrative Agent and the Majority Lenders prior to such Acquisition Closing Date, PROVIDED that such Earnings before Interest and Taxes may include the amount of any cost savings directly attributable to such Approved Acquisition, to the extent that such savings are either (i) recognized by Regulation S-X under the Securities Exchange Act of 1934, or (ii) approved in writing by the Administrative Agent and the Majority Lenders prior to such Acquisition Closing Date, all as determined in accordance with generally accepted accounting principles. CONSOLIDATED EBITDA. With respect to any Reference Period, Earnings Before Interest and Taxes for such Reference Period, before provision for any depreciation and amortization, as determined in accordance with generally accepted accounting principles. CONSOLIDATED EXCESS CASH FLOW. With respect to TransTechnology and its Subsidiaries and any particular fiscal period, an amount equal to (a) Consolidated Operating Cash Flow for such period LESS (b) the sum of (i) Consolidated Total Interest Expense for such period, PLUS (ii) any mandatory repayments or prepayments (whether scheduled or otherwise) of principal on any Indebtedness of TransTechnology or any of its Subsidiaries paid or due and payable during such period PLUS (iii) any voluntary repayments or prepayments of principal on any Indebtedness of TransTechnology or any of its Subsidiaries made during such period, except for repayments of Revolving Credit Loans made other than in connection with a permanent reduction or termination of the Total Revolving Credit Commitment pursuant to section 2.3, PLUS (iv) an amount equal to the amount of repayments of Revolving Credit Loans and Unpaid Reimbursement Obligations as may be necessary to ensure that, as of the last day of such fiscal period, the aggregate amount of Revolving Credit Availability PLUS the total amount of cash and cash equivalents held by TransTechnology and its Subsidiaries exceeds $15,000,000, PLUS (v) to the extent not otherwise deducted from Consolidated EBITDA in the calculation of Consolidated Operating Cash Flow for such period, an amount equal to the costs (including amounts payable as purchase price and fees and expenses of professional advisers) actually incurred by TransTechnology and its Subsidiaries during such fiscal period with respect to any Approved Acquisition. CONSOLIDATED NET INCOME (OR DEFICIT). The consolidated net income (or deficit) of TransTechnology and its Subsidiaries, after deduction of all expenses, taxes and other proper charges, determined in accordance with generally accepted accounting principles. 17 -9- CONSOLIDATED NET WORTH. The excess of Consolidated Total Assets over Consolidated Total Liabilities, LESS, to the extent otherwise includable in the computation of Consolidated Net Worth, any subscriptions receivable. CONSOLIDATED OPERATING CASH FLOW. For any period, an amount equal to (a) Consolidated EBITDA for such period, LESS (b) the sum of (i) cash payments for all income taxes paid during such period, PLUS (ii) Capital Expenditures made during such period to the extent permitted by section 11.6, PLUS (iii) amounts included in Consolidated EBITDA for such period and attributable to gains on asset sales during such period, to the extent such asset sales are permitted by section 10.5, PLUS (iv) Distributions made during such period, to the extent permitted by section 10.4. CONSOLIDATED TOTAL ASSETS. All assets of TransTechnology and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles. CONSOLIDATED TOTAL INTEREST EXPENSE. For any period, the aggregate amount of interest required to be paid or accrued by TransTechnology and its Subsidiaries during such period on all Indebtedness of TransTechnology and its Subsidiaries outstanding during all or any part of such period, whether such interest was or is required to be reflected as an item of expense or capitalized, including payments consisting of interest in respect of Subordinated Debt or Capitalized Leases and including commitment fees, agency fees, facility fees and similar fees or expenses in connection with the borrowing of money, but EXCLUDING the non-cash amortization of fees paid with respect to the Prior Credit Agreement, or pursuant to sections 6.1 and 6.2 under the Credit Agreement on the Closing Date. CONSOLIDATED TOTAL LIABILITIES. All liabilities of TransTechnology and its Subsidiaries determined on a consolidated basis in accordance with generally accepted accounting principles and all Indebtedness of TransTechnology and its Subsidiaries, whether or not so classified. CONVERSION REQUEST. A notice given by a Borrower to the Administrative Agent or a Fronting Bank, as the case may be, of such Borrower's election to convert or continue a Loan in accordance with section 2.7. COPYRIGHT MORTGAGES. Any Copyright Mortgage and Security Agreements made by TransTechnology or any of its Subsidiaries in favor of the Administrative Agent and in form and substance satisfactory to the Lenders and the Administrative Agent. COUNTER INDEMNITY. Any indemnity or counter indemnity from GmbH or Limited, as the case may be, in favor of the DM Fronting Bank or the Sterling Fronting Bank, as applicable, with respect to any Collateral Instrument issued to or for the account of either GmbH or Limited, in the standard form of indemnity or counter indemnity used by such Fronting Bank or in such other form and substance as may be satisfactory to such Fronting Bank and including (without limitation) any 18 -10- letter of credit application incorporating indemnification language satisfactory to such Fronting Bank. CREDIT AGREEMENT. This Second Amended and Restated Credit Agreement, including the Schedules and Exhibits hereto. DEBENTURES. The Debenture dated January 3, 1996 made by Limited in favor of the Administrative Agent, the Debenture dated June 30, 1995 made by Anderton (Predecessors) Limited in favor of the Administrative Agent, and any Debenture made by Ellison Holdings plc or any of its Subsidiaries in favor of the Administrative Agent after the Closing Date pursuant to and in accordance with that certain letter agreement dated July 19, 1999, in each case as amended and in effect from time to time. DEFAULT. See section 14.1. DEUTSCHMARKS or DM. Deutschmarks in lawful currency of the Federal Republic of Germany, or any unit of currency replacing the Deutschmark as the lawful currency of the Federal Republic of Germany in accordance with European laws or regulations. DISTRIBUTION. The declaration or payment of any dividend on or in respect of any shares of any class of capital stock of TransTechnology, other than dividends payable solely in shares of common stock of TransTechnology; the purchase, redemption, or other retirement of any shares of any class of capital stock of TransTechnology, directly or indirectly through a Subsidiary of TransTechnology or otherwise; the return of capital by TransTechnology to its shareholders as such; or any other distribution on or in respect of any shares of any class of capital stock of TransTechnology. DM BASE RATE. The annual rate of interest announced from time to time by the DM Fronting Bank as its "base rate" for loans denominated in Deutschmarks. DM EQUIVALENT. On any date of determination, with respect to an amount denominated in Deutschmarks, such amount of Deutschmarks, and with respect to an amount denominated in Sterling or Dollars, the amount of Deutschmarks which could be purchased with that amount of Sterling or Dollars, as the case may be, at the spot rate of exchange quoted by the DM Fronting Bank in the Frankfurt Foreign Exchange Market at or about 11:00 a.m. (Frankfurt time) on the date of determination for the purchase of Deutschmarks with Sterling or Dollars, as the case may be. DM EUROCURRENCY LOAN. See section 3.1 DM EUROCURRENCY RATE. For any Interest Period with respect to a DM Loan, the rate of interest equal to the rate per annum (rounded upwards to the nearest 1/16 of one percent) at which the DM Fronting Bank is offered deposits in Deutschmarks two (2) Eurocurrency Business Days prior to the beginning of such Interest Period in the Frankfurt interbank market for delivery on the first day of 19 -11- such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the DM Loan to which such Interest Period applies, divided by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable. DM FACILITY LOANS. The DM Eurocurrency Loans and the DM Overdraft Advances, collectively. DM FRONTING BANK. Initially, the head office in Frankfurt, Germany, of BHF-BANK Aktiengesellschaft, in its capacity as DM Fronting Bank, and thereafter such office as may be appointed as successor DM Fronting Bank in accordance with section 6.12.3. DM LOAN. Any International Facility Loan which is denominated in Deutschmarks. DM OVERDRAFT ADVANCE. See section 3.1. DOCUMENTATION AGENT. See the preamble of this Credit Agreement. DOLLAR BASE RATE. The higher of (i) the annual rate of interest announced from time to time by the Administrative Agent at its Head Office in Boston, Massachusetts, as its "base rate" for loans denominated in Dollars, and (ii) one-half of one percent (1/2%) above the Federal Funds Effective Rate. For the purposes of this definition, "FEDERAL FUNDS EFFECTIVE RATE" shall mean for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three funds brokers of recognized standing selected by the Administrative Agent. DOLLAR EQUIVALENT. On any date of determination, with respect to an amount denominated in Dollars, such amount of Dollars, and with respect to an amount denominated in Sterling or Deutschmarks, the amount of Dollars which could be purchased with that amount of Sterling or Deutschmarks, as the case may be, at the spot rate of exchange quoted by the Fronting Bank in the London Foreign Exchange Market at or about 11:00 a.m. (London time) on the date of determination for the purchase of Dollars with Sterling or Deutschmarks, as the case may be. DOLLARS or $. Dollars in lawful currency of the United States of America. DOMESTIC LENDING OFFICE. Initially, the office of each Lender designated as such in SCHEDULE 1 hereto and thereafter, such other office of such Lender, if any, located within the United States that will be making or maintaining Base Rate Loans. 20 -12- DOMESTIC SUBSIDIARIES. Those Subsidiaries of TransTechnology which are incorporated in or organized under the laws of any state, district or territory of the United States, Canada or the Commonwealth of Puerto Rico. DRAWDOWN DATE. The date on which any Revolving Credit Loan or any International Facility Loan or the Term Loan is made or is to be made, and the date on which any Loan or is converted or continued in accordance with section 2.7, as the case may be. EARLY PLACING DATE. The date no later than the ninetieth (90th) day following the Closing Date upon which TransTechnology shall have completed the placing of at least $125,000,000 in aggregate principal amount of Subordinated Debt. EARNINGS BEFORE INTEREST AND TAXES. The consolidated earnings (or loss) from the operations of TransTechnology and its Subsidiaries for any period, after all expenses and other proper charges but before payment or provision for any income taxes or interest expense for such period, determined in accordance with generally accepted accounting principles, after eliminating therefrom all non-recurring items of income (or loss) resulting from the discontinuation of operations to the extent that all assets characterized as belonging to or being employed in such operations are also excluded from Consolidated Total Assets pursuant to the definition thereof. ELIGIBLE ASSIGNEE. Any of (i) a commercial bank or finance company organized under the laws of the United States, or any State thereof or the District of Columbia, and having total assets in excess of $5,000,000,000; (ii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having a net worth of at least $500,000,000, calculated in accordance with generally accepted accounting principles; (iii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having total assets in excess of $5,000,000,000, PROVIDED that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; (iv) the central bank of any country which is a member of the OECD; (v) a Lender or an Affiliate of a Lender; and (vi) if, but only if, any Event of Default has occurred and is continuing, any other bank, insurance company, commercial finance company, investment fund or other financial institution or other Person approved by the Administrative Agent, such approval not to be unreasonably withheld. EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of section 3(3) of ERISA maintained or contributed to by TransTechnology or any ERISA Affiliate, other than a Multiemployer Plan. ENGLISH GUARANTEES. The Deed of Guarantee and Indemnity, dated June 30, 1995, made by Limited in favor of the Administrative Agent, and the Deed of Guarantee of Indemnity, June 30, 1995, made by Anderton (Predecessors) Limited 21 -13- in favor of the Administrative Agent, each as amended and in effect from time to time. ENGLISH SECURITY DOCUMENTS. The Debentures and the Charges over Shares, as in effect from time to time. ENVIRONMENTAL LAWS. See section 8.18(a). ERISA. The Employee Retirement Income Security Act of 1974. ERISA AFFILIATE. Any Person which is treated as a single employer with TransTechnology under section 414 of the Code. ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed Pension Plan within the meaning of section 4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. EUROCURRENCY BUSINESS DAY. Any day (other than a Saturday or Sunday) on which commercial banks are open for international business (including dealings in Dollar, Deutschmark and Sterling deposits) in London, England and Frankfurt-am-Main, Germany. EUROCURRENCY RATE. With respect to amounts denominated in Dollars, the Eurodollar Rate; with respect to amounts denominated in Deutschmarks, the DM Eurocurrency Rate; with respect to amounts denominated in Sterling, the Sterling Eurocurrency Rate. EUROCURRENCY RATE LOANS. Any Revolving Credit Loans, any International Facility Loans, and any portion of the Term Loan bearing interest calculated by reference to a Eurocurrency Rate. EUROCURRENCY RESERVE RATE. For any day with respect to a Eurocurrency Rate Loan, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. EURODOLLAR LENDING OFFICE. Initially, the office of each Lender designated as such in SCHEDULE 1 hereto, and thereafter, such other office of such Lender, if any, that shall be making or maintaining Eurocurrency Rate Loans denominated in Dollars. EURODOLLAR RATE. For any Interest Period with respect to a Eurocurrency Rate Loan denominated in Dollars, the rate of interest equal to (i) the arithmetic average of the rates per annum for the Reference Bank (rounded upwards to the nearest 1/16 of one percent) of the rate at which the Reference Bank's Eurodollar 22 -14- Lending Office is offered Dollar deposits two Eurocurrency Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations of such Eurodollar Lending Office are customarily conducted, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Eurocurrency Rate Loan to which such Interest Period applies, divided by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable. EVENT OF DEFAULT. See section 14.1. FEE LETTER. The letter agreement or agreements between BankBoston, the Arranger and TransTechnology dated or to be dated on or prior to the Closing Date with respect to the amount of certain fees payable or to be paid by the Borrowers jointly and severally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) under or in respect of this Credit Agreement. FOREIGN SUBSIDIARIES. Those Subsidiaries of TransTechnology other than the Domestic Subsidiaries. FRONTED LOANS. The International Facility Loans, with each (and any portion of each) being individually a "FRONTED LOAN". FRONTING BANKS. The DM Fronting Bank and the Sterling Fronting Bank, collectively, and each individually a "FRONTING BANK". FUNDED INDEBTEDNESS. At any time of determination, the aggregate principal amount of all funded Indebtedness for borrowed money (including, for the avoidance of doubt, all Subordinated Debt of TransTechnology and any of its Subsidiaries), PLUS all obligations, contingent and otherwise, to reimburse the issuer in respect of any letter of credit, performance bonds, bankers' acceptances, guarantees or other similar instruments, PLUS Capitalized Leases, of TransTechnology and its Subsidiaries. FUNDING ACCOUNT. See section 2.8.1. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. (i) When used in section 11, whether directly or indirectly through reference to a capitalized term used therein, means (A) principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and (B) to the extent consistent with such principles, the accounting practice of TransTechnology reflected in its financial statements for the year ended on the Balance Sheet Date, and (ii) when used in general, other than as provided above, means principles that are (A) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (B) consistently applied with past financial statements of TransTechnology adopting the same principles, PROVIDED that in each case referred to in this definition of "generally accepted accounting principles" a certified public accountant would, insofar as the use of such 23 -15- accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied. GERMAN MORTGAGE. The Real Estate Mortgages dated as of February 28, 1996 and May 30, 1996, together with the German Security Agreement, dated June 23, 1998, entered into by SO OHG in favor of the DM Fronting Bank, as agent for the Administrative Agent and for the benefit of the Lenders, with respect to the real property at: (a) Wiesbadener Strasse/Fischbacher Strasse, Konigstein, Germany (Folio 19-615); (b) Wiesbadener Strasse, Konigstein, Germany (Folio 21-699); and (c) Frittlingen, Germany (Folio 1349); as amended in effect from time to time. GERMAN PLEDGE AGREEMENTS. The Pledge of Shares made by TTSO Inc. in favor of the Administrative Agent with respect to the share capital of GmbH, and the pledge of Partnership Interests by GmbH in favor of the Administrative Agent with respect to its interest as managing general partner of SO OHG, in each case as amended and in effect from time to time. GERMAN SECURITY DOCUMENTS. The Pledges as to Equipment and Inventory and the Assignment of Accounts Receivable dated December 28, 1995 and June 23, 1998, by SO OHG in favor of the DM Fronting Bank, as agent for the Administrative Agent and for the benefit of the Lenders, with respect to all of the equipment, inventory and accounts receivable of SO OHG, as amended and in effect from time to time, the German Mortgage, and the German Pledge Agreements. GMBH. See the preamble to this Credit Agreement. GUARANTEED PENSION PLAN. Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by TransTechnology or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. GUARANTIES. The Parent Guaranty, the Subsidiary Guaranty and the English Guarantees. GUARANTOR. Each Subsidiary of TransTechnology which is a party to the Subsidiary Guaranty or the English Guarantees. HAZARDOUS SUBSTANCES. See Section 8.18(b). 24 -16- INDEBTEDNESS. All obligations, contingent and otherwise, that in accordance with generally accepted accounting principles should be classified upon the obligor's balance sheet as liabilities, or to which reference should be made by footnotes thereto, including in any event and whether or not so classified: (i) all debt and similar monetary obligations, whether direct or indirect; (ii) all liabilities secured by any mortgage, pledge, security interest, lien, charge or other encumbrance existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; and (iii) all guarantees, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness of others, including any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase indebtedness, or to assure the owner of indebtedness against loss, through an agreement to purchase goods, supplies, or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise, and the obligations to reimburse the issuer in respect of any letters of credit, performance bonds, bankers' acceptances, guarantees or other similar instruments; but EXCLUDING all liabilities in respect of Operating Leases. INELIGIBLE SECURITIES. Securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1993 (12 U.S.C. Section 24, Seventh). INITIAL PRICING GRID. See the definition of APPLICABLE MARGIN. INTEREST PAYMENT DATE. (i) As to any Base Rate Loan, the first day after the last day of the Interest Period with respect thereto; and (ii) as to any Eurocurrency Rate Loan in respect of which the Interest Period is (A) 3 months or less, the last day of such Interest Period, and (B) more than 3 months, the date that is 3 months from the first day of such Interest Period and, in addition, the last day of such Interest Period. INTEREST PERIOD. With respect to each Loan, (i) initially, the period commencing on the Drawdown Date of such Loan and ending on the last day of one of the following periods, as selected by the relevant Borrower of such Loan in a Loan Request: (A) for any Base Rate Loan, a calendar quarter, and (B) for any Eurocurrency Rate Loan, 1, 2, 3 or 6 months; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Loan and ending on the last day of one of the periods set forth above, as selected by the relevant Borrower of such Loan in a Conversion Request; PROVIDED that all of the foregoing provisions relating to Interest Periods are subject to the following: (a) if any Interest Period with respect to a Eurocurrency Rate Loan would otherwise end on a day that is not a Eurocurrency Business Day, that Interest Period shall be extended to the next succeeding Eurocurrency Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Eurocurrency Business Day; 25 -17- (b) if any Interest Period with respect to a Base Rate Loan would end on a day that is not a Business Day, that Interest Period shall end on the next succeeding Business Day; (c) if the relevant Borrower shall fail to give notice as provided in ss.2.7, such Borrower shall be deemed to have requested a conversion of the affected Eurocurrency Rate Loan to a Base Rate Loan and the continuance of all Base Rate Loans as Base Rate Loans on the last day of the then current Interest Period with respect thereto; (d) any Interest Period relating to any Eurocurrency Rate Loan that begins on the last Eurocurrency Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Eurocurrency Business Day of a calendar month; and (e) any Interest Period relating to any Eurocurrency Rate Loan that would otherwise extend beyond the Revolving Credit Loan Maturity Date shall end on the Revolving Credit Loan Maturity Date. INTEREST RATE PROTECTION DOCUMENTS. The documents evidencing the interest rate cap or swap arrangements entered into by TransTechnology pursuant to Section 9.15, as such arrangements and the related documents may be amended, modified, varied or supplemented from time to time. INTERNATIONAL FACILITY AMOUNT. At any time of determination, the Dollar Equivalent at such time of the sum of the Total DM Facility Usage and the Total Sterling Facility Usage. INTERNATIONAL FACILITY LOANS. The DM Facility Loans made or to be made by the DM Fronting Bank to GmbH and the Sterling Facility Loans made or to be made by the Sterling Fronting Bank to Limited, in each case pursuant to Section 3, and all liabilities of GmbH and Limited (whether contingent or otherwise) incurred or to be incurred in connection with the issuance of Collateral Instruments and delivery of Counter Indemnities pursuant to Section 3. INTERNATIONAL FACILITY LOAN REQUEST. See Sections 3.6 and 3.7. INVESTMENTS. All expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of stock or Indebtedness of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other commitments as described under Indebtedness), or obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (i) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (ii) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (iii) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, 26 -18- repayment, liquidating dividend or liquidating distribution); (iv) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (ii) may be deducted when paid; and (v) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. LENDERS. The Lenders referred to on SCHEDULE 1 hereto, and, unless the context otherwise requires, also the Fronting Banks and the Issuing Bank, collectively, and each individually being referred to as a "Lender". LETTER OF CREDIT. See Section 5.1.1. LETTER OF CREDIT APPLICATION. See Section 5.1.1. LETTER OF CREDIT FEES. See Section 5.6. LETTER OF CREDIT PARTICIPATION. See Section 5.1.4. LEVERAGE RATIO. As of any date of testing, the ratio of Funded Indebtedness outstanding at such date to Consolidated Adjusted EBITDA, calculated for a Reference Period ended on the last day of the fiscal quarter ending on such date or most recently ended prior to such date, as the case may be. LIMITED. See the preamble to this Credit Agreement. LOAN DOCUMENTS. This Credit Agreement, the Notes, the Letter of Credit Applications, the Letters of Credit, the Interest Rate Protection Documents, the Counter Indemnities and the Security Documents, together with any other documents from time to time entered into and identified therein as a "Loan Document" hereunder. LOAN REQUEST. A Revolving Credit Loan Request or an International Facility Loan Request. LOANS. The Revolving Credit Loans, the International Facility Loans and the Term Loan. MAJORITY LENDERS. As of any date, so long as there is only one Lender, such Lender, and so long as there are at least two Lenders, two or more Lenders holding at least fifty-one percent (51%) of the outstanding principal amount of the Revolving Credit Notes and the Term Notes (if any), taken together, and if no such amounts are outstanding, two or more Lenders whose aggregate Commitments constitute at least fifty-one percent (51%) of the aggregate of the Commitments of all of the Lenders. MAXIMUM DM AMOUNT. The maximum principal amount of International Facility Loans denominated in Deutschmarks available to GmbH from the DM Fronting Bank, as such amount may be reduced from time to time in accordance 27 -19- with the terms and provisions of this Credit Agreement. At the Closing Date, prior to the drawdown of any International Facility Loans, the Maximum DM Amount shall be the DM Equivalent of $10,000,000. MAXIMUM DRAWING AMOUNT. The maximum aggregate amount that the beneficiaries may at any time draw under outstanding Letters of Credit, as such aggregate amount may be reduced from time to time pursuant to the terms of the Letters of Credit. MAXIMUM INTERNATIONAL FACILITY AMOUNT. The aggregate amount of the Maximum DM Amount PLUS the Maximum Sterling Amount. MAXIMUM STERLING AMOUNT. The maximum principal amount of International Facility Loans denominated in Sterling available to Limited from the Sterling Fronting Bank, as such amount may be reduced from time to time in accordance with the terms and provisions of this Credit Agreement. At the Closing Date, prior to the drawdown of any International Facility Loans, the Maximum Sterling Amount shall be the Sterling Equivalent of $20,000,000. MORTGAGED PROPERTY. Any Real Estate which is subject to the German Mortgage, the Debentures or any other Mortgage. MORTGAGES. The several mortgages and deeds of trust from TransTechnology and its Subsidiaries to the Administrative Agent with respect to the fee and certain leasehold interests of TransTechnology and its Subsidiaries in the Real Estate, in each case as amended and in effect from time to time. MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by TransTechnology or any ERISA Affiliate. NET CASH PROCEEDS. If from a sale of assets or of equity, the cash proceeds received from such sale, net of all costs of sale, underwriting or brokerage costs, and taxes paid or payable as a result thereof by TransTechnology and its Subsidiaries, and if from the incurring of Indebtedness, the cash proceeds received from such incurring of Indebtedness, net of all costs thereof incurred and fees and all expenses payable in connection therewith, and taxes paid or payable as a result thereof, by TransTechnology and its Subsidiaries. NOTES. The Revolving Credit Notes and the Term Notes. OBLIGATIONS. All indebtedness, obligations and liabilities of any of TransTechnology and its Subsidiaries to any of the Lenders and the Administrative Agent, individually or collectively, existing on the date of this Credit Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Credit Agreement or any of the other Loan Documents or in respect of any of the Loans made or Reimbursement Obligations incurred or any of the Notes, Letter of Credit 28 -20- Applications, Letters of Credit, the Interest Rate Protection Documents, Counter Indemnities or other instruments at any time evidencing any thereof. OPERATING LEASES. Leases (unless otherwise stated, under which TransTechnology or any of its Subsidiaries is the lessee or obligor) of any property, whether real, personal or mixed, which are not Capitalized Leases. OUTSTANDING. With respect to any Loan or the Loans, the aggregate unpaid principal thereof as of any date of determination. PARENT GUARANTY. The Guaranty, dated as of June 30, 1995, made by TransTechnology in favor of the Administrative Agent, pursuant to which TransTechnology guaranties to the Lenders and the Administrative Agent the payment and performance of the Obligations of GmbH and Limited, as amended and in effect from time to time. PARTNERSHIP AGREEMENT. The partnership agreement of SO OHG entered into between TTSOB and GmbH, as in effect on October 27, 1995. PATENT ASSIGNMENT. The Patent Assignment, dated as of June 30, 1995 made by TransTechnology and its Subsidiaries in favor of the Administrative Agent, as amended and in effect from time to time, and any other Patent Assignments made by TransTechnology or any of its Subsidiaries in favor of the Administrative Agent and in form and substance satisfactory to the Lenders and the Administrative Agent. PBGC. The Pension Benefit Guaranty Corporation created by ss.4002 of ERISA and any successor entity or entities having similar responsibilities. PERFECTION CERTIFICATES. The Perfection Certificates as defined in the Security Agreements. PERMITTED LIENS. Liens, security interests and other encumbrances permitted by Section 10.2. PERSON. Any individual, corporation, partnership, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. PLACING DATE. The date upon which TransTechnology shall have completed the placing of at least $100,000,000 in aggregate principal amount of Subordinated Debt. PRIOR CREDIT AGREEMENT. See the preamble to this Credit Agreement. PROJECTIONS. See Section 8.4.3. RATE SETTING PERIOD. See the definition of "APPLICABLE MARGIN". 29 -21- REAL ESTATE. All real property at any time owned or leased (as lessee or sublessee) by TransTechnology or any of its Subsidiaries. RECORD. The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Lender with respect to any Loan referred to in such Note. REFERENCE BANK. BankBoston. REFERENCE PERIOD. A period of four (4) consecutive fiscal quarters. REIMBURSEMENT OBLIGATION. TransTechnology's obligation to reimburse the Administrative Agent, the Issuing Bank and the Lenders on account of any drawing under any Letter of Credit as provided in Section 5.2. RELATED FUND. With respect to any Lender that is an investment fund that invests in commercial loans, any other such fund that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. RENTAL OBLIGATIONS. All present or future obligations of TransTechnology or any of its Subsidiaries under any rental agreements or leases of real or personal property, other than (i) obligations that can be terminated by the giving of notice without liability to TransTechnology or such Subsidiary in excess of the liability for rent due as of the date on which such notice is given and under which no penalty or premium is paid as a result of any such termination, and (ii) obligations in respect of Capitalized Leases. RESET DATE. The first Business Day of the month immediately following the month in which a Compliance Certificate is required to be delivered by TransTechnology pursuant to Section 9.4(c). REVOLVING CREDIT AVAILABILITY. At any time of reference thereto, the amount by which the Total Revolving Credit Commitment as in effect at such time exceeds the aggregate of (a) the outstanding amount of Revolving Credit Loans at such time (after giving effect to all amounts requested) PLUS (b) the sum of the Maximum Drawing Amount, all Unpaid Reimbursement Obligations and the International Facility Amount at such time. REVOLVING CREDIT COMMITMENT. With respect to each Lender, (a) initially, the amount set forth on column 2 of SCHEDULE 1 hereto, and (b) in the event the Early Placing Date shall have occurred and all of the Senior Subordinated Loans and the Term Loan shall have been repaid in full, the amount set forth on column 3 of SCHEDULE 1 hereto, as the amount of such Lender's commitment to make Revolving Credit Loans to TransTechnology, to participate in the issuance, extension and renewal of Letters of Credit for the account of TransTechnology, and to indemnify the Fronting Banks in accordance with Section 6.12.2, as the same may be reduced from time to time, or if such commitment is terminated pursuant to the provisions hereof, zero. 30 -22- REVOLVING CREDIT LOAN MATURITY DATE. August 31, 2004. REVOLVING CREDIT LOANS. Revolving credit loans made or to be made by the Lenders to TransTechnology pursuant to Section 2. REVOLVING CREDIT LOAN REQUEST. See Section 2.6. REVOLVING CREDIT NOTE RECORD. A Record with respect to a Revolving Credit Note. REVOLVING CREDIT NOTES. See Section 2.4. SECTION 20 SUBSIDIARY. A Subsidiary of the bank holding company controlling any Lender, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities. SECURITY AGREEMENTS. The several Security Agreements, dated as of June 30, 1995, between TransTechnology and its Subsidiaries and the Administrative Agent, as amended and in effect from time to time. SECURITY DOCUMENTS. The Guaranties, the Security Agreements, the Mortgages, the Patent Assignments, the Trademark Assignments, the Copyright Mortgages, the German Security Documents, the English Security Documents, the Canadian Security Documents, the Collateral Assignments of Acquisition Agreements, the Brazilian Pledge Agreement, and the Stock Pledge Agreements, and any other documents or instruments from time to time securing any of the Obligations or evidencing such security. SENIOR FUNDED INDEBTEDNESS. At any time of determination, the aggregate principal amount of all funded Indebtedness for borrowed money (other than Subordinated Debt), PLUS all obligations, contingent and otherwise, to reimburse the issuer in respect of any letters of credit, performance bonds, bankers' acceptances, guarantees or other similar instruments, PLUS Capitalized Leases, of TransTechnology and its Subsidiaries. SENIOR LEVERAGE RATIO. As of any date of testing, the ratio of Senior Funded Indebtedness outstanding at such date to Consolidated Adjusted EBITDA, calculated for a Reference Period ended on the last day of the fiscal quarter ended on such date or most recently ended prior to such date, as the case may be. SENIOR SUBORDINATED LOAN AGREEMENT. The $75,000,000 Senior Subordinated Note Purchase Agreement, dated of even date herewith, by and among the Company, the Lenders and Holders referred to therein and BankBoston, N.A., as Administrative Agent for such Lenders and Holders. SENIOR SUBORDINATED LOAN DOCUMENTS. Collectively, the Senior Subordinated Loan Agreement, the Subordinated Guaranty, and each of the Notes, the Warrant Agreement, the Warrants, the Warrant Holders' Agreement, the Registration Rights 31 -23- Agreement, the Exchange Escrow Agreement and the Indenture, each as defined in the Senior Subordinated Loan Agreement. SENIOR SUBORDINATED LOANS. Amounts outstanding under the Senior Subordinated Loan Agreement, as such amounts may be converted in accordance with the terms thereof. SO OHG. Seeger-Orbis GmbH & Co. OHG, a German general commercial partnership, at least ninety-nine percent (99%) of whose partnership interests are held by GmbH and the remainder of whose partnership interests are held by TTSOB. STERLING or (POUND). Pounds sterling in the lawful currency of the United Kingdom of Great Britain and Northern Ireland. STERLING BASE RATE. The annual rate of interest announced from time to time by the Sterling Fronting Bank as its "base rate" for loans denominated in Sterling. STERLING EQUIVALENT. On any date of determination, with respect to an amount denominated in Sterling, such amount of Sterling, and with respect to an amount denominated in Deutschmarks or Dollars, the amount of Sterling which could be purchased with that amount of Deutschmarks or Dollars, as the case may be, at the spot rate of exchange quoted by the Sterling Fronting Bank in the London Foreign Exchange Market at or about 11:00 a.m. (London time) on the date of determination for the purchase of Sterling with Deutschmarks or Dollars, as the case may be. STERLING EUROCURRENCY LOAN. See Section 3.3. STERLING EUROCURRENCY RATE. For any Interest Period with respect to a Sterling Loan, the rate of interest equal to the rate per annum (rounded upwards to the nearest 1/16 of one percent) at which the Sterling Fronting Bank is offered deposits in Sterling two (2) Eurocurrency Business Days prior to the beginning of such Interest Period in the London interbank market for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Sterling Loan to which such Interest Period applies, divided by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable. STERLING FACILITY LOANS. The Sterling Eurocurrency Loans and the Sterling Overdraft Advances, collectively. STERLING FRONTING BANK. Initially, the London Branch of BankBoston, in its capacity as Sterling Fronting Bank; and thereafter such office as may be appointed as may be appointed as successor Sterling Fronting Bank in accordance with Section 6.12.3. STERLING LOAN. Any International Facility Loan which is denominated in pounds Sterling. 32 -24- STERLING OVERDRAFT ADVANCE. See Section 3.3. STOCK PLEDGE AGREEMENTS. The Stock Pledge Agreements, dated as of June 30, 1995, between TransTechnology and certain of the Guarantors on the one hand and the Administrative Agent on the other hand with respect to each of the Domestic Subsidiaries of TransTechnology, as amended and in effect from time to time. SUBORDINATED DEBT. Unsecured Indebtedness of TransTechnology or any of its Subsidiaries in an amount, containing other terms and conditions, and expressly subordinated and made junior to the payment and performance in full of the Obligations, pursuant to a written instrument containing subordination provisions, in each respect satisfactory to and approved by the Majority Lenders and the Administrative Agent in writing. SUBORDINATED GUARANTY. The Subordinated Guaranty dated of even date herewith entered into by TransTechnology's Domestic Subsidiaries in favor of the Administrative Agent and the Lenders under and as defined in the Senior Subordinated Note Purchase Agreement with respect to the Senior Subordinated Loans. SUBSIDIARY. Any corporation, association, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Stock. SUBSIDIARY GUARANTY. The Guaranty, dated as of June 30, 1995, made by each Domestic Subsidiary in favor of the Lenders and the Administrative Agent, pursuant to which each Domestic Subsidiary guaranties to the Lenders and the Administrative Agent the payment and performance of the Obligations, as amended and in effect from time to time. SURVEY. In relation to a Mortgaged Property, an instrument survey of such Mortgaged Property acceptable to the Administrative Agent. SYNDICATION AGENT. See the preamble of this Credit Agreement. TERM LOAN. The term loan made or to be made by the Lenders to TransTechnology on the Closing Date in the aggregate principal amount of $50,000,000 pursuant to Section 4.1. TERM LOAN MATURITY DATE. August 31, 2004. TERM NOTE RECORD. A Record with respect to a Term Note. TERM NOTES. See Section 4.2. TINNERMAN ACQUISITION. The acquisition by TransTechnology or certain Subsidiaries of TransTechnology of substantially all of Eaton Corporation's 33 -25- Engineered Fastener Division pursuant to and in accordance with the Tinnerman Acquisition Agreement. TINNERMAN ACQUISITION AGREEMENT. The Asset Purchase Agreement dated as of July 9, 1999 by and between TransTechnology and Eaton Corporation. TINNERMAN ACQUISITION DOCUMENTS. The Tinnerman Acquisition Agreement and each of the other documents entered into by TransTechnology or any of its Subsidiaries pursuant thereto. TITLE INSURANCE COMPANY. Commonwealth Title Insurance Company. TITLE POLICY. In relation to each Mortgaged Property located in the United States of America, an ALTA standard form title insurance policy issued by the Title Insurance Company (with such reinsurance or co-insurance as the Administrative Agent may require, any such reinsurance to be with direct access endorsements) in such amount as may be determined by the Administrative Agent insuring the priority of the Mortgage of such Mortgaged Property and that TransTechnology or one of its Subsidiaries holds marketable fee simple title to such Mortgaged Property, subject only to the encumbrances permitted by such Mortgage and which shall not contain exceptions for mechanics liens or persons in occupancy (except as may be permitted by such Mortgage), shall not insure over any matter except to the extent that any such affirmative insurance is acceptable to the Administrative Agent in its sole discretion, and shall contain such endorsements and affirmative insurance as the Administrative Agent in its discretion may require. TOTAL DM FACILITY USAGE. See Section 3.1. TOTAL REVOLVING CREDIT COMMITMENT. The sum of the Revolving Credit Commitments of the Lenders, as in effect from time to time, being (a) $200,000,000 on the Closing Date and (b) $250,000,000, if the Revolving Credit Commitments of the Lenders are increased pursuant to clause (b) of the definition thereof. TOTAL SHAREHOLDERS' EQUITY. At any time of determination, the total shareholders' equity of the TransTechnology Group at such time, determined in accordance with generally accepted accounting principles. TOTAL STERLING FACILITY USAGE. See Section 3.3. TRADEMARK ASSIGNMENTS. The Trademark Assignment dated as of June 30, 1995, made by TransTechnology and certain of its Subsidiaries in favor of the Administrative Agent, as amended and in effect from time to time, and any other Trademark Assignments made by TransTechnology or any of its other subsidiaries in favor of the Administrative Agent and in form and substance satisfactory to the Lenders and the Administrative Agent. TRANSTECHNOLOGY CANADA. TransTechnology Canada Corporation, an Ontario corporation. 34 -26- TRANSTECHNOLOGY GROUP. TransTechnology and all of its Subsidiaries on a consolidated basis. TTSO INC. TransTechnology Seeger Inc., a Delaware corporation, formerly known as TransTechnology Seeger-Orbis Inc. TTSOB. Seeger-Orbis Beteiligungsgesellschaft mbH, a German limited liability company and a wholly-owned subsidiary of GmbH. TYPE. As to any Revolving Credit Loan or International Facility Loan, or any portion of the Term Loan, its nature as a Base Rate Loan or a Eurocurrency Rate Loan. UNIFORM CUSTOMS. With respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 or any successor version thereto adopted by the Administrative Agent in the ordinary course of its business as a letter of credit issuer and in effect at the time of issuance of such Letter of Credit. UNPAID REIMBURSEMENT OBLIGATION. Any Reimbursement Obligation for which TransTechnology does not reimburse the Administrative Agent and the Lenders on the date specified in, and in accordance with, Section 5.2. VOTING STOCK. Stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, trust or other business entity involved, whether or not the right so to vote exists by reason of the happening of a contingency. YEAR 2000 PROBLEM. See Section 8.21. 1.2. RULES OF INTERPRETATION. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement. (b) The singular includes the plural and the plural includes the singular. (c) A reference to any law includes any amendment or modification to such law. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer. 35 -27- (f) The words "include", "includes" and "including" are not limiting. (g) All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts, have the meanings assigned to them therein, with the term "instrument" being that defined under Article 9 of the Uniform Commercial Code. (h) Reference to a particular "section" refers to that section of this Credit Agreement unless otherwise indicated. (i) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Credit Agreement as a whole and not to any particular section or subdivision of this Credit Agreement. 2. THE REVOLVING CREDIT FACILITY. ------------------------------ 2.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in this Credit Agreement, each of the Lenders severally agrees to lend to TransTechnology and TransTechnology may borrow, repay, and reborrow from time to time between the Closing Date and the Revolving Credit Loan Maturity Date upon notice by TransTechnology to the Administrative Agent given in accordance with ss.2.6, such sums in Dollars as are requested by TransTechnology up to a maximum aggregate amount outstanding (after giving effect to all amounts requested) at any one time equal to such Lender's Revolving Credit Commitment in effect at such time MINUS such Lender's Commitment Percentage of the sum of (a) the Maximum Drawing Amount, (b) all Unpaid Reimbursement Obligations, and (c) the International Facility Amount, PROVIDED that the sum of the outstanding amount of the Revolving Credit Loans (after giving effect to all amounts requested) PLUS the Maximum Drawing Amount, all Unpaid Reimbursement Obligations, and the International Facility Amount shall not at any time exceed the Total Revolving Credit Commitment. The Revolving Credit Loans shall be made pro rata in accordance with each Lender's Commitment Percentage. Each request for a Revolving Credit Loan hereunder shall constitute a representation and warranty by TransTechnology that the conditions set forth in Section 12 and Section 13, in the case of the initial Revolving Credit Loans to be made on the Closing Date, and ss.13, in the case of all other Revolving Credit Loans, have been satisfied on the date of such request. 2.2. REVOLVING CREDIT COMMITMENT FEE. TransTechnology agrees to pay to the Administrative Agent for the accounts of the Lenders in accordance with their respective Commitment Percentages a commitment fee calculated at the Commitment Fee Rate per annum on the average daily amount during each calendar quarter or portion thereof from the Closing Date to the Revolving Credit Loan Maturity Date by which the Total Revolving Credit Commitment, MINUS the sum of (a) the Maximum Drawing Amount, (b) all Unpaid Reimbursement Obligations and (c) the Maximum International Facility Amount, exceeds the outstanding amount of Revolving Credit Loans during such calendar quarter. The revolving credit commitment fee shall be payable quarterly in arrears on the first 36 -28- day of each calendar quarter with respect to the immediately preceding calendar quarter, commencing on the first such date following the date hereof, with a final payment on the Revolving Credit Loan Maturity Date or any earlier date on which the Revolving Credit Commitments shall terminate. 2.3. REDUCTION OF TOTAL REVOLVING CREDIT COMMITMENT. Trans-Technology shall have the right at any time and from time to time upon five (5) Business Days prior written notice to the Administrative Agent to reduce by $1,000,000 or an integral multiple thereof or terminate entirely the Total Revolving Credit Commitment, whereupon the Revolving Credit Commitments of the Lenders shall be reduced PRO RATA in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated. Promptly after receiving any notice of TransTechnology delivered pursuant to this Section 2.3, the Administrative Agent will notify the Lenders of the substance thereof. Upon the effective date of any such reduction or termination, TransTechnology shall pay to the Administrative Agent for the respective accounts of the Lenders the full amount of any commitment fee then accrued on the amount of the reduction. No reduction or termination of the Revolving Credit Commitments may be reinstated. 2.4. THE REVOLVING CREDIT NOTES. The Revolving Credit Loans shall be evidenced by separate promissory notes of TransTechnology in substantially the form of EXHIBIT A hereto (each a "REVOLVING CREDIT NOTE"), dated as of the Closing Date and completed with appropriate insertions. One Revolving Credit Note shall be payable to the order of each Lender in a principal amount equal to such Lender's Revolving Credit Commitment in effect at such time, or, if less, the outstanding amount of all Revolving Credit Loans made by such Lender, plus interest accrued thereon, as set forth below. TransTechnology irrevocably authorizes each Lender to make or cause to be made, at or about the time of the Drawdown Date of any Revolving Credit Loan or at the time of receipt of any payment of principal on such Lender's Revolving Credit Note, an appropriate notation on such Lender's Revolving Credit Note Record reflecting the making of such Revolving Credit Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Revolving Credit Loans set forth on such Lender's Revolving Credit Note Record shall be PRIMA FACIE evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender's Revolving Credit Note Record shall not limit or otherwise affect the obligations of TransTechnology hereunder or under any Revolving Credit Note to make payments of principal of or interest on any Revolving Credit Note when due. 2.5. INTEREST ON REVOLVING CREDIT LOANS. Except as otherwise provided in section 6.11, the Revolving Credit Loans shall bear interest as follows: (a) each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the sum of (i) the Dollar Base Rate PLUS (ii) the Applicable Margin with respect to Base Rate Loans as in effect from time to time; and 37 -29- (b) each Eurocurrency Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the sum of (i) the Eurodollar Rate determined for such Interest Period PLUS (ii) the Applicable Margin with respect to Eurocurrency Rate Loans as in effect from time to time. TransTechnology promises to pay interest on each Revolving Credit Loan in arrears on each Interest Payment Date with respect thereto. 2.6. REQUESTS FOR REVOLVING CREDIT LOANS. TransTechnology shall give to the Administrative Agent telephonic notice, confirmed in writing in the form of EXHIBIT B hereto, of each Revolving Credit Loan requested hereunder (a "REVOLVING CREDIT LOAN REQUEST") no later than 1:00 p.m. (Boston time) (a) on the proposed Drawdown Date of any Base Rate Loan, or (b) on the third (3rd) Eurocurrency Business Day prior to the proposed Drawdown Date of any Eurocurrency Rate Loan. Each Revolving Credit Loan Request shall specify (i) the principal amount of the Revolving Credit Loan requested, (ii) the proposed Drawdown Date of such Revolving Credit Loan, (iii) the Interest Period for such Revolving Credit Loan, and (iv) the Type of such Revolving Credit Loan. Promptly upon receipt of any such notice, the Administrative Agent shall notify each of the Lenders thereof. Each Revolving Credit Loan Request shall be irrevocable and binding on TransTechnology and shall obligate TransTechnology to accept the Revolving Credit Loan requested from the Lenders or, as the case may be, from the Administrative Agent on behalf of the Lenders, on the proposed Drawdown Date therefor. Each Revolving Credit Loan Request shall be in a minimum aggregate amount of $100,000, or an integral multiple thereof. 2.7. CONVERSION OPTIONS. 2.7.1. CONVERSION TO DIFFERENT TYPE OF REVOLVING CREDIT LOAN. TransTechnology may elect from time to time to convert any outstanding Revolving Credit Loan to a Revolving Credit Loan of another Type, PROVIDED that (a) with respect to any such conversion of a Revolving Credit Loan to a Base Rate Loan, TransTechnology shall give the Administrative Agent at least one (1) Business Day prior written notice of such election; (b) with respect to any such conversion of a Base Rate Loan to a Eurocurrency Rate Loan, TransTechnology shall give the Administrative Agent at least three (3) Eurocurrency Business Days prior written notice of such election; (c) with respect to any such conversion of a Eurocurrency Rate Loan into a Revolving Credit Loan of another Type, such conversion shall only be made on the last day of the Interest Period with respect thereto and (d) no Loan may be converted into a Eurocurrency Rate Loan when any Default or Event of Default has occurred and is continuing. All or any part of outstanding Revolving Credit Loans of any Type may be converted into a Revolving Credit Loan of another Type as provided herein, PROVIDED that any partial conversion shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. Each Conversion Request relating to the 38 -30- conversion of a Revolving Credit Loan to a Eurocurrency Rate Loan shall be irrevocable by TransTechnology. 2.7.2. CONTINUATION OF TYPE OF REVOLVING CREDIT LOAN. Any Revolving Credit Loan of any Type may be continued as a Revolving Credit Loan of the same Type upon the expiration of an Interest Period with respect thereto by compliance by TransTechnology with the notice provisions contained in Section 2.7.1; PROVIDED that no Eurocurrency Rate Loan may be continued as such when any Default or Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto ending during the continuance of any Default or Event of Default of which officers of the Administrative Agent active upon TransTechnology's account have actual knowledge. In the event that TransTechnology fails to provide any such notice with respect to the continuation of any Eurocurrency Rate Loan as such, then such Eurocurrency Rate Loan shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto. The Administrative Agent shall notify the Lenders promptly when any such automatic conversion contemplated by this Section 2.7 is scheduled to occur. 2.7.3. EUROCURRENCY RATE LOANS. Any conversion to or from Eurocurrency Rate Loans shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of all Eurocurrency Rate Loans having the same Interest Period shall not be less than $5,000,000 or a whole multiple of $1,000,000 in excess thereof. 2.8 FUNDS FOR REVOLVING CREDIT LOANS. Not later than 2:00 p.m. (Boston time) on the proposed Drawdown Date of any Revolving Credit Loans, upon receipt of the documents required by Sections 12 and 13 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Administrative Agent will make available in immediately available funds the amount of the requested Revolving Credit Loans by transferring such amount into TransTechnology's account with the Administrative Agent's Head Office, identified as the "TransTechnology Funding Account" (the "FUNDING ACCOUNT"). 2.9. MATURITY OF REVOLVING CREDIT LOANS. TransTechnology promises to pay on the Revolving Credit Loan Maturity Date, and there shall become absolutely due and payable on the Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans outstanding on such date, together with any and all accrued and unpaid interest thereon. 2.10. MANDATORY REPAYMENTS OF REVOLVING CREDIT LOANS. If at any time the sum of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing Amount, all Unpaid Reimbursement Obligations and the International Facility Amount exceeds the Total Revolving Credit Commitment then TransTechnology shall immediately pay the amount of such excess to the Administrative Agent for the respective accounts of the Lenders for application: 39 -31- first, to any Unpaid Reimbursement Obligations; second, to the Revolving Credit Loans; third, to the International Facility Loans; and fourth, to provide to the Administrative Agent cash collateral for Reimbursement Obligations as contemplated by Section 5.2(b) and (c). Each payment of any Unpaid Reimbursement Obligations or prepayment of Revolving Credit Loans shall be allocated among the Lenders, in proportion, as nearly as practicable, to each Reimbursement Obligation or (as the case may be) the respective unpaid principal amount of each Lender's Revolving Credit Note, with adjustments to the extent practicable to equalize any prior payments or repayments not exactly in proportion. 2.11. OPTIONAL REPAYMENTS OF REVOLVING CREDIT LOANS. Trans-Technology shall have the right, at its election, to repay the outstanding amount of the Revolving Credit Loans, as a whole or in part, at any time without penalty or premium, PROVIDED that any full or partial prepayment of the outstanding amount of any Eurocurrency Rate Loans pursuant to this Section 2.11 may be made only on the last day of the Interest Period relating thereto, unless all costs in connection with such prepayment are paid in full simultaneously with such prepayment pursuant to Section 6.10. Each partial prepayment of the Revolving Credit Loans shall be in an integral multiple of $100,000, shall (in the case of Eurocurrency Rate Loans) be accompanied by the payment of accrued interest on the principal prepaid to the date of prepayment, and shall be applied, in the absence of instruction by TransTechnology, first to the principal of Base Rate Loans, and then to the principal of Eurocurrency Rate Loans. Each partial prepayment shall be allocated among the Lenders, in proportion, as nearly as practicable, to the respective unpaid principal amount of each Lender's Revolving Credit Note, with adjustments to the extent practicable to equalize any prior repayments not exactly in proportion. 3. INTERNATIONAL CREDIT FACILITY. ------------------------------ 3.1. DM FACILITY LOANS. Subject to the terms and conditions set forth in this Credit Agreement, (a) the DM Fronting Bank agrees to lend to GmbH and GmbH may borrow, repay, and reborrow from time to time between the Closing Date and the Revolving Credit Loan Maturity Date either (i) upon notice by GmbH to the DM Fronting Bank given in accordance with section 3.6, Loans in Deutschmarks for a specified Interest Period to bear interest at the rate specified in Section 3.5(c) below (the "DM EUROCURRENCY LOANS"), or (ii) by means of overdraft advances on GmbH's DM current account with the DM Fronting Bank (the "DM OVERDRAFT ADVANCES"), and (b) the DM Fronting Bank agrees to issue Collateral Instruments to or for the account of GmbH upon the DM Fronting Bank's receipt of a duly-completed and executed Counter Indemnity from GmbH in respect of each such Collateral Instrument, in form and substance satisfactory to the DM Fronting Bank, PROVIDED THAT the aggregate amount of all liabilities of GmbH in respect of all such Counter Indemnities (whether contingent or otherwise) PLUS the total amount of DM Eurocurrency Loans and DM Overdraft Advances outstanding at any one time (after giving effect to all amounts requested) (such aggregate amount being referred to herein as "TOTAL DM FACILITY USAGE") shall not exceed the DM Equivalent at such time of $10,000,000. Each request for a DM Eurocurrency Loan, each application to the DM Fronting Bank for a Collateral Instrument, and each acceptance of a DM 40 -32- Overdraft Advance under this Section 3.1 shall constitute a representation and warranty by GmbH that the conditions set forth in Section 12 and Section 13, in the case of the initial DM Facility Loans or Collateral Instruments (if any) to be made or issued on the Closing Date, and Section 13, in the case of all other DM Facility Loans or Collateral Instruments, have been satisfied on the date of such request or acceptance, as the case may be. 3.2. MANDATORY REPAYMENTS OF DM FACILITY LOANS. If at any time, for any reason whatsoever, including without limitation fluctuations in currency rates, Total DM Facility Usage exceeds by more than 5% the DM Equivalent at such time of $10,000,000, then GmbH shall immediately pay the excess amount for application first, to reduce the outstanding amount of DM Overdraft Advances, second, to provide to the DM Fronting Bank cash cover in respect of any outstanding Counter Indemnities in favor of the DM Fronting Bank, and third, to prepay any DM Eurocurrency Loans then outstanding. 3.3. STERLING FACILITY LOANS. Subject to the terms and conditions set forth in this Credit Agreement, (a) the Sterling Fronting Bank agrees to lend to Limited and Limited may borrow, repay, and reborrow from time to time between the Closing Date and the Revolving Credit Loan Maturity Date either (i) upon notice by Limited to the Sterling Fronting Bank given in accordance with Section 3.7, Loans in Sterling for a specified Interest Period to bear interest at the rate specified in Eurocurrency Loan, each application to the DM Fronting Bank for a Collateral Instrument, and each acceptance of a DM 3.5(d) below (the "STERLING EUROCURRENCY LOANS"), or (ii) by means of overdraft advances on Limited's Sterling current account with the Sterling Fronting Bank (the "STERLING OVERDRAFT ADVANCES"), and (b) the Sterling Fronting Bank agrees to issue Collateral Instruments to or for the account of Limited upon the Sterling Fronting Bank's receipt of a duly-completed and executed Counter Indemnity from Limited in respect of each such Collateral Instrument, in form and substance satisfactory to the Sterling Fronting Bank, PROVIDED that the aggregate amount of all liabilities of Limited in respect of all such Counter Indemnities (whether contingent or otherwise) plus the total amount of Sterling Eurocurrency Loans and Sterling Overdraft Advances outstanding at any one time (after giving effect to all amounts requested) (such aggregate amount being referred to herein as "TOTAL STERLING FACILITY USAGE") shall not exceed the Sterling Equivalent at such time of $20,000,000. Each request for a Sterling Eurocurrency Loan, each application to the Sterling Fronting Bank for a Collateral Instrument and each acceptance of a Sterling Overdraft Advance under this Section 3.3 shall constitute a representation and warranty by Limited that the conditions set forth in Section 12 and Section 13, in the case of the initial Sterling Facility Loans or Collateral Instruments (if any) to be made or issued on the Closing Date, and Section 13, in the case of all other Sterling Facility Loans or Collateral Instruments, have been satisfied on the date of such request or acceptance, as the case may be. 3.4. MANDATORY REPAYMENTS OF STERLING FACILITY LOANS. If at any time, for any reason whatsoever, including without limitation fluctuations in currency rates, Total Sterling Facility Usage exceeds by more than 5% the Sterling Equivalent at such time of $20,000,000, then Limited shall immediately pay the excess amount for application first, to reduce the outstanding amount of Sterling Overdraft Advances, second to provide to the Sterling Fronting Bank cash collateral 41 -33- in respect of any outstanding Counter Indemnities, and third, to prepay any Sterling Eurocurrency Loans then outstanding. 3.5. INTEREST ON INTERNATIONAL FACILITY LOANS. Except as otherwise provided in Section 6.11, the International Facility Loans shall bear interest as follows: (a) with respect to DM Overdraft Advances, interest shall be payable by GmbH on the day-to-day balance in GmbH's current account maintained with the DM Fronting Bank at a rate per annum equal to the sum of (i) the DM Base Rate PLUS (ii) the Applicable Margin with respect to Base Rate Loans as in effect from time to time; and shall be deducted from such current account on the last Eurocurrency Business Day of each calendar month or on such other monthly date as the DM Fronting Bank may reasonably require such payments; (b) with respect to Sterling Overdraft Advances, interest shall be payable by Limited on the day-to-day balance in Limited's current account maintained with the Sterling Fronting Bank at a rate per annum equal to the sum of (i) the Sterling Base Rate PLUS (ii) the Applicable Margin with respect to Eurocurrency Rate Loans as in effect from time to time; and shall be deducted from such current account on the last Eurocurrency Business Day of each calendar month or on such other monthly date as the Sterling Fronting Bank may reasonably require such payments; (c) each DM Eurocurrency Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the sum of (i) the DM Eurocurrency Rate determined for such Interest Period PLUS (ii) the Applicable Margin with respect to Eurocurrency Rate Loans as in effect from time to time. GmbH promises to pay interest, in accordance with Section 6.3.2, on each DM Eurocurrency Loan in arrears on each Interest Payment Date with respect thereto; and (d) each Sterling Eurocurrency Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at a rate per annum equal to the sum of (i) the Sterling Eurocurrency Rate determined for such Interest Period PLUS (ii) the Applicable Margin with respect to Eurocurrency Rate Loans as in effect from time to time. Limited promises to pay interest, in accordance with Section 6.3.2, on each Sterling Eurocurrency Loan in arrears on each Interest Payment Date with respect thereto. 3.6. REQUESTS FOR DM EUROCURRENCY LOANS. GmbH shall give to the DM Fronting Bank written notice substantially in the form of EXHIBIT B hereto (or telephonic notice confirmed in a writing in the form of EXHIBIT B hereto) of each DM Eurocurrency Loan requested hereunder (an "INTERNATIONAL FACILITY LOAN REQUEST") no less than two (2) Eurocurrency Business Days prior to the proposed Drawdown Date of such Eurocurrency Rate Loan. Each such notice shall specify (a) the 42 -34- principal amount of the Loan requested, (b) the proposed Drawdown Date of such Loan, (c) the Interest Period for such Loan and (d) the Type of such Loan. Each International Facility Loan Request for a DM Eurocurrency Loan shall be irrevocable and binding on GmbH and shall obligate GmbH to accept the DM Eurocurrency Loan requested on the proposed Drawdown Date therefor. Each such International Facility Loan Request shall be in a minimum aggregate amount of the DM Equivalent of $100,000 or an integral multiple thereof. 3.7. REQUESTS FOR STERLING EUROCURRENCY LOANS. Limited shall give to the Sterling Fronting Bank written notice substantially in the form of EXHIBIT B hereto (or telephonic notice confirmed in a writing in the form of EXHIBIT B hereto) of each Sterling Eurocurrency Loan requested hereunder (also referred to herein as an "INTERNATIONAL FACILITY LOAN REQUEST") no less than two (2) Eurocurrency Business Days prior to the proposed Drawdown Date of such Eurocurrency Rate Loan. Each such notice shall specify (a) the principal amount of the Loan requested, (b) the proposed Drawdown Date of such Loan, (c) the Interest Period for such Loan and (d) the Type of such Loan. Each International Facility Loan Request for a Sterling Eurocurrency Loan shall be irrevocable and binding on Limited and shall obligate Limited to accept the Sterling Eurocurrency Loan requested on the proposed Drawdown Date therefor. Each such International Facility Loan Request shall be in a minimum aggregate amount of the Sterling Equivalent of $100,000 or an integral multiple thereof. 3.8 EVIDENCE OF DM FACILITY LOANS. The obligations of GmbH to repay all amounts borrowed by it as DM Eurocurrency Loans and DM Overdraft Advances, all interest thereon and all other amounts payable by it in respect thereof shall be evidenced by this Credit Agreement, it being the intention of the parties hereto that GmbH's obligations with respect to the DM Facility Loans owed by it is evidenced only as stated herein and not by separate promissory notes or other instruments. 3.9. EVIDENCE OF STERLING FACILITY LOANS. The obligations of Limited to repay all amounts borrowed by it as Sterling Eurocurrency Loans and Sterling Overdraft Advances, all interest thereon and all other amounts payable by it in respect thereof shall be evidenced by this Credit Agreement, it being the intention of the parties hereto that Limited's obligations with respect to the Sterling Facility Loans owed by it is evidenced only as stated herein and not by separate promissory notes or other instruments. 3.10. MATURITY OF DM FACILITY LOANS. GmbH promises to pay on the Revolving Credit Loan Maturity Date, or such earlier date as the Total Revolving Credit Commitment shall terminate or the obligations with respect to the International Facility Loans shall be accelerated in accordance with Section 14, and there shall become absolutely due and payable on the Revolving Credit Loan Maturity Date or such earlier date, all of the DM Facility Loans outstanding on such date, together with any and all accrued and unpaid interest thereon, and to provide on such date cash cover satisfactory to the DM Fronting Bank for the aggregate 43 -35- amount of all liabilities of GmbH (whether contingent or otherwise) in respect of all Counter Indemnities in favor of the DM Fronting Bank outstanding on such date. 3.11. MATURITY OF STERLING FACILITY LOANS. Limited promises to pay on the Revolving Credit Loan Maturity Date, or such earlier date as the Total Revolving Credit Commitment shall terminate or the obligations with respect to the International Facility Loans shall be accelerated in accordance with Section 14, and there shall become absolutely due and payable on the Revolving Credit Loan Maturity Date or such earlier date, all of the Sterling Facility Loans outstanding on such date, together with any and all accrued and unpaid interest thereon, and to provide on such date cash cover satisfactory to the Sterling Fronting Bank for the aggregate amount of all liabilities of Limited (whether contingent or otherwise) in respect of all Counter Indemnities in favor of the Sterling Fronting Bank outstanding on such date. 3.12. OPTIONAL REPAYMENT OF INTERNATIONAL FACILITY LOANS. GmbH and Limited shall each have the right, at their election, to repay the outstanding amount of the DM Facility Loans and Sterling Facility Loans, as applicable as a whole or in part, at any time without penalty or premium, PROVIDED that any full or partial prepayment of the outstanding amount of any Eurocurrency Rate Loans pursuant to this Section 3.12 may be made only on the last day of the Interest Period relating thereto, unless all costs in connection with such prepayment are paid in full simultaneously with such prepayment pursuant to Section 6.10. GmbH shall give the DM Fronting Bank, no later than 10:00 a.m., Frankfurt time, at least three (3) Eurocurrency Business Days prior written notice of any proposed prepayment pursuant to this Section 3.12 of DM Facility Loans which are Base Rate Loans, and four (4) Eurocurrency Business Days notice of any proposed prepayment pursuant to this Section 3.12 of DM Facility Loans which are Eurocurrency Rate Loans, in each case specifying the proposed date of prepayment of such DM Facility Loans and the principal amount to be prepaid. Each such partial prepayment of the DM Facility Loans shall be in an integral multiple of DM50,000. Limited shall give the Sterling Fronting Bank, no later than 10:00 a.m., London time, at least three (3) Eurocurrency Business days prior written notice of any proposed prepayment pursuant to this Section 3.12 of Sterling Facility Loans which are Base Rate Loans, and four (4) Eurocurrency Business Days notice of any proposed prepayment pursuant to this Section 3.12 of Sterling Facility Loans which are Eurocurrency Rate Loans, in each case specifying the proposed date of prepayment of such Sterling Facility Loans and the principal amount to be prepaid. Each such partial prepayment of the Sterling Facility Loans shall be in an integral multiple of (pound)50,000. Any prepayment pursuant to this Section 3.12 shall be accompanied by the payment of accrued interest on the principal prepaid to the date of prepayment, and shall be applied, in the absence of instruction by GmbH or Limited, as the case may be, first to outstanding interest on such International Facility Loans, second to the principal of International Facility Loans which are Base Rate Loans, third to provide to each of the Fronting Banks cash cover in respect of any outstanding Counter Indemnities in favor of such Fronting Bank, and fourth to the principal of International Facility Loans which are Eurocurrency Rate Loans. Notwithstanding anything in this Credit Agreement to the contrary, there shall be an interval of not 44 -36- less than two (2) weeks between each prepayment by GmbH or Limited under this Section 3.12. 3.13. DM FACILITY COMMITMENT FEE. GmbH agrees to pay to the DM Fronting Bank, for payment by it to the Administrative Agent for the accounts of the Lenders in accordance with their respective Commitment Percentages, a commitment fee calculated at the Commitment Fee Rate per annum on the average daily amount during each calendar quarter or portion thereof from the Closing Date to the Revolving Credit Loan Maturity Date by which the Maximum DM Amount exceeds Total DM Facility Usage during such calendar quarter. Such DM facility commitment fee shall be payable, in the applicable amount of Deutschmarks or the Dollar Equivalent thereof on the date of such payment, quarterly in arrears on the first day of each calendar quarter with respect to the immediately preceding calendar quarter, commencing on the first such date following the date hereof, with a final payment on the Revolving Credit Loan Maturity Date or any earlier date on which the Revolving Credit Commitments shall terminate. 3.14. STERLING FACILITY COMMITMENT FEE. Limited agrees to pay to the Sterling Fronting Bank, for payment by it to the Administrative Agent for the accounts of the Lenders in accordance with their respective Commitment Percentages, a commitment fee calculated at the Commitment Fee Rate per annum on the average daily amount during each calendar quarter or portion thereof from the Closing Date to the Revolving Credit Loan Maturity Date by which the Maximum Sterling Amount exceeds Total Sterling Facility Usage during such calendar quarter. Such Sterling facility commitment fee shall be payable, in the applicable amount of Sterling or the Dollar Equivalent thereof on the date of such payment, quarterly in arrears on the first day of each calendar quarter with respect to the immediately preceding calendar quarter, commencing on the first such date following the date hereof, with a final payment on the Revolving Credit Loan Maturity Date or any earlier date on which the Revolving Credit Commitments shall terminate. 4. THE TERM LOAN. 4.1. COMMITMENT TO LEND. Subject to the terms and conditions set forth in this Credit Agreement, each Lender agrees to lend to TransTechnology on the Closing Date the amount of its Commitment Percentage of the principal amount of $50,000,000. 4.2. THE TERM NOTES. The Term Loan shall be evidenced by separate promissory notes of TransTechnology in substantially the form of EXHIBIT C hereto (each a "TERM NOTE"), dated the Closing Date and completed with appropriate insertions. One Term Note shall be payable to the order of each Lender in a principal amount equal to such Lender's Commitment Percentage of the Term Loan and representing the obligation of TransTechnology to pay to such Lender such principal amount or, if less, the outstanding amount of such Lender's Commitment Percentage of the Term Loan, plus interest accrued thereon, as set forth below. TransTechnology irrevocably authorizes each Lender to make or cause to be made a 45 -37- notation on such Lender's Term Note Record reflecting the original principal amount of such Lender's Commitment Percentage of the Term Loan and, at or about the time of such Lender's receipt of any principal payment on such Lender's Term Note, an appropriate notation on such Lender's Term Note Record reflecting such payment. The aggregate unpaid amount set forth on such Lender's Term Note Record shall be PRIMA FACIE evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender's Term Note Record shall not affect the obligations of TransTechnology hereunder or under any Term Note to make payments of principal of and interest on any Term Note when due. 4.3. SCHEDULE OF INSTALLMENT PAYMENTS OF PRINCIPAL OF TERM LOAN. TransTechnology promises to pay to the Administrative Agent for the account of the Lenders the principal amount of the Term Loan in 20 (twenty) consecutive quarterly payments in the amounts set forth on SCHEDULE 4.3 hereto, such installments to be due and payable on the first Business Day following the last day of each calendar quarter set forth on SCHEDULE 4.3 hereto, commencing with the first Business Day following December 31, 1999, with a final payment on the Term Loan Maturity Date in an amount equal to the unpaid balance of the Term Loan. 4.4. OPTIONAL PREPAYMENT OF TERM LOAN. TransTechnology shall have the right at any time to prepay the Term Notes on or before the Term Loan Maturity Date, as a whole, or in part, upon not less than five (5) Business Days prior written notice to the Administrative Agent, without premium or penalty, PROVIDED that (i) each partial prepayment shall be in the principal amount of $100,000 or an integral multiple thereof, (ii) no portion of the Term Loan bearing interest at the Eurodollar Rate may be prepaid pursuant to this Section 4.4 except on the last day of the Interest Period relating thereto, and (iii) each partial prepayment shall be allocated among the Lenders, in proportion, as nearly as practicable, to the respective outstanding amount of each Lender's Term Note, with adjustments to the extent practicable to equalize any prior prepayments not exactly in proportion. Any prepayment of principal of the Term Loan shall include all interest accrued to the date of prepayment and shall be applied against the scheduled installments of principal due on the Term Loan in the inverse order of maturity. No amount repaid with respect to the Term Loan may be reborrowed. 4.5. INTEREST ON TERM LOAN. 4.5.1 INTEREST RATES. Except as otherwise provided in Section 6.11, the Term Loan shall bear interest during each Interest Period relating to all or any portion of the Term Loan at the following rates: (a) To the extent that all or any portion of the Term Loan bears interest during such Interest Period based on the Base Rate, the Term Loan or such portion shall bear interest during such Interest Period at the Base Rate PLUS the Applicable Margin. 46 -38- (b) To the extent that all or any portion of the Term Loan bears interest during such Interest Period based on the Eurodollar Rate, the Term Loan or such portion shall bear interest during such Interest Period at the Eurodollar Rate PLUS the Applicable Margin. TransTechnology promises to pay interest on the Term Loan or any portion thereof outstanding during each Interest Period in arrears on each Interest Payment Date applicable to such Interest Period. 4.5.2 NOTIFICATION BY TRANSTECHNOLOGY. TransTechnology shall notify the Administrative Agent, such notice to be irrevocable, at least three (3) Eurodollar Business Days prior to the Drawdown Date of the Term Loan if all or any portion of the Term Loan is to bear interest based on the Eurodollar Rate. After the Term Loan has been made, the provisions of Section 2.7 shall apply MUTATIS MUTANDIS with respect to all or any portion of the Term Loan so that TransTechnology may have the same interest rate options with respect to all or any portion of the Term Loan as it would be entitled to with respect to the Revolving Credit Loans. 4.5.3. AMOUNTS, ETC. Any portion of the Term Loan bearing interest based on the Eurodollar Rate relating to any Interest Period shall be in the amount of $500,000 or a greater integral multiple of $100,000. No Interest Period relating to the Term Loan or any portion thereof bearing interest based on the Eurodollar Rate shall extend beyond the date on which a regularly scheduled installment payment of the principal of the Term Loan is to be made unless a portion of the Term Loan at least equal to such installment payment has an Interest Period ending on such date or is then bearing interest based on the Base Rate. 4.6. MANDATORY PREPAYMENTS FROM ASSET SALES OR NEW DEBT. In the event that any member of the TransTechnology Group shall either (a) incur any Indebtedness after the Closing Date which is either permitted pursuant to Section 10.1(f) or is incurred in an amount and on terms and conditions previously agreed in writing by the Administrative Agent and the Majority Lenders, or (b) sell any of its assets (other than inventory sold in the ordinary course of business) or group of related assets, whether by sale of such assets or sale of the stock of any member of the TransTechnology Group, where such asset sale is either permitted pursuant to Section 10.5.2 or is previously consented to in writing by the Administrative Agent and the Majority Lenders, then, so long as the Leverage Ratio on the date of receipt by any member of the TransTechnology Group of the Net Cash Proceeds of such new Indebtedness or such asset sale, as the case may be (without giving effect to the incurrence of such Indebtedness or the sale of such assets), is greater than 3.25:1, TransTechnology shall prepay the Term Loan as soon as practicable and in any event within thirty (30) days after the date of such receipt in an amount equal to (i) 100% of the Net Cash Proceeds of such new Indebtedness, PROVIDED, HOWEVER, that, upon the issuance by TransTechnology of any Subordinated Debt, the Net Cash Proceeds from the issuance of such Indebtedness shall be applied first to the repayment of the Senior Subordinated Loans, and only applied in repayment of the 47 -39- Term Loan in accordance with Section 4.9 upon payment in full of the Senior Subordinated Loans and all amounts outstanding with respect thereto under the Senior Subordinated Loan Documents, and (ii) 100% of the Net Cash Proceeds of such asset sale, but only to the extent that the aggregate amount of Net Cash Proceeds of all such asset sales received by TransTechnology and its Subsidiaries during any fiscal year ending after the date hereof exceeds $5,000,000. 4.7. MANDATORY PREPAYMENTS FROM NEW EQUITY. In the event that any member of the TransTechnology Group shall after the Closing Date sell or issue any shares of its stock, options (other than stock options awarded to employees and directors pursuant to incentive compensation plans operated by members of the TransTechnology Group) or warrants for the purchase of its stock or other equity or equity instruments, then, so long as the Leverage Ratio on the date of completion of such sale or issuance (without giving effect to such sale or issuance or the application of proceeds thereof) is greater than 3.25:1, TransTechnology shall prepay the Term Loan as soon as practicable and in any event within thirty (30) days after the completion of the sale or issuance of such new equity in an amount equal to 100% of the Net Cash Proceeds to the TransTechnology Group of such sale or issuance of new equity. 4.8. MANDATORY PREPAYMENTS FROM EXCESS CASH FLOW. For each fiscal year ending on or after March 31, 2000, so long as the Leverage Ratio as at the end of such fiscal year is greater than 3.25:1, TransTechnology shall prepay the Term Loan in an amount equal to 50% of the Consolidated Excess Cash Flow for such fiscal year, such mandatory prepayment to be due and payable ninety (90) days after the end of each such fiscal year. 4.9. APPLICATION OF MANDATORY PREPAYMENTS. Subject to the provisions of Section 4.6(i) above, all mandatory prepayments of the Term Loan pursuant to Sections 4.6 - 4.8 shall be applied to payment of installments on the Term Loan in the inverse order of maturity in accordance with the provisions of Section 4.4. 5. LETTERS OF CREDIT. 5.1. LETTER OF CREDIT COMMITMENTS. 5.1.1. COMMITMENT TO ISSUE LETTERS OF CREDIT. Subject to the terms and conditions hereof and the execution and delivery by TransTechnology of a letter of credit application on the Issuing Bank's customary form (a "LETTER OF CREDIT APPLICATION"), the Issuing Bank on behalf of the Lenders and in reliance upon the agreement of the Lenders set forth in Section 5.1.4 and upon the representations and warranties of TransTechnology contained herein, agrees, in its individual capacity, to issue, extend and renew for the account of TransTechnology one or more standby or documentary letters of credit (individually, a "LETTER OF CREDIT"), in such form as may be requested from time to time by TransTechnology and agreed to by the Issuing Bank; PROVIDED, HOWEVER, that, after giving effect to such request, (a) the sum of the aggregate Maximum Drawing Amount and all Unpaid 48 -40- Reimbursement Obligations shall not exceed $5,000,000 at any one time, and (b) the aggregate outstanding amount of the Revolving Credit Loans, plus the Maximum Drawing Amount, PLUS all Unpaid Reimbursement Obligations, PLUS the International Facility Amount shall not exceed the Total Revolving Credit Commitment; and PROVIDED FURTHER that, after the Issuing Bank shall have received notice in writing of the occurrence of an Event of Default and until it has received written notice of the cure or waiver of such Event of Default, the Issuing Bank shall not be obliged to issue any such Letter of Credit unless the Majority Lenders shall have consented to such issuance in writing. 5.1.2. LETTER OF CREDIT APPLICATIONS. Each Letter of Credit Application shall be completed to the satisfaction of the Issuing Bank. In the event that any provision of any Letter of Credit Application shall be inconsistent with any provision of this Credit Agreement, then the provisions of this Credit Agreement shall, to the extent of any such inconsistency, govern. 5.1.3. TERMS OF LETTERS OF CREDIT. Each Letter of Credit issued, extended or renewed hereunder shall, among other things, (i) provide for the payment of sight drafts for honor thereunder when presented in accordance with the terms thereof and when accompanied by the documents described therein, and (ii) have an expiry date no later than the date which is thirty (30) days (or, if the Letter of Credit is confirmed by a confirmer or otherwise provides for one or more nominated persons, sixty (60) days) prior to the Revolving Credit Loan Maturity Date. Each Letter of Credit so issued, extended or renewed shall be subject to the Uniform Customs. 5.1.4. REIMBURSEMENT OBLIGATIONS OF LENDERS. Each Lender severally agrees that it shall be absolutely liable, without regard to the occurrence of any Default or Event of Default or any condition precedent other than that set forth in the proviso to this Section 5.1.4, to reimburse the Issuing Bank or the Administrative Agent, as the case may be, on demand, to the extent of such Lender's Commitment Percentage, for the amount of each draft paid by the Issuing Bank or the Administrative Agent under each Letter of Credit to the extent that such amount is not reimbursed by TransTechnology pursuant to Section 5.2 (such agreement for a Lender being called herein the "LETTER OF CREDIT PARTICIPATION" of such Lender) PROVIDED, HOWEVER, that to the extent that any Letter of Credit shall have been issued by the Issuing Bank during the continuance of an Event of Default of which the Issuing Bank had prior written notice, then the Lenders shall only be liable to reimburse the Issuing Bank or the Administrative Agent, as applicable, in accordance with this Section 5.1.4 with respect to any draft under such Letter of Credit paid by the Issuing Bank or the Administrative Agent and not reimbursed by TransTechnology if the issuance of such Letter of Credit shall have been approved by the Majority Lenders pursuant to and in accordance with Section 5.1.1 above. 49 -41- 5.1.5. PARTICIPATIONS OF LENDERS. Each such payment made by a Lender shall be treated as the purchase by such Lender of a participating interest in TransTechnology's Reimbursement Obligation under Section 5.2 in an amount equal to such payment. Each Lender shall share in accordance with its participating interest in any interest which accrues pursuant to Section 5.2. 5.2. REIMBURSEMENT OBLIGATION OF TRANSTECHNOLOGY. In order to induce the Issuing Bank to issue, extend and renew each Letter of Credit and the Lenders to participate therein, TransTechnology hereby agrees to reimburse or pay to the Administrative Agent, for the account of the Issuing Bank or (as the case may be), the Administrative Agent or the Lenders, with respect to each Letter of Credit issued, extended or renewed by the Issuing Bank hereunder, (a) except as otherwise expressly provided in Section 5.2(b) and (c), on each date that any draft presented under such Letter of Credit is honored by the Issuing Bank, or the Issuing Bank otherwise makes a payment with respect thereto, (i) the amount paid by the Issuing Bank under or with respect to such Letter of Credit, and (ii) the amount of any taxes, fees, charges or other costs and expenses whatsoever incurred by the Issuing Bank, the Administrative Agent or any Lender in connection with any payment made by the Issuing Bank or any Lender under, or with respect to, such Letter of Credit, (b) upon the reduction (but not termination) of the Total Revolving Credit Commitment to an amount less than the Maximum Drawing Amount, an amount equal to such difference, which amount shall be held by the Issuing Bank for the benefit of the Lenders, the Administrative Agent and the Issuing Bank as cash collateral for all Reimbursement Obligations, and (c) upon the termination of the Total Revolving Credit Commitment, or the acceleration of the Reimbursement Obligations with respect to all Letters of Credit in accordance with Section 14, an amount equal to the then Maximum Drawing Amount on all Letters of Credit, which amount shall be held by the Issuing Bank for the benefit of the Lenders, the Administrative Agent and the Issuing Bank as cash collateral for all Reimbursement Obligations. Each such payment shall be made to the Administrative Agent at the Administrative Agent's Head Office (for the account of the Issuing Bank or (as the case may be) the Administrative Agent or the Lenders) in immediately available funds. Interest on any and all amounts remaining unpaid by TransTechnology under this Section 5.2 at any time from the date such amounts become due and payable (whether as stated in this Section 5.2, by acceleration or otherwise) until payment in full (whether before or after judgment) shall be payable to the Administrative Agent (for the account of the Issuing Bank or (as the case may be) the Administrative Agent or the Lenders) on demand at the rate specified in Section 6.11 for overdue principal on the Revolving Credit Loans. 50 -42- 5.3. LETTER OF CREDIT PAYMENTS. If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the Issuing Bank shall notify TransTechnology of the date and amount of the draft presented or demand for payment and of the date and time when it expects to pay such draft or honor such demand for payment. If TransTechnology fails to make payment to the Administrative Agent as provided in Section 5.2 on or before the date that such draft is paid or other payment is made by the Issuing Bank, the Issuing Bank may at any time thereafter notify the Administrative Agent and the Lenders of the amount of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston time) on the Business Day next following the receipt of such notice, each Lender shall make available to the Issuing Bank, at its Head Office, in immediately available funds, such Lender's Commitment Percentage of such Unpaid Reimbursement Obligation, together with an amount equal to the product of (i) the average, computed for the period referred to in clause (iii) below, of the weighted average interest rate paid by the Issuing Bank for federal funds acquired by the Issuing Bank during each day included in such period, times (ii) the amount equal to such Lender's Commitment Percentage of such Unpaid Reimbursement Obligation, times (iii) a fraction, the numerator of which is the number of days that elapse from and including the date the Issuing Bank paid the draft presented for honor or otherwise made payment to the date on which such Lender's Commitment Percentage of such Unpaid Reimbursement Obligation shall become immediately available to the Issuing Bank, and the denominator of which is 360. The responsibility of the Issuing Bank to TransTechnology and to the Administrative Agent and the Lenders shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit. 5.4. OBLIGATIONS ABSOLUTE. TransTechnology's obligations under this Section 5 shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff, counterclaim or defense to payment which TransTechnology may have or have had against the Issuing Bank, the Administrative Agent, any Lender or any beneficiary of a Letter of Credit. TransTechnology further agrees with the Issuing Bank, the Administrative Agent and the Lenders that the Issuing Bank, the Administrative Agent and the Lenders shall not be responsible for, and TransTechnology's Reimbursement Obligations under Section 5.2 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among TransTechnology, the beneficiary of any Letter of Credit or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of TransTechnology against the beneficiary of any Letter of Credit or any such transferee. The Issuing Bank, the Administrative Agent and the Lenders shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit. TransTechnology agrees that any action taken or omitted by any of the Issuing Bank, the Administrative Agent or any Lender under or in connection with each Letter of Credit and the related drafts 51 -43- and documents, if done in good faith, shall be binding upon TransTechnology and shall not result in any liability on the part of the Issuing Bank, the Administrative Agent or any Lender to TransTechnology. 5.5. RELIANCE BY ISSUING BANK. To the extent not inconsistent with Section 5.4, the Issuing Bank shall be entitled to rely, and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants and other experts selected by the Issuing Bank. The Issuing Bank shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Majority Lenders as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Issuing Bank shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Majority Lenders, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Lenders and all future holders of the Revolving Credit Notes or of a Letter of Credit Participation. 5.6. LETTER OF CREDIT FEE. TransTechnology shall pay a fee (in each case, a "LETTER OF CREDIT FEE") to the Issuing Bank in respect of each Letter of Credit, calculated as a percentage per annum of the face amount of such Letter of Credit equal to the sum of (a) the then Applicable Margin with respect to Eurocurrency Rate Loans, PLUS (b) one-quarter of one percent (0.25%), PLUS the Administrative Agent's customary issuance, amendment, negotiation or document examination fee. Such Letter of Credit Fees, with the exception of (i) such issuance, amendment, negotiation or document examination fees and (ii) an amount equal to one-quarter of one percent (0.25%) of the face amount of the applicable Letter of Credit, which shall be retained by the Issuing Bank for its own account, shall be for the accounts of the Lenders in accordance with their respective Commitment Percentages. Such Letter of Credit Fees shall be payable quarterly in arrears on the first day of each calendar quarter with respect to the immediately preceding calendar quarter or portion thereof, commencing on the first such date following the date of issuance of a Letter of Credit, as well as (with respect to any applicable issuance, amendment negotiation or document examination fees) at such other time or times as such charges are customarily made by the Issuing Bank. 5.7. RESIGNATION OF ISSUING BANK. The Issuing Bank may resign at any time by giving sixty (60) days prior written notice thereof to the Lenders and TransTechnology. Upon any such resignation, the Majority Lenders shall have the right to appoint a successor Issuing Bank. Unless a Default or Event of Default shall have occurred and be continuing, such successor Issuing Bank shall be reasonably acceptable to TransTechnology. If no successor Issuing Bank shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Issuing Bank's giving of notice 52 -44- of resignation, then the retiring Issuing Bank may, on behalf of the Lenders, appoint a successor Issuing Bank, which shall be a financial institution having a rating of not less than A or its equivalent by Standard & Poor's Corporation. Upon the acceptance of any appointment as Issuing Bank hereunder by a successor Issuing Bank, such successor Issuing Bank shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the retiring Issuing Bank, and, after arranging for the replacement of, reissuance of or issuance of back-up Letters of Credit with respect to all outstanding Letters of Credit in a manner satisfactory to the Majority Lenders, the retiring Issuing Bank shall be discharged from its duties and obligations hereunder. After any retiring Issuing Bank's resignation, the provisions of this Credit Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Issuing Bank. 6. CERTAIN GENERAL PROVISIONS. 6.1. CLOSING FEE. The Borrowers (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) jointly and severally agree to pay on the Closing Date to the Administrative Agent for its own account a closing fee in the amount agreed in the Fee Letter. 6.2. ADMINISTRATIVE AGENT'S FEE. The Borrowers jointly and severally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) agree to pay to the Administrative Agent annually in advance, on the Closing Date and on each subsequent anniversary thereof, for the Administrative Agent's own account, an Administrative Agent's fee in the amount agreed in the Fee Letter, PROVIDED that the payment of such fee on the Closing Date shall be adjusted to give credit for any prior payment of Agent's fees under the Prior Credit Agreement for any period following the Closing Date. 6.3. PAYMENT PROVISIONS. 6.3.1. CURRENCY OF ACCOUNT. Dollars are the currency of account and payment for each and every sum at any time due from the Borrowers hereunder, PROVIDED that: (i) each repayment of a Loan or a part thereof shall be made in the currency in which such Loan is denominated at the time of that repayment; (ii) each payment in respect of a Letter of Credit shall, except as otherwise provided herein, be made in the currency in which such Letter of Credit is denominated; (iii) each payment of interest shall be made in the currency in which the sum in respect of which such interest is payable is denominated; 53 -45- (iv) each payment in respect of costs and expenses shall be made in the currency in which the same were incurred; and (v) any amount expressed to be payable in a currency other than Dollars shall be paid in that other currency. 6.3.2. APPLICATION OF INTEREST PAYMENTS. Interest and commissions payable by the Borrowers shall be paid as follows: (a) as to interest and commissions due with respect to the International Facility Loans, to the Fronting Banks, for the account of the respective Fronting Banks, PROVIDED that (i) to the extent that a Lender has paid to such Fronting Bank any amount in respect of any Fronted Loan pursuant to Section 6.12, interest or commissions to the extent as aforesaid on such amount of such Fronted Loan (including, without limitation, any interest accruing at rates calculated in accordance with Section 6.11) shall thereafter accrue for the account of such Lender, and (ii) the Fronting Banks shall pay all amounts of interest received by them in an amount equal to the Applicable Margin to the Administrative Agent for the account of the Lenders in the proportion of the Lenders' respective Commitment Percentages; and (b) as to interest due with respect to Revolving Credit Loans, to the Administrative Agent for the account of the Lenders in the proportion of the Lenders' respective Commitment Percentages. 6.3.3. JUDGMENT CURRENCY. If any sum due from a Borrower under this Credit Agreement or any order or judgment given or made in relation hereto has to be converted from the currency (the "FIRST CURRENCY") in which the same is payable hereunder or under such order or judgment into another currency (the "SECOND CURRENCY") for the purpose of (i) making or filing a claim or proof against such Borrower, (ii) obtaining an order or judgment in any court or other tribunal or (iii) enforcing any order or judgment given or made in relation hereto, such Borrower shall indemnify and hold harmless each of the Persons to whom such sum is due from and against any loss suffered as a result of any discrepancy between (A) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (B) the rate or rates of exchange at which such Person may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. 6.3.4. TIME OF PAYMENT. On each date on which this Credit Agreement requires an amount to be paid by any of the Borrowers or any of the Lenders hereunder, such Borrower or, as the case may be, such Lender shall make the same available to the Administrative Agent, the DM Fronting Bank or the Sterling Fronting Bank, as the case may be, to such account as the Administrative Agent or such Fronting Bank shall have notified to any of the Borrowers or to such Lender, as the case may be. Each such payment 54 -46- which is made for the account of a Person other than the Administrative Agent shall be made in time to enable the Administrative Agent to make available such other Person's portion thereof for value the same day. 6.3.5. PAYMENTS BY ADMINISTRATIVE AGENT. Where a sum is to be paid hereunder to the Administrative Agent for the account of another Person, the Administrative Agent shall not be obliged to make the same available to that other Person until the Administrative Agent has been able to establish to its satisfaction that it has actually received such sum, but if the Administrative Agent does so and it proves to be the case that the Administrative Agent has not actually received the sum it paid out, then the Person to whom such sum was so made available shall on request refund the same to the Administrative Agent, together with an amount sufficient to reimburse the Administrative Agent for any amount it may have been required to pay out by way of interest on moneys borrowed to fund the sum in question during the period beginning on the due date for payment thereof and ending on the date on which it receives the same. 6.3.6. NO OFFSET, ETC. All payments by the Borrowers hereunder and under any of the other Loan Documents shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless any of the Borrowers is compelled by law to make such deduction or withholding. If any such obligation is imposed upon a Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, such Borrower will make such deduction or withholding, will pay the full amount deducted or withheld to the applicable authority, and will also pay to the Administrative Agent, for the account of the Lenders or (as the case may be), the Issuing Bank, the applicable Fronting Bank or Banks or the Administrative Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount as shall be necessary to enable the Lenders, the Issuing Bank, the applicable Fronting Bank or Banks or the Administrative Agent (as the case may be) to receive the same net amount in the same currency which the Lenders, the Issuing Bank, the applicable Fronting Bank or Banks or the Administrative Agent would have received on such due date had no such obligation been imposed upon such Borrower. Each Borrower so affected will deliver, within thirty (30) days of any such deduction or payment, to the Administrative Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by such Borrower hereunder or under such other Loan Document. 6.4. COMPUTATIONS. All computations of interest on Eurocurrency Rate Loans shall, unless otherwise expressly provided herein, be based on a 360-day year and paid for the actual number of days elapsed. All computations of interest on 55 -47- Base Rate Loans, commitment fees, Letter of Credit Fees or other fees shall, unless otherwise expressly provided herein, be based on a 365-day year and paid for the actual number of days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to Eurocurrency Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Revolving Credit Loans as reflected on the Revolving Credit Note Records from time to time shall be considered correct and binding on TransTechnology unless within five (5) Business Days after receipt of any notice by the Administrative Agent or any of the Lenders of such outstanding amount, the Administrative Agent or such Lender shall notify such Borrower to the contrary. 6.5. INABILITY TO DETERMINE EUROCURRENCY RATE. In the event, prior to the commencement of any Interest Period relating to any Eurocurrency Rate Loan, (a) the DM Fronting Bank shall determine, with respect to any DM Facility Loan which is a Eurocurrency Rate Loan, (b) the Sterling Fronting Bank shall determine with respect to any Sterling Facility Loan which is Eurocurrency Rate Loan, or (c) the Administrative Agent shall determine or be notified by the Majority Lenders, with respect to any other Loan which is a Eurocurrency Rate Loan, that adequate and reasonable methods do not exist for ascertaining the applicable Eurocurrency Rate that would otherwise determine the rate of interest to be applicable to such Eurocurrency Rate Loan, the applicable Fronting Bank or the Administrative Agent, as the case may be, shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrowers and the Lenders) to the applicable Borrower(s) and (in the case of the Administrative Agent) to the applicable Lender(s). In such event (i) any Loan Request or Conversion Request with respect to Eurocurrency Rate Loans shall be automatically withdrawn and, to the fullest extent practicable, shall be deemed a request for Base Rate Loans, (ii) each Eurocurrency Rate Loan will automatically, on the last day of the then current Interest Period relating thereto, become a Base Rate Loan, and (iii) the obligations of the applicable Lender(s) or, as the case may be, Fronting Bank(s) to make Eurocurrency Rate Loans shall be suspended until the Administrative Agent or, as the case may be, the applicable Fronting Bank(s), or the Majority Lenders determine that the circumstances giving rise to such suspension no longer exist, whereupon the Administrative Agent or, as the case may be, the Administrative Agent upon the instruction of the Majority Lenders or the applicable Fronting Bank(s), shall so notify the applicable Borrower(s) and (in the case of the Administrative Agent) the applicable Lender(s). 6.6. ILLEGALITY. Notwithstanding any other provisions herein, if any present or future law, regulation, treaty or directive or in the interpretation or application thereof shall make it unlawful for any Lender or Fronting Bank to make or maintain Eurocurrency Rate Loans, such Lender, if so affected, shall forthwith give notice of such circumstances to TransTechnology, the Administrative Agent and the other Lenders, and such Fronting Bank, if so affected, shall forthwith give notice of such circumstances to the Borrowers and the Administrative Agent. Thereupon (i) the commitment of such Lender or Fronting Bank to make Eurocurrency Rate Loans 56 -48- or convert Loans of another Type to Eurocurrency Rate Loans shall forthwith be suspended, and (ii) such Lender's or Fronting Bank's Loans then outstanding as Eurocurrency Rate Loans, if any, shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such Eurocurrency Rate Loans or within such earlier period as may be required by law. The Borrowers hereby jointly and severally agree promptly to pay the Administrative Agent for the account of such Lender or Fronting Bank upon demand by such Lender or Fronting Bank, any additional amounts necessary to compensate such Lender or Fronting Bank for any costs incurred by such Lender or Fronting Bank in making any conversion in accordance with this ss.6.6, including any interest or fees payable by such Lender or Fronting Bank to lenders of funds obtained by it in order to make or maintain its Eurocurrency Rate Loans hereunder. 6.7. ADDITIONAL COSTS, ETC. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender or the Administrative Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Lender or Fronting Bank, the Issuing Bank, or the Administrative Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, such Lender's Commitment, the Loans or any payment of interest or fees payable with respect to any Loans (other than taxes based upon or measured by the income or profits of such Lender, Issuing Bank, Fronting Bank or Administrative Agent, or bank franchise taxes), but including any tax or withholding applicable to any payment to be made by a Fronting Bank to the Administrative Agent pursuant to Section 6.3.2(a), or by any Lender to the Administrative Agent for the account of a Fronting Bank pursuant to Section 6.12.2, or (b) materially change the basis of taxation (except for changes in taxes on income or profits or bank franchise taxes) of payments to any Lender of the principal of or the interest on any Loans or any other amounts payable to any Lender or the Administrative Agent under this Credit Agreement or any of the other Loan Documents, or (c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Credit Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of any office of any Lender (including any Fronting Bank or the Issuing Bank), and including, without limitation, any MLA costs with 57 -49- respect to Sterling Facility Loans or indemnification obligations of any Lender with respect thereto, or (d) impose on any Lender (including any Fronting Bank or the Issuing Bank) or the Administrative Agent any other conditions or requirements with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, the Loans, such Lender's Commitment, or any class of loans, letters of credit or commitments of which any of the Loans or such Lender's Commitment forms a part, and the result of any of the foregoing is (i) to increase the cost to any such Lender of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Lender's Commitment or any Letter of Credit, or (ii) to reduce the amount of principal, interest, Reimbursement Obligation or other amount payable to such Lender or the Administrative Agent hereunder on account of such Lender's Commitment, any Letter of Credit or any of the Loans, or (iii) to require such Lender or the Administrative Agent to make any payment or to forego any interest or Reimbursement Obligation or other sum payable hereunder, the amount of which payment or foregone interest or Reimbursement Obligation or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or the Administrative Agent from the Borrowers hereunder, then, and in each such case, within fifteen (15) days after demand made by such Lender or Fronting Bank or (as the case may be) the Administrative Agent or the Issuing Bank at any time and from time to time and as often as the occasion therefor may arise, the Borrowers will (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) jointly and severally pay to such Lender, Fronting Bank, Administrative Agent or Issuing Bank such additional amounts as will be sufficient to compensate such Lender, Fronting Bank, Administrative Agent or Issuing Bank, as the case may be, for such additional cost, reduction, payment or foregone interest or Reimbursement Obligation or other sum. 6.8. CAPITAL ADEQUACY. If after the date hereof any Lender (including any Fronting Bank and the Issuing Bank) or the Administrative Agent determines that (i) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding capital requirements for Lenders or Lender holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, or (ii) compliance by such Lender or the Administrative Agent or any corporation controlling such Lender, or the Administrative Agent with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect 58 -50- of reducing the return on such Lender's, or the Administrative Agent's commitment with respect to any Loans or Letters of Credit to a level below that which such Lender or the Administrative Agent could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or the Administrative Agent's then existing policies with respect to capital adequacy and assuming full utilization of such entity's capital) by any amount deemed by such Lender or (as the case may be) the Administrative Agent to be material, then such Lender or the Administrative Agent may notify the Borrowers of such fact. To the extent that the amount of such reduction in the return on capital is not reflected in the Base Rate, TransTechnology agrees to pay such Lender or (as the case may be) the Administrative Agent for the amount of such reduction in the return on capital as and when such reduction is determined upon presentation by such Lender or (as the case may be) the Administrative Agent of a certificate in accordance with ss.6.9 hereof. Each Lender and the Administrative Agent shall allocate such cost increases among its customers in good faith and on an equitable basis. 6.9. CERTIFICATE. A certificate setting forth any additional amounts payable pursuant to Sections 6.7 or 6.8 and a brief explanation of such amounts which are due, submitted by any Lender (including any Fronting Bank and the Issuing Bank) or the Administrative Agent to the Borrowers, shall be conclusive, absent manifest error, that such amounts are due and owing. 6.10. INDEMNITY. The Borrowers jointly and severally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) agree to indemnify each Lender and to hold each Lender harmless from and against any loss, cost or expense (including loss of anticipated profits) that such Lender may sustain or incur as a consequence of (i) default by any of the Borrowers in payment of the principal amount of or any interest on any Eurocurrency Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain its Eurocurrency Rate Loans, (ii) default by any of the Borrowers in making a borrowing or conversion after such Borrower has given (or is deemed to have given) a Loan Request, notice or a Conversion Request relating thereto, or (iii) the making of any payment of a Eurocurrency Rate Loan or the making of any conversion of any such Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by such Lender to lenders of funds obtained by it in order to maintain any such Loans. 6.11. INTEREST AFTER DEFAULT. 6.11.1. OVERDUE AMOUNTS. Overdue principal and (to the extent permitted by applicable law) interest on the Loans and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest compounded monthly and payable on demand at a rate per annum equal to the sum of (i) two percent (2%) per annum, PLUS (ii) the Applicable Margin with respect to Eurocurrency Rate Loans PLUS (iii) the Base Rate, until such amount shall be paid in full (after as well as before judgment). 59 -51- 6.11.2. AMOUNTS NOT OVERDUE. During the continuance of a Default or an Event of Default, the principal of the Revolving Credit Loans, the Term Loan and the International Facility Loans not overdue shall, until such Default or Event of Default has been cured or remedied or such Default or Event of Default has been waived by the Majority Lenders pursuant to Section 27, bear interest at a rate per annum equal to the greater of (i) two percent (2%) above the rate of interest otherwise applicable to such Loans pursuant to Section 2.5 or Section 3.5, and (ii) the rate of interest applicable to overdue principal pursuant to Section 6.11.1. 6.12. FRONTING BANK PROVISIONS. 6.12.1. FRONTING FEE. The Borrowers jointly and severally agree to pay to the Fronting Banks for the account of the Fronting Banks a fronting fee calculated at the rate of one-quarter of one percent (1/4%) per annum on the average principal amount of Fronted Loans outstanding (including amounts requested) during each calendar quarter or portion thereof from the Closing Date to the Revolving Credit Loan Maturity Date. The fronting fee shall be payable quarterly in arrears on the first day of each calendar quarter with respect to the immediately preceding calendar quarter, commencing on the first such date following the date hereof, with a final payment on the Revolving Credit Loan Maturity Date or any earlier date on which a Fronting Bank's commitment to make Fronted Loans shall terminate. 6.12.2. INDEMNITIES. Each of the Lenders severally undertakes to keep the Fronting Banks indemnified as follows: (a) Each Lender irrevocably and unconditionally undertakes to pay to the Administrative Agent for the account of each Fronting Bank, on demand made by such Fronting Bank through the Administrative Agent: (i) such Lender's Commitment Percentage of each amount which is expressed to be payable by any of the Borrowers to or for the account of such Fronting Bank by way of the payment, repayment or prepayment of any International Facility Loan and which the applicable Borrower fails to pay together with interest which has accrued with respect thereto, and (ii) such additional amount as shall be necessary to reimburse such Fronting Bank for its cost of funding the amount payable by such Lender as mentioned in sub-clause (i) above during the period beginning on the date the amount was due from the applicable Borrower and ending on the date demand is made on such Lender for payment of the same, and agrees that neither the Fronting Banks nor the Administrative Agent shall be obliged to make any demand on or take any proceedings against any 60 -52- of the Borrowers or any other person before making demand on such Lender hereunder. (b) Each Lender irrevocably and unconditionally undertakes to pay to the Administrative Agent for the account of each Fronting Bank on demand made by such Fronting Bank through the Administrative Agent at any time after an Event of Default has occurred and is continuing and has not been waived, its Commitment Percentage of the Dollar Equivalent on the date of such payment of any outstanding International Facility Loan made by such Fronting Bank, and any such payment shall be in satisfaction pro tanto of the undertakings of such Lender contained in clause (a) above. (c) If a Lender fails to make payment on the due date therefor of any amount due from it for the account of a Fronting Bank pursuant to clauses (a) or (b) above (a "RELEVANT AMOUNT") then (i) such Lender shall be deemed to be Delinquent Lender pursuant to Section 16.5.3, and (ii) until such Fronting Bank has received payment of the relevant amount in full (and without prejudice to any other rights or remedies of the Administrative Agent or such Fronting Bank in respect of such failure) such Fronting Bank shall be entitled to receive any interest which such Delinquent Lender would otherwise have been entitled to receive in respect of the Loan in respect of which the relevant amount is payable and (iii) such Delinquent Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents, and, for so long as such Lender remains a Delinquent Lender under this Section 6.12.2, the determination of the Majority Lenders shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to the interest of such Delinquent Lender in the Loans to the extent of such participation. (d) The Borrowers jointly and severally, irrevocably and unconditionally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany), undertake (i) to reimburse to each Lender any amount paid by such Lender pursuant to this Section 6.12.2, and such amount shall be immediately due from the Borrowers to such Lender on the day such amount is paid by such Lender to the Administrative Agent, and shall accrue interest from such date until the date of payment in full of such amount (including all accrued and unpaid interest thereon) at the rate of interest applicable to overdue principal pursuant to Section 6.11.1, and (ii) to indemnify and hold each Lender harmless against all actions, proceedings, liabilities, claims, demands, costs and expenses of whatsoever nature and howsoever occurring which such Lender may properly incur, suffer or sustain by reason of its payment of such amount, including without limitation any losses (in Dollars) arising from fluctuations in currency rates between the date of any payment to the Administrative Agent by such Lender pursuant to clauses (a) or (b) above, and the date of such Lender's receipt of payment pursuant to this clause (d). 6.12.3. RESIGNATION OF FRONTING BANK. The DM Fronting Bank or the Sterling Fronting Bank may resign at any time by giving sixty (60) days 61 -53- prior written notice thereof to the Lenders and TransTechnology. Upon any such resignation, the Majority Lenders shall have the right to appoint a successor DM Fronting Bank or Sterling Fronting Bank, as the case may be. Unless a Default or Event of Default shall have occurred and be continuing, such successor Fronting Bank shall be reasonably acceptable to TransTechnology. If no successor Fronting Bank shall have been so appointed by the Majority Lenders and shall have accepted such appointment within thirty (30) days after the retiring Fronting Bank's giving of notice of resignation, then the retiring Fronting Bank may, on behalf of the Banks, appoint a successor Fronting Bank, which shall be a financial institution having a rating of not less than A or its equivalent by Standard & Poor's Ratings Group, and having either the ability to fund DM Loans from a lending office located in Germany, if the retiring Fronting Bank is the DM Fronting Bank, or the ability to fund Sterling Loans from a lending office located in England, if the retiring Fronting Bank is the Sterling Fronting Bank. Upon the acceptance of any appointment as a Fronting Bank hereunder by a successor Fronting Bank, such successor Fronting Bank shall thereupon succeed to and become vested with all the rights, powers, privileges, duties and obligations of the retiring Fronting Bank, and the retiring Fronting Bank shall be discharged from its duties and obligations hereunder. After any retiring Fronting Bank's resignation, the provisions of this Credit Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as a Fronting Bank. 6.12.4. NOTICE TO LENDERS. The Administrative Agent will notify each of the Lenders as to such Lender's balance of all Fronted Loans outstanding at least once each month, and, upon a Lender's reasonable request, at any other time. 6.13. LIMITS ON NUMBER OF SEPARATE EUROCURRENCY RATE LOANS. No more than ten (10) separate Eurocurrency Rate Loans (whether outstanding with respect to the Revolving Credit Loans, the Term Loan or International Facility Loans) may be outstanding under this Credit Agreement at any one time. Notwithstanding the foregoing, during the period commencing on the Closing Date and ending on the date which is the earlier of (i) sixty (60) days after the Closing Date and (ii) the date on which the Administrative Agent notifies TransTechnology in writing that syndication of the Loans hereunder has been completed, there shall be no more than three (3) Eurocurrency Rate Loans in effect, the Interest Periods of which shall be no longer than one (1) month, and each of which shall terminate no later than the sixtieth (60th) day after the Closing Date. 7. COLLATERAL SECURITY AND GUARANTIES. 7.1. SECURITY OF BORROWERS. Subject to Sections 7.3 and 7.4, all of the Obligations shall be secured by a perfected first priority security interest (subject only to Permitted Liens entitled to priority under applicable law) in all of the assets of TransTechnology, whether now owned or hereafter acquired, pursuant to the 62 -54- terms of the Security Documents to which TransTechnology is a party. The Obligations of GmbH shall be secured by a security interest (subject only to Permitted Liens entitled to priority under applicable law) in all of the assets of GmbH and SO OHG, whether now owned or hereafter acquired, pursuant to the terms of the German Security Documents. The Obligations of Limited shall be secured by a first priority fixed and floating charge over all of the assets of Limited, whether now owned or hereafter acquired, pursuant to the terms of the Debenture. 7.2. GUARANTIES AND SECURITY OF SUBSIDIARIES. Each of the Domestic Subsidiaries shall guarantee the payment and performance of the Obligations pursuant to the terms of the Guaranties or of guaranties in similar form to the Subsidiary Guaranty. The obligations of each of the Guarantors shall be in turn secured by a perfected first priority security interest (subject only to Permitted Liens entitled to priority under applicable law) in all of the assets of each such Guarantor, whether now owned or hereafter acquired, pursuant to the terms of the Security Documents to which each such Guarantor is a party. 7.3. PLEDGES OF STOCK. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, including without limitation the German Pledge Agreement and the Charges Over Shares, to the extent that any pledge, lien, security interest, charge, mortgage or other encumbrance over any shares of a Foreign Subsidiary granted by TransTechnology or any of its Domestic Subsidiaries extends or purports to extend to any shares in excess of 65% of the aggregate issued and outstanding shares of capital stock of such Foreign Subsidiary, neither the Administrative Agent nor any of the Lenders shall exercise any rights it may have or purport to have with respect to such excess shares. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, in the event that TransTechnology or any of the Domestic Subsidiaries delivers to the Administrative Agent or, as the case may be, a Fronting Bank acting on behalf of the Administrative Agent, certificates or other instruments representing greater than 65% of the aggregate issued and outstanding shares of capital stock of such Foreign Subsidiary, the shares in excess of 65% of such Foreign Subsidiary's capital stock shall not be subject to any pledge, lien, security interest, charge, mortgage or other encumbrance under this Agreement or any of the other Loan Documents but shall be held in the custody of the Administrative Agent or such Fronting Bank for and on behalf of TransTechnology or such Domestic Subsidiary, as applicable, until such time as TransTechnology or such Domestic Subsidiary shall have delivered to the Administrative Agent certificates or other instruments representing 65% of the aggregate issued and outstanding shares of capital stock of such Foreign Subsidiary, at which time the Administrative Agent or such Fronting Bank shall release the original certificates or other instruments delivered to it to TransTechnology or the applicable Domestic Subsidiary. 7.4. GUARANTEES AND PLEDGES OF ASSETS OF FOREIGN SUBSIDIARIES. Not-withstanding anything to the contrary contained herein or in any of the other Loan Documents, no guarantee entered into by any Foreign Subsidiary, including without limitation either of the English Guarantees, shall be construed in any way as a guarantee of, and no pledge, lien, security interest, charge, mortgage or other 63 -55- encumbrance over any assets of a Foreign Subsidiary shall be construed in any way to secure, any obligation of TransTechnology or any of its Domestic Subsidiaries. 8. REPRESENTATIONS AND WARRANTIES. The Borrowers jointly and severally represent and warrant to the Lenders and the Administrative Agent, at the Closing Date and on each Acquisition Closing Date after giving effect to the Approved Acquisition occurring thereon, as follows: 8.1. CORPORATE AUTHORITY. 8.1.1. INCORPORATION; GOOD STANDING. Each of the Borrowers and its respective Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of its place of incorporation, (ii) has all requisite corporate power to own its property and conduct its business as now conducted and as presently contemplated, and (iii) is in good standing as a foreign corporation and is duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified would not have a materially adverse effect on the business, assets or financial condition of such Borrower or Subsidiary. 8.1.2. AUTHORIZATION. The execution, delivery and performance of this Credit Agreement and the other Loan Documents to which the Borrowers or any of their Subsidiaries are or are to become a party and the transactions contemplated hereby and thereby (i) are within the corporate authority of such Person, (ii) have been duly authorized by all necessary corporate proceedings, (iii) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which any of the Borrowers or their Subsidiaries, or any of the assets of any of the Borrowers or their Subsidiaries, are subject or any judgment, order, writ, injunction, license or permit applicable to any of the Borrowers or their Subsidiaries and (iv) do not conflict with any provision of the corporate charter, bylaws or memorandum and articles of association of, or any agreement or other instrument binding upon, any of the Borrowers or their Subsidiaries. 8.1.3. ENFORCEABILITY. The execution and delivery of this Credit Agreement and the other Loan Documents to which the Borrowers or any of their Subsidiaries are or are to become a party will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. 64 -56- 8.2. GOVERNMENTAL APPROVALS. Except as set forth on SCHEDULE 8.2 hereto, the execution, delivery and performance by each of the Borrowers and their respective Subsidiaries of this Credit Agreement, the other Loan Documents and the Acquisition Documents to which any of the Borrowers or any of their Subsidiaries are or are to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained. 8.3 TITLE TO PROPERTIES; LEASES. Except as indicated on SCHEDULE 8.3 hereto, (a) TransTechnology and its respective Subsidiaries own all of the assets reflected in the consolidated balance sheet of TransTechnology and its Subsidiaries as at the Balance Sheet Date or acquired since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date) subject to no rights of others, including any mortgages, leases, conditional sales agreements, title retention agreements, liens or other encumbrances except Permitted Liens, and (b) all of TransTechnology's and its respective Subsidiaries' assets are reflected in the consolidated balance sheet as at the Balance Sheet Date described in Section 8.4.1. 8.4. FINANCIAL STATEMENTS AND PROJECTIONS. 8.4.1. FINANCIAL STATEMENTS. There has been furnished to each of the Lenders a consolidated balance sheet of TransTechnology and its Subsidiaries as at the Balance Sheet Date, and a consolidated statement of income of TransTechnology and its Subsidiaries for the fiscal year then ended, certified by Deloitte & Touche LLP. Such balance sheet and statement of income have been prepared in accordance with generally accepted accounting principles and fairly present the financial condition of TransTechnology as at the close of business on the date thereof and the results of operations for the fiscal year then ended. There are no contingent liabilities of TransTechnology or any of its Subsidiaries as of such date involving material amounts, known to the officers of TransTechnology, which were not disclosed in such balance sheet and the notes related thereto. 8.4.2. PROJECTIONS. There has been furnished to each of the Lenders projections (dated July 23, 1999) of the annual operating budgets of TransTechnology and its Subsidiaries on a consolidated basis, balance sheets and cash flow statements for the 2000 to 2004 fiscal years (the "PROJECTIONS"), which fairly disclose all assumptions made with respect to general economic, financial and market conditions used in their formulation. To the knowledge of TransTechnology, no facts exist that (individually or in the aggregate) would result in any material change in any of the Projections. The Projections are based upon reasonable estimates and assumptions, have been prepared on the basis of the assumptions stated therein and reflect the reasonable estimates of TransTechnology of the results of operations and other information projected therein. 8.5. NO MATERIAL CHANGES, ETC. 65 -57- (a) Since the Balance Sheet Date there has occurred no materially adverse change in the financial condition or business of TransTechnology or any of its Subsidiaries or any material assets of TransTechnology or any of its Subsidiaries as shown on or reflected in the consolidated balance sheet of TransTechnology and its Subsidiaries as at the Balance Sheet Date, or the consolidated statement of income for the fiscal year then ended, other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of TransTechnology or any of its Subsidiaries or any material assets of TransTechnology or any of its Subsidiaries. (b) Each of the Borrowers and each of their Subsidiaries (before and after giving effect to the transactions contemplated by this Credit Agreement and the other Loan Documents) (i) is solvent, (ii) has assets having a fair value in excess of its liabilities, (iii) has assets having a fair value in excess of the amount required to pay its liabilities on existing debts as such debts become absolute and matured, and (iv) has, and expects to continue to have, access to adequate capital for the conduct of its business and the ability to pay its debts from time to time incurred in connection with the operation of its business as such debts mature. 8.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC. Each of the Borrowers and each of their Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of its business substantially as now conducted without known conflict with any rights of others. 8.7. LITIGATION. Except as set forth in SCHEDULE 8.7 hereto, there are no actions, suits, proceedings or investigations of any kind pending or threatened against any of the Borrowers or their Subsidiaries before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, materially adversely affect the properties, assets, financial condition or business of any of the Borrowers or their Subsidiaries or materially impair the right of any of the Borrowers or their Subsidiaries to carry on business substantially as now conducted by them, or result in any substantial liability not adequately covered by insurance, or for which adequate reserves are not maintained on the consolidated balance sheet of the Borrowers and their Subsidiaries, or which question the validity of this Credit Agreement or any of the other Loan Documents, or any action taken or to be taken pursuant hereto or thereto. 8.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. None of the Borrowers nor any of their Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business, assets or financial condition of any of the Borrowers or their Subsidiaries. None of the Borrowers nor any of their Subsidiaries is a party to any contract or agreement that is in default or has or is expected, in the judgment of the Borrowers' officers, to have any materially adverse effect on the business of any of the Borrowers or their Subsidiaries. 66 -58- 8.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. None of the Borrowers nor any of their Subsidiaries is in violation of any provision of its charter documents, bylaws, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, act, statute, license, rule, regulation or other law, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of any of the Borrowers or their Subsidiaries. 8.10. TAX STATUS. Except as disclosed on SCHEDULE 8.10 hereto, each of the Borrowers and its Subsidiaries (i) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which any of them is subject, (ii) has paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (iii) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Borrowers know of no basis for any such claim. 8.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing. 8.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. None of the Borrowers nor any of their Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor are any of the Borrowers or their Subsidiaries an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. 8.13. ABSENCE OF FINANCING STATEMENTS, ETC. There is no financing statement, security agreement, chattel mortgage, real estate mortgage, lease or other document filed or recorded with any filing records, registry or other public office, or otherwise, that purports to cover, affect or give notice of any present or possible future lien on, or security interest in, any assets or property of any of the Borrowers or their Subsidiaries or any rights relating thereto, except with respect to Permitted Liens. 8.14. PERFECTION OF SECURITY INTEREST. All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary or advisable, under applicable law, to establish and perfect the Administrative Agent's security interests in and charges over the Collateral. The Collateral and the Administrative Agent's rights with respect to the Collateral are not subject to any material setoff, claims, withholdings or other defenses. The Borrowers or their Subsidiaries, as specified in the Security 67 -59- Documents, are the owners of the Collateral free from any lien, security interest, encumbrance and any other claim or demand, except for Permitted Liens. 8.15. CERTAIN TRANSACTIONS. Except for arm's length transactions pursuant to which any of the Borrowers or their Subsidiaries or any officer, director or employee of such Borrower or Subsidiary makes payments in the ordinary course of business upon terms no less favorable than such Borrowers, Subsidiaries, officers, directors or employees could obtain from third parties, none of the officers, directors, or employees of any of the Borrowers or their Subsidiaries is presently a party to any transaction with any of the Borrowers or their Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of any Borrower, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 8.16. EMPLOYEE BENEFIT PLANS. 8.16.1. IN GENERAL. Each Employee Benefit Plan has been maintained and operated in compliance in all material respects with the provisions of ERISA and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions. TransTechnology has heretofore delivered to the Administrative Agent the most recently completed annual report, Form 5500, with all required attachments, and actuarial statement required to be submitted under ss.103(d) of ERISA, with respect to each Guaranteed Pension Plan. 8.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit Plan which is an employee welfare benefit plan within the meaning of Section 3(1) or Section 3(2)(B) of ERISA, no benefits are due unless the event giving rise to the benefit entitlement occurs prior to plan termination (except as required by Title I, Part 6 of ERISA, or as provided in the Tinnerman Acquisition Agreement). Except as provided in the Tinnerman Acquisition Agreement, TransTechnology or an ERISA Affiliate, as appropriate, may terminate each such Plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) in the discretion of TransTechnology or such ERISA Affiliate without liability to any Person. 8.16.3. GUARANTEED PENSION PLANS. Each contribution required to be made to a Guaranteed Pension Plan, whether required to be made to avoid the incurrence of an accumulated funding deficiency, the notice or lien provisions of Section 302(f) of ERISA, or otherwise, has been timely made. No waiver of an accumulated funding deficiency or extension of amortization periods has been received with respect to any Guaranteed Pension Plan. No liability to the PBGC (other than required insurance premiums, all of which have been paid) has been incurred by TransTechnology or any ERISA 68 -60- Affiliate with respect to any Guaranteed Pension Plan and there has not been any ERISA Reportable Event, or any other event or condition which presents a material risk of termination of any Guaranteed Pension Plan by the PBGC. Except with respect to the Guaranteed Pension Plan to be established by TransTechnology as described in, and to the extent provided in, the Tinnerman Acquisition Agreement, based on the latest valuation of each Guaranteed Pension Plan (which in each case occurred within twelve months of the date of this representation), and on the actuarial methods and assumptions employed for that valuation, the aggregate benefit liabilities of all such Guaranteed Pension Plans within the meaning of Section 4001 of ERISA did not exceed the aggregate value of the assets of all such Guaranteed Pension Plans, disregarding for this purpose the benefit liabilities and assets of any Guaranteed Pension Plan with assets in excess of benefit liabilities. 8.16.4. MULTIEMPLOYER PLANS. Other than (a) the Electronics Local 431 Pension Fund relating to employees of Seeger Inc., a Subsidiary of TransTechnology, and (b) the Western Pennsylvania Teamster and Employers Pension Fund relating to employees of TransTechnology's Breeze-Industrial division, neither TransTechnology nor any ERISA Affiliate is a member of any Multiemployer Plan. Neither TransTechnology nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of assets described in Section 4204 of ERISA. Neither TransTechnology nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of Section 4241 or Section 4245 of ERISA or that any Multiemployer Plan intends to terminate or has been terminated under Section 4041A of ERISA. 8.16.5. COMPLIANCE WITH EMPLOYMENT BENEFIT LAWS. Except as set forth in SCHEDULE 8.16.5 hereto, none of the Borrowers nor any of their Subsidiaries is in violation of any material provision of any applicable pension, retirement funding or employee benefit legislation in any jurisdiction. 8.17. USE OF PROCEEDS. The proceeds of the Loans shall be used to refinance certain Indebtedness of the Borrowers under the Prior Credit Agreement, to finance Approved Acquisitions and for working capital and general corporate purposes of the Borrowers. TransTechnology will obtain Letters of Credit solely for working capital and general corporate purposes. No portion of any Loan is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. No portion of the proceeds of any Loans is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of (a) knowingly purchasing, or providing credit support for the purchase of, Ineligible Securities from a Section 20 Subsidiary during any period in which such Section 20 Subsidiary makes a market in such Ineligible Securities, (b) knowingly purchasing, 69 -61- or providing credit support for the purchase of, during the underwriting or placement period, any Ineligible Securities being underwritten or privately placed by a Section 20 Subsidiary, or (c) making, or providing credit support for the making of, payments of principal or interest on Ineligible Securities underwritten or privately placed by a Section 20 Subsidiary and issued by or for the benefit of the Borrowers or any Subsidiary or other Affiliate of any of the Borrowers. 8.18. ENVIRONMENTAL COMPLIANCE. Each of the Borrowers and their Subsidiaries has taken all necessary steps to investigate the past and present condition and usage of the Real Estate and the operations conducted thereon and, based upon such diligent investigation, has determined that, except as set forth on SCHEDULE 8.18 attached hereto: (a) none of the Borrowers, their Subsidiaries or any operator of the Real Estate or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any European Union, national, federal, state or local statute, regulation, ordinance, order or decree relating to health, safety or the environment (hereinafter "Environmental Laws"), which violation would have a material adverse effect or the business, assets or financial condition of any of the Borrowers or their Subsidiaries or the consummation of the transactions referred to in this Agreement; (b) the Borrowers and their Subsidiaries have conducted all business operations on the Real Estate and continue to operate and maintain their businesses in compliance in all material respects with all applicable Environmental Laws and any other European Union, national, federal, state and local laws, rules and regulation relating to air emissions, water discharge, noise emissions, solid, or liquid waste disposal, hazardous waste, or materials, or other environmental, health or safety matters and there are no outstanding citations, notices, or order of non-compliance issued to any of the Borrowers or their Subsidiaries, or relating to the respective businesses, assets, Real Estate, other property, leaseholds, or equipment of any of the Borrowers or their Subsidiaries under any such laws, rules or regulations; and (c) None of the Borrowers and their Subsidiaries, any Mortgaged Property and any of the other Real Estate is subject to any applicable environmental law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any governmental agency or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby, or as a 70 -62- condition to the recording of any Mortgage or to the effectiveness of any other transactions contemplated hereby. 8.19. SUBSIDIARIES, ETC. A complete and correct list of the Subsidiaries of each of the Borrowers and the jurisdictions of their incorporation as of the Closing Date is set forth on SCHEDULE 8.19 hereto. Except as set forth on SCHEDULE 8.19 hereto, none of the Borrowers nor any of their Subsidiaries is engaged in any joint venture or partnership with any other Person. 8.20. BANK ACCOUNTS. SCHEDULE 8.20 sets forth the account numbers and location of all bank accounts of each of the Borrowers and their Subsidiaries. 8.21. YEAR 2000 COMPLIANCE. The Borrowers and their Subsidiaries have undertaken a review, the extent of which the Borrowers believe to be commercially reasonable, of their critical business and operational systems which could be adversely affected by, and have developed a program to address on a timely basis, the "Year 2000 Problem" (i.e., the risk that computer applications used by the Borrowers or any of their Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999). Based upon such review and the implementation of such program, the Borrowers reasonably believe that the "Year 2000 Problem" will not have any materially adverse effect on the business or financial condition of the Borrowers or any of their Subsidiaries. 9. AFFIRMATIVE COVENANTS OF THE BORROWERS. Each of the Borrowers covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any obligation to make any Loans or the Issuing Bank has any obligation to issue, extend or renew any Letters of Credit: 9.1. PUNCTUAL PAYMENT. Each of the Borrowers will duly and punctually pay or cause to be paid the principal and interest on the Loans, all Reimbursement Obligations, the Letter of Credit Fees, the commitment fees, the Administrative Agent's fee, the fronting fee and all other amounts provided for in this Credit Agreement and the other Loan Documents to which any of the Borrowers or their Subsidiaries is a party, all in accordance with the terms of this Credit Agreement and such other Loan Documents. 9.2. MAINTENANCE OF OFFICES. (a) TransTechnology and each of its Domestic Subsidiaries (other than TransTechnology Canada) will maintain its chief executive office in Liberty Corner, New Jersey, or at such other place in the United States of America as TransTechnology shall designate upon written notice to the Administrative Agent, where notices, presentations and demands to or upon TransTechnology or such Subsidiary in respect of the Loan Documents to which TransTechnology or such Subsidiary is a party may be given or made. 71 -63- (b) GmbH will maintain its chief executive office in Konigstein, Germany, or at such other place in Germany as GmbH shall designate upon written notice to the Administrative Agent and the DM Fronting Bank, where notices, presentations and demands to or upon GmbH in respect of the Loan Documents to which GmbH is a party may be given or made. (c) Limited will maintain its registered office either in Bingley or Keighley, Yorkshire, England, or at such other place in England as Limited shall designate upon written notice to the Administrative Agent and the Sterling Fronting Bank, where notices, presentations and demands to or upon Limited in respect of the Loan Documents to which Limited is a party may be given or made. (d) TransTechnology Canada will maintain its chief executive office in Hamilton, Ontario, or at such other place in Canada as TransTechnology Canada shall designate upon written notice to the Administrative Agent, where notices, presentations and demands to or upon TransTechnology Canada in respect of the Loan Documents to which TransTechnology Canada is a party may be made or given. 9.3. RECORDS AND ACCOUNTS. Each of the Borrowers will, and will cause each of its Subsidiaries to, (a) if such Borrower or Subsidiary is located in the United States, keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles and (b) if such Borrower or Subsidiary is located outside the United States, keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles in the country in which such Borrower or Subsidiary, as the case may be, is located. Each of the Borrowers will maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves. 9.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. Trans-Technology will deliver to each of the Lenders: (a) as soon as practicable, but in any event not later than one hundred (100) days after the end of each fiscal year of TransTechnology, the consolidated balance sheet of TransTechnology and its Subsidiaries and the consolidating balance sheet of TransTechnology and its Subsidiaries, each as at the end of such year, and the related consolidated and consolidating statements of income and consolidated statement of cash flow for such year, each setting forth in comparative form the figures for the previous fiscal year and all such consolidated and consolidating statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and certified (as to the consolidated statements) without qualification by Deloitte & Touche LLP or by other independent certified public accountants satisfactory to the Administrative Agent, together with a written statement from such accountants to the effect that they have read a copy of this Credit 72 -64- Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; PROVIDED that such accountants shall not be liable to the Lenders for failure to obtain knowledge of any Default or Event of Default; (b) as soon as practicable, but in any event not later than forty-five (45) days after the end of each of the fiscal quarters of TransTechnology, copies of the unaudited consolidated balance sheet of TransTechnology and its Subsidiaries and the unaudited consolidating balance sheet of TransTechnology and its Subsidiaries, each as at the end of such quarter, and the related consolidated and consolidating statements of income and consolidated statement of cash flow for the portion of TransTechnology's fiscal year then elapsed, all in reasonable detail and prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officer of TransTechnology that the information contained in such financial statements fairly presents the financial position of TransTechnology and its Subsidiaries on the date thereof (subject to year-end adjustments); (c) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement certified by the principal financial or accounting officer of TransTechnology in substantially the form of EXHIBIT D hereto and setting forth in reasonable detail computations evidencing compliance with the covenants contained in Section 11 and (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date; (d) contemporaneously with the filing or mailing thereof, copies of all material filed with the Securities and Exchange Commission or sent to the stockholders of TransTechnology which is either of a financial nature or addresses the Year 2000 Problem; (e) by April 30 of each year, the annual budget of TransTechnology and its Subsidiaries for the next fiscal year; and (f) from time to time such other financial data and information (including accountants' management letters) as the Administrative Agent or any Lender may reasonably request. 9.5. NOTICES. 9.5.1. DEFAULTS. Each of the Borrowers will promptly notify the Administrative Agent and each of the Lenders in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting 73 -65- an Event of Default) under this Credit Agreement or any other note, evidence of indebtedness, indenture or other obligation to which or with respect to which any of the Borrowers or their Subsidiaries is a party or obligor, whether as principal, guarantor, surety or otherwise, each of the Borrowers shall forthwith give written notice thereof to the Administrative Agent and each of the Lenders, describing the notice or action and the nature of the claimed default. 9.5.2. ENVIRONMENTAL EVENTS. Each of the Borrowers will promptly give notice to the Administrative Agent and each of the Lenders (i) of any violation of any Environmental Law that any of the Borrowers or their Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (ii) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, or any federal, state or local environmental agency or board, that has the potential to materially affect the assets, liabilities, financial conditions or operations of any of the Borrowers or their Subsidiaries, or the Administrative Agent's mortgages, deeds of trust or security interests pursuant to the Security Documents. 9.5.3. NOTIFICATION OF CLAIMS AGAINST COLLATERAL. Each of the Borrowers will, immediately upon becoming aware thereof, notify the Administrative Agent and each of the Lenders in writing of any setoff, claims (including, with respect to the Real Estate, environmental claims), withholdings or other defenses to which any of the Collateral, or the Administrative Agent's rights with respect to the Collateral, are subject. 9.5.4. NOTICE OF LITIGATION AND JUDGMENTS. Each of the Borrowers will, and will cause each of its Subsidiaries to, give notice to the Administrative Agent and each of the Lenders in writing within fifteen (15) days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting any of the Borrowers or their Subsidiaries or to which any of the Borrowers or their Subsidiaries is or becomes a party involving an uninsured claim against any of the Borrowers or their Subsidiaries that could reasonably be expected to have a materially adverse effect on any of the Borrowers or their Subsidiaries and stating the nature and status of such litigation or proceedings. Each of the Borrowers will, and will cause each of its Subsidiaries to, give notice to the Administrative Agent and each of the Lenders, in writing, in form and detail satisfactory to the Administrative Agent, within ten (10) days of any judgment not covered by insurance, final or otherwise, against such Borrower or any of its Subsidiaries in an amount in excess of $1,000,000. 9.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. Each of the Borrowers will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises and those of its Subsidiaries. Each of the Borrowers (i) will cause all of its properties and those of its 74 -66- Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of such Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, and (iii) will, and will cause each of its Subsidiaries to, continue to engage primarily in the businesses now conducted by them and in related businesses; PROVIDED that nothing in this Section 9.6 shall prevent any Borrower from discontinuing the operation and maintenance of any of its properties or any of those of its Subsidiaries if such discontinuance is, in the judgment of such Borrower, desirable in the conduct of its or their business and that do not in the aggregate materially adversely affect the business of any of the Borrowers and their Subsidiaries on a consolidated basis. 9.7. INSURANCE. Each of the Borrowers will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent and in accordance with the terms of the Security Agreements, including provisions naming the Administrative Agent as additional loss payee and providing for a minimum thirty (30) days' notice to the Administrative Agent prior to cancellation. Each of the Borrowers will, and will cause each of its Subsidiaries to, maintain insurance on the Mortgaged Properties in accordance with the terms of the Mortgages. Upon reasonable request from the Administrative Agent, the Borrowers shall furnish the Administrative Agent from time to time with information concerning the Borrowers' and their Subsidiaries' insurance, including (when requested) copies of the certificates of insurance evidencing such insurance. 9.8. TAXES. Each of the Borrowers will, and will cause each of its Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon it and its real properties, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a lien or charge upon any of its property; PROVIDED that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if such contesting Borrower or Subsidiary shall have set aside on its books adequate reserves with respect thereto; and PROVIDED further that each of the Borrowers and its Subsidiaries will pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any lien that may have attached as security therefor. 9.9. INSPECTION OF PROPERTIES AND BOOKS, ETC. 75 -67- 9.9.1. GENERAL. Each of the Borrowers shall permit the Lenders, through the Administrative Agent or any of the Lenders' other designated representatives, to visit and inspect any of the properties of such Borrower and any of its Subsidiaries, to examine the books of account of such Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of such Borrower and its Subsidiaries with, and to be advised as to the same by, its and their officers, all at such reasonable times and intervals as the Administrative Agent or any Lender may reasonably request. Upon the request of the Administrative Agent, TransTechnology will obtain and deliver to the Administrative Agent a report of an independent collateral auditor satisfactory to the Administrative Agent (which may be affiliated with one of the Lenders) setting forth such information regarding the Collateral as the Administrative Agent may reasonably require. All such collateral value reports shall be conducted and made at the expense of TransTechnology. If an Event of Default shall have occurred and be continuing, each of the Borrowers upon the request of the Administrative Agent, will obtain and deliver to the Administrative Agent appraisal reports in form and substance and from appraisers satisfactory to the Administrative Agent, stating (i) the then current fair market, orderly liquidation and forced liquidation values of all or any portion of the equipment or real estate owned by such Borrower or any of its Subsidiaries and (ii) the then current business value of such Borrower and its Subsidiaries. All such appraisals shall be conducted and made at the expense of the Borrower obtaining and delivering such appraisal reports. 9.9.2. ENVIRONMENTAL ASSESSMENTS. Whether or not an Event of Default shall have occurred, the Administrative Agent may, from time to time, in its discretion for the purpose of assessing and ensuring the value of any Mortgaged Property, obtain one or more environmental assessments or audits of such Mortgaged Property prepared by a hydrogeologist, an independent engineer or other qualified consultant or expert approved by the Administrative Agent to evaluate or confirm (i) whether any Hazardous Materials are present in the soil or water at such Mortgaged Property and (ii) whether the use and operation of such Mortgaged Property complies with all Environmental Laws. Environmental assessments may include without limitation detailed visual inspections of such Mortgaged Property including any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, surface water samples and ground water samples, as well as such other investigations or analyses as the Administrative Agent deems appropriate. All such environmental assessments shall be conducted at the expense of TransTechnology. 9.9.3. COMMUNICATIONS WITH ACCOUNTANTS. Each of the Borrowers authorizes the Administrative Agent and, if accompanied by the Administrative Agent, the Lenders to communicate directly with such Borrower's independent certified public accountants, PROVIDED that TransTechnology shall have received advance notice of any such communications, and authorizes such accountants to disclose to the 76 -68- Administrative Agent and the Lenders any and all financial statements and other supporting financial documents and schedules including copies of any management letter with respect to the business, financial condition and other affairs of such Borrower or any of its Subsidiaries. At the request of the Administrative Agent, each of the Borrowers shall deliver a letter addressed to such accountants instructing them to comply with the provisions of this section 9.9.3. 9.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. Each of the Borrowers will, and will cause each of its Subsidiaries to, comply in all material respects with (i) the applicable laws and regulations wherever its business is conducted, including all Environmental Laws, (ii) the provisions of its charter documents and, in the event such by-laws exist, its by-laws, (iii) all agreements and instruments by which it or any of its properties may be bound and (iv) all applicable decrees, orders, and judgments. If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that any of the Borrowers or their Subsidiaries may fulfill any of its obligations hereunder or any of the other Loan Documents to which such Borrower or Subsidiary is a party, such Borrower will, or (as the case may be) will cause such Subsidiary to, immediately take or cause to be taken all reasonable steps within the power of such Borrower or Subsidiary to obtain such authorization, consent, approval, permit or license and furnish the Administrative Agent and the Lenders with evidence thereof. 9.11. EMPLOYEE BENEFIT PLANS. TransTechnology will (i) promptly upon filing the same with the United States Department of Labor or Internal Revenue Service, upon request of the Administrative Agent, furnish to the Administrative Agent a copy of the most recent actuarial statement required to be submitted under Section 103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch, furnish to the Administrative Agent any notice, report or demand sent or received in respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA. Each of the Borrowers and each of their Subsidiaries shall comply with all applicable pension, retirement funding or employee benefit legislation in any jurisdiction. 9.12. USE OF PROCEEDS. The proceeds of the Loans shall be used to refinance certain Indebtedness of the Borrowers under the Prior Credit Agreement, to finance Approved Acquisitions, and for working capital and general corporate purposes of the Borrowers. TransTechnology will obtain Letters of Credit solely for working capital and general corporate purposes. 9.13. ADDITIONAL MORTGAGED PROPERTY. If, after the Closing Date, any of the Borrowers or their Subsidiaries acquires or leases for a term in excess of five (5) years real estate used as a manufacturing or warehouse facility, such Borrower shall, or shall, upon the request of the Administrative Agent or the Majority Lenders, cause such Subsidiary to, forthwith deliver to the Administrative Agent a 77 -69- fully executed mortgage or deed of trust over such real estate, in form and substance satisfactory to the Administrative Agent, together with title insurance policies, surveys, evidences of insurance with the Administrative Agent named as loss payee and additional insured, legal opinions and other documents and certificates with respect to such real estate as was required for Real Estate of such Borrower or Subsidiary as of the Closing Date. Each of the Borrowers further agrees that, following the taking of such actions with respect to such real estate, the Administrative Agent shall have for the benefit of the Lenders and the Administrative Agent a valid and enforceable first priority mortgage or deed of trust over such real estate, free and clear of all defects and encumbrances except for Permitted Liens. 9.14. BANK ACCOUNTS. Each of the Borrowers will, and will cause its Subsidiaries to, together with the employees, agents and other Persons acting on behalf of such Borrower or Subsidiary, receive and hold in trust for the Administrative Agent and the Lenders all payments constituting proceeds of accounts receivable or other Collateral which come into their possession or under their control and, immediately upon receipt thereof, deposit such payments in the form received, with any appropriate endorsements, in one of the accounts designated as a lockbox or central depository account on SCHEDULE 8.20. 9.15. INTEREST RATE PROTECTION. With effect from a date no later than December 31, 1999, TransTechnology will maintain interest rate protection arrangements on terms and conditions satisfactory to the Administrative Agent with respect to a principal amount of at least $125,000,000 for a period of three (3) years from the date of implementation of such arrangements; PROVIDED that if prior to December 31, 1999, TransTechnology shall have issued at least $125,000,000 of fixed rate long-term debt, the requirement for interest rate protection arrangements detailed in this Section 9.15 will be considered met. 9.16. FURTHER ASSURANCES. Each of the Borrowers will, and will cause each of its Subsidiaries to, cooperate with the Lenders and the Administrative Agent and execute such further instruments and documents as the Lenders or the Administrative Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Credit Agreement and the other Loan Documents. 10. CERTAIN NEGATIVE COVENANTS OF THE BORROWERS. Each of the Borrowers covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any obligation to make any Loans or the Issuing Bank has any obligations to issue, extend or renew any Letters of Credit: 10.1. RESTRICTIONS ON INDEBTEDNESS. The Borrowers will not, and will not permit any of their Subsidiaries to, create, incur, assume, guarantee, or be or remain liable, contingently or otherwise, with respect to, any Indebtedness other than: 78 -70- (a) Indebtedness to the Lenders and the Administrative Agent arising under any of the Loan Documents; (b) current liabilities of any of the Borrowers or their Subsidiaries incurred in the ordinary course of business not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; (c) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 9.8; (d) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which any of the Borrowers or Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; (e) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; (f) Subordinated Debt not exceeding $150,000,000 in aggregate principal amount at any I time outstanding; (g) obligations under Capitalized Leases not exceeding $8,000,000 in aggregate amount at any time outstanding; (h) Indebtedness incurred in connection with (i) the acquisition after the Closing Date of any real or personal property by any of the Borrowers or their Subsidiaries, and (ii) the issuance by any of the Borrowers or their Subsidiaries of any industrial revenue bonds, industrial development bonds or similar instruments, PROVIDED that the aggregate principal amount of Indebtedness of TransTechnology and its Subsidiaries incurred pursuant to this clause (h) shall not exceed the aggregate amount of $10,000,000 at any one time; (i) Indebtedness existing on the date hereof and listed and described on SCHEDULE 10.1 hereto; and (j) Indebtedness of any Subsidiary of TransTechnology to TransTechnology; PROVIDED that such Indebtedness shall be evidenced by promissory notes duly executed by the obligor, and all such intercompany notes shall be pledged and delivered to the Administrative Agent and be in form and substance satisfactory to the Administrative Agent. 79 -71- 10.2. RESTRICTIONS ON LIENS. The Borrowers will not, and will not permit any of their Subsidiaries to, (i) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; (ii) transfer any of such property or assets or the income or profits therefrom for the purpose of subjecting the same to the payment of Indebtedness or performance of any other obligation in priority to payment of its general creditors; (iii) acquire, or agree or have an option to acquire, any property or assets upon conditional sale or other title retention or purchase money security agreement, device or arrangement; (iv) suffer to exist for a period of more than thirty (30) days after the same shall have been incurred any Indebtedness or claim or demand against it that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be given any priority whatsoever over its general creditors; or (v) sell, assign, pledge or otherwise transfer any accounts, contract rights, general intangibles, chattel paper or instruments, with or without recourse; PROVIDED that the Borrowers and their Subsidiaries may create or incur or suffer to be created or incurred or to exist: (a) liens in favor of a Borrower on all or part of the assets of Subsidiaries of such Borrower securing Indebtedness owing by such Subsidiaries to such Borrower; (b) liens to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties other than Mortgaged Properties to secure claims for labor, material or supplies in respect of obligations not overdue or delinquent; (c) deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age pensions or other social security obligations; (d) liens on properties other than Mortgaged Properties in respect of judgments or awards, the Indebtedness with respect to which is permitted by Section 10.1(d); (e) liens of carriers, warehousemen, mechanics and materialmen, and other like liens on properties other than Mortgaged Properties, in existence less than 120 days from the date of creation thereof in respect of obligations not overdue or delinquent; (f) encumbrances on Real Estate other than the Mortgaged Property consisting of easements, rights of way, zoning restrictions, restrictions on the use of real property and defects and irregularities in the title thereto, landlord's or lessor's liens under leases to which a Borrower or a Subsidiary of a Borrower is a party, and other minor liens or encumbrances none of which in the opinion of the Borrowers interferes materially with the use of the property affected in the ordinary conduct of the business of the Borrowers and their Subsidiaries, which defects do not individually or in the aggregate 80 -72- have a materially adverse effect on the business of any Borrower individually or of TransTechnology and its Subsidiaries on a consolidated basis; (g) liens existing on the date hereof and listed on SCHEDULE 10.2 hereto; (h) security interests in, or purchase money mortgages on, real or personal property other than Mortgaged Properties acquired after the date hereof to secure Indebtedness of the type permitted by Section 10.1(h)(i), in amounts not to exceed those permitted by Section 10.1(h), and incurred in connection with the acquisition of such property, which security interests or mortgages cover only the real or personal property so acquired (or comparable security interests, such as collateral assignments or retention of title agreements entered into in the ordinary course of business); (i) liens and encumbrances on each Mortgaged Property as and to the extent permitted by the Mortgage applicable thereto; and (j) liens in favor of the Administrative Agent for the benefit of the Lenders and the Administrative Agent under the Loan Documents. 10.3. RESTRICTIONS ON INVESTMENTS. The Borrowers will not, and will not permit any of their Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments in: (a) marketable direct or guaranteed obligations of the United States of America, the Federal Republic of Germany or the United Kingdom that mature within one (1) year from the date of purchase; (b) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States or Canadian banks having total assets in excess of $1,000,000,000 or, with respect to Subsidiaries of TransTechnology located outside the United States, deposit accounts with local banks having total assets in excess of $1,000,000,000 or the local currency equivalent thereof; (c) securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than "P 1" if rated by Moody's Investors Services, Inc., and not less than "A 1" if rated by Standard and Poor's; (d) Investments existing on the date hereof and listed on SCHEDULE 10.3 hereto; (e) Investments with respect to Indebtedness permitted by Section 10.1(j) so long as such entities remain Subsidiaries of TransTechnology; 81 -73- (f) Investments consisting of the Guaranties or Investments by TransTechnology in Subsidiaries of TransTechnology existing on the Closing Date; (g) Investments consisting of promissory notes received as proceeds of asset dispositions permitted by Section 10.5.2; (h) Investments consisting of loans and advances to employees for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed $250,000 in the aggregate at any time outstanding; and (i) other Investments in an aggregate amount not in excess of $100,000; PROVIDED, HOWEVER, that, with the exception of demand deposits referred to in Section 10.3(b) and loans and advances referred to in Section 10.3(h), such Investments will be considered Investments permitted by this Section 10.3 only if all actions have been taken to the satisfaction of the Administrative Agent to provide to the Administrative Agent, for the benefit of the Lenders and the Administrative Agent, a first priority perfected security interest in all of such Investments free of all encumbrances other than Permitted Liens; and PROVIDED, FURTHER, that, subject to Section 7.4, no Investments in any Subsidiaries shall be permitted unless such Subsidiary either is at the time of such Investment a Guarantor or at such time enters into a guaranty or joinder or other agreement, in each case in form and substance acceptable to the Administrative Agent, pursuant to which such Subsidiary becomes a guarantor of the payment and performance of the Obligations. 10.4. DISTRIBUTIONS. TransTechnology will not make, or permit any of its Subsidiaries to make, any Distributions, EXCEPT that, so long as no Default or Event of Default has occurred and is continuing or would result therefrom, TransTechnology may declare and pay dividends on or in respect of any shares of its capital stock in an aggregate amount not to exceed $2,000,000 paid in any period of twelve (12) consecutive months. 10.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS. 10.5.1. MERGERS AND ACQUISITIONS. The Borrowers will not, and will not permit any of their Subsidiaries to, become a party to any merger or consolidation, to convert any of the Borrowers or their Subsidiaries from one form of corporate organization or partnership to another, or agree to or effect any asset acquisition or stock acquisition, other than: (a) the acquisition of assets (other than assets which constitutes all or a substantial part of a business or division) in the ordinary course of business consistent with the past practices of the TransTechnology Group; (b) Approved Acquisitions, subject to fulfillment of the conditions set forth in the definition thereof; 82 -74- (c) the merger or consolidation of one or more of the Subsidiaries of TransTechnology with and into TransTechnology; or (d) the merger, conversion or consolidation of two or more Subsidiaries of TransTechnology, PROVIDED that no assets of any such Subsidiary which prior to such merger or consolidation were pledged to the Administrative Agent or the Lenders or in or over which the Administrative Agent or the Lenders had any security interest, charge, lien or other encumbrance shall, as a result of such merger, conversion or consolidation, cease to be so pledged or otherwise encumbered. 10.5.2. DISPOSITION OF ASSETS. The Borrowers will not, and will not permit any of their Subsidiaries to, become a party to or agree to or effect any disposition of assets, other than: (a) the disposition of assets (other than assets which constitutes all or a substantial part of a business or division) in the ordinary course of business, consistent with the past practices of the TransTechnology Group; (b) the disposition of the assets listed in SCHEDULE 10.5.2, PROVIDED that (i) such disposition is for consideration equal to or greater than the fair market value of such assets, as determined by the management of the selling member of the TransTechnology Group in its reasonable discretion and (ii) the proceeds of any such disposition shall be paid to the Administrative Agent for the account of the Lenders, to be applied against the Loans in accordance with Section 4.9; and (c) the disposition of the assets identified on the most recent balance sheet of TransTechnology and its Subsidiaries as belonging to or employed in operations identified in such balance sheet as discontinued operations of the TransTechnology Group, PROVIDED that the proceeds of any such disposition shall be paid to the Administrative Agent for the account of the Lenders, to be applied against the Loans in accordance with Section 4.9; PROVIDED, however, that in the event of any disposition of assets specifically permitted pursuant to this Section 10.5.2, the Administrative Agent shall be required, upon the request of any of the Borrowers, to release any security interest in the Administrative Agent's favor on any such assets, and the Administrative Agent is hereby authorized to release any such security interest by each of the Lenders. 10.6. SALE AND LEASEBACK. The Borrowers will not, and will not permit any of their Subsidiaries to, enter into any arrangement, directly or indirectly, whereby any Borrower or Subsidiary of a Borrower shall sell or transfer any property owned by it in order then or thereafter to lease such property or lease other 83 -75- property that any member of the TransTechnology Group intends to use for substantially the same purpose as the property being sold or transferred. 10.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Borrowers will not, and will not permit any of their Subsidiaries to, (i) construct or install on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances, (ii) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause any material release (i.e., releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) of Hazardous Substances on, upon or into the Real Estate, or (iii) otherwise conduct any activity at any Real Estate or use any Real Estate in any manner that would be in material violation of any Environmental Law or bring such Real Estate in material violation of any Environmental Law. 10.8. SUBORDINATED DEBT. Without the prior written consent of the Majority Lenders and the Administrative Agent, TransTechnology will not, and will not permit any of its Subsidiaries to: (a) amend or modify the provisions of any Subordinated Debt so as to affect the subordination of such Subordinated Debt to the Obligations, or accelerate the required payment dates or the maturity of such Subordinated Debt, or impose upon TransTechnology and its Subsidiaries materially more onerous or restrictive covenants, events of default or remedies, or otherwise and in similar fashion adversely affect the interests of the Lenders hereunder in any material respect; or (b) make any optional payment, prepayment, redemption or repurchase of any Subordinated Debt, including without limitation any payments on account of or for any sinking fund or other similar fund for the repurchase, retirement or redemption of Subordinated Debt, other than as required by the terms thereof and in accordance with the subordination provisions applicable thereto. 10.9. EMPLOYEE BENEFIT PLANS. Neither TransTechnology nor any ERISA Affiliate will: (a) engage in any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code which could result in a material liability for TransTechnology or any of its Subsidiaries; or (b) permit any Guaranteed Pension Plan to incur an "accumulated funding deficiency", as such term is defined in Section 302 of ERISA, whether or not such deficiency is or may be waived; or (c) fail to contribute to any Guaranteed Pension Plan to an extent which, or terminate any Guaranteed Pension Plan in a manner which, could result in the imposition of a lien or encumbrance on the assets of TransTechnology or any of its Subsidiaries pursuant to Section 302(f) or Section 4068 of ERISA; or 84 -76- (d) permit or take any action which would result in the aggregate benefit liabilities (with the meaning of Section 4001 of ERISA) of all Guaranteed Pension Plans exceeding the value of the aggregate assets of such Plans, disregarding for this purpose the benefit liabilities and assets of any such Plan with assets in excess of benefit liabilities. 10.10. BANK ACCOUNTS. TransTechnology will not, and will not permit any of its Subsidiaries to, (i) establish any bank accounts other than those listed on SCHEDULE 8.20 without the Administrative Agent's prior written consent, (ii) violate directly or indirectly any bank agency or lock box agreement in favor of the Administrative Agent for the benefit of the Lenders and the Administrative Agent with respect to such account, or (iii) deposit into any of the payroll accounts listed on SCHEDULE 8.20 any amounts in excess of amounts necessary to pay current payroll obligations from such accounts. 10.11. OPERATING LEASES. The Borrowers will not, and will not permit any of their Subsidiaries to, create, incur, assume, guarantee or remain liable for, contingently or otherwise, any Rental Obligations with respect to Operating Leases in excess of an aggregate amount of $5,500,000 scheduled to become due and payable in any fiscal year. 10.12. SO OHG PARTNERSHIP AGREEMENT. TransTechnology will not, and will not permit any of its Subsidiaries to, amend, supplement, restate or otherwise modify the Partnership Agreement of SO OHG as in effect as of October 27, 1995, in any way which adversely affects any of the security interests created by the German Security Documents or otherwise adversely affects the interest of the Administrative Agent or any of the Lenders, without the prior written consent of the Administrative Agent, the DM Fronting Bank and the Majority Lenders. 10.13. MAINTENANCE OF BUSINESS. The Borrowers will not, and will not permit any of their Subsidiaries to, materially change the business of such Borrower or Subsidiary from the Business. 11. FINANCIAL COVENANTS OF THE BORROWERS. The Borrowers jointly and severally covenant and agree that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Lender has any obligation to make any Loans or the Issuing Bank has any obligation to issue, extend or renew any Letters of Credit: 11.1. CONSOLIDATED EBITDA TO CONSOLIDATED TOTAL INTEREST EXPENSE. TransTechnology will not permit the ratio of Consolidated EBITDA for any Reference Period ending during any period described in the table set forth below to Consolidated Total Interest Expense for such Reference Period to be less than the ratio set forth opposite such period in such table: @@ Period Ratio ------ ----- 85 -77- From the Closing Date through 2.25 : 1 December 31, 2000 From January 1, 2001 through 2.50 : 1 June 30, 2002 From July 1, 2002 and thereafter 2.75 : 1 @@ 11.2. FIXED CHARGE COVERAGE RATIO. TransTechnology will not permit the ratio of (a) the aggregate amount of (i) Consolidated EBITDA for any Reference Period ending during any period described in the table set forth below, LESS (ii) the amount of Capital Expenditures of TransTechnology and its Subsidiaries for such Reference Period, to (b) the aggregate amount of Consolidated Total Interest Expense for such Reference Period, PLUS the aggregate amount of payments of principal of any Funded Indebtedness of TransTechnology and its Subsidiaries actually made or required to be made during such Reference Period (including, for the avoidance of doubt, any such payments made or required to be made in respect of the Term Loan or with respect to any Subordinated Debt), but excluding any such amounts required to be repaid pursuant to Section 4 hereof, to be less than the ratio set forth opposite such period in such table: @@ Period Ratio ------ ----- From the Closing Date through 1.50 : 1 December 31, 2000 From January 1, 2001 through 1.75 : 1 June 30, 2002 From July 1, 2002 and thereafter 2.00 : 1 @@ 11.3. LEVERAGE RATIO. TransTechnology will not permit the Leverage Ratio at any time during any Reference Period ending during any period described in the table set forth below to exceed the ratio set forth opposite such period in such table: @@ Period Ratio ------ ----- From the Closing Date through 5.00 : 1 March 31, 2000 From April 1, 2000 through 4.75 : 1 March 31, 2001 86 -78- From April 1, 2001 and thereafter 4.50 : 1 @@ 11.4. SENIOR LEVERAGE RATIO. TransTechnology will not permit the Senior Leverage Ratio at any time during any Reference Period ending during any period described in the table set forth below, to exceed the ratio set forth opposite such period in such table: @@ Period Ratio ------ ----- From the Closing Date through 3.75 : 1 March 31, 2000 From April 1, 2000 through 3.50 : 1 March 31, 2001 From April 1, 2001 and thereafter 3.25 : 1 @@ PROVIDED, that from and after the Placing Date, the applicable table shall be as follows: @@ Period Ratio ------ ----- From the Closing Date through 3.25 : 1 March 31, 2000 From April 1, 2000 through 3.00 : 1 March 31, 2001 From April 1, 2001 and thereafter 2.75 : 1 @@ 11.5. MINIMUM NET WORTH. TransTechnology will not permit Consolidated Net Worth at any time to be less than $112,500,000, as such amount shall be increased at the end of each fiscal quarter (commencing with the fiscal quarter ending on or around September 30, 1999), for the fiscal quarter thereafter, by the addition of seventy-five percent (75%) of Consolidated Net Income earned after June 30, 1999. 11.6. CAPITAL EXPENDITURES. Subject to the last sentence of this Section 11.6, TransTechnology will not make, or permit any Subsidiary of TransTechnology to make, Capital Expenditures in any fiscal year that exceed in the aggregate for 87 -79- TransTechnology and its Subsidiaries for such fiscal year the amount set forth for such fiscal year in the chart below: @@ Fiscal Year Amount ----------- ------ Ending on March 31, 2000 $12,000,000 Ending on March 31, 2001 $12,000,000 Ending on March 31, 2002 $13,000,000 Ending on March 31, 2003 $15,000,000 Ending on March 31, 2004 and thereafter $15,000,000 @@ If during any fiscal year set forth in the table above the amount of Capital Expenditures permitted for that fiscal year is not utilized, the unutilized amount may be utilized in any subsequent fiscal year, PROVIDED, HOWEVER, that the aggregate amount of (i) the unutilized portion from any one fiscal year, PLUS (ii) any unutilized portion previously carried forward and which remains unutilized, which may be carried forward from one fiscal year to the subsequent fiscal year shall not exceed $2,000,000. 12. CLOSING CONDITIONS. The obligations of the Lenders to make the initial Revolving Credit Loans, of the Fronting Banks to make the initial International Facility Loans, and of the Issuing Bank to issue any initial Letters of Credit shall be subject to the satisfaction of the following conditions precedent on or prior to the Closing Date: 12.1. LOAN DOCUMENTS. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to each of the Lenders. The Administrative Agent shall have received a fully executed copy of each such document. 12.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Lenders shall have received from TransTechnology and each of its Subsidiaries a copy, certified by a duly authorized officer of such Person to be true and complete on the Closing Date, of each of (i) its charter or other incorporation documents as in effect on such date of certification, and (ii) its by-laws as in effect on such date. 12.3. CORPORATE ACTION. All corporate action necessary for the valid execution, delivery and performance by TransTechnology and each of its Subsidiaries of this Credit Agreement and the other Loan Documents to which it is 88 -80- or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Lenders shall have been provided to each of the Lenders. 12.4. INCUMBENCY CERTIFICATE. Each of the Lenders shall have received from TransTechnology and each of its Subsidiaries an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of TransTechnology or such Subsidiary, and giving the name and bearing a specimen signature of each individual who shall be authorized: (i) to sign, in the name and on behalf of each of TransTechnology and such Subsidiary, each of the Loan Documents and Acquisition Documents to which TransTechnology or such Subsidiary is or is to become a party; and (ii) in the case and the Borrowers, to make Loan Requests and Conversion Requests, to apply for Letters of Credit, and to give notices and to take other action on behalf of the Borrowers under the Loan Documents. 12.5. VALIDITY OF LIENS. The Security Documents shall be effective to create in favor of the Administrative Agent a legal, valid and enforceable first (except for Permitted Liens entitled to priority under applicable law) security interest in and lien upon the Collateral. All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Administrative Agent to protect and preserve such security interests shall have been duly effected. The Administrative Agent shall have received evidence thereof in form and substance satisfactory to the Administrative Agent. 12.6. PERFECTION CERTIFICATES AND UCC SEARCH RESULTS. The Administrative Agent shall have received from each of TransTechnology and its Subsidiaries a completed and fully executed Perfection Certificate and the results of UCC searches or searches of any other relevant register of charges or commercial register with respect to the Collateral, indicating no liens other than Permitted Liens and otherwise in form and substance satisfactory to the Administrative Agent. 12.7. SURVEYS. The Administrative Agent shall have received a Survey of each Mortgaged Property as to which a survey has been conducted on or prior to the date hereof. 12.8. TITLE INSURANCE, ETC.. (a) The Administrative Agent shall have received a Title Policy covering each Mortgaged Property located in the United States (or commitments to issue such policies, with all conditions to issuance of the Title Policy deleted by an authorized agent of the Title Insurance Company) together with proof of payment of all fees and premiums for such policies, from the Title Insurance Company and in amounts satisfactory to the Administrative Agent, insuring the interest of the Administrative Agent and each of the Lenders as mortgagee under the Mortgages. (b) The Administrative Agent shall have received an opinion of Canadian counsel addressed to the Administrative Agent for the benefit of the Lenders, in form and substance satisfactory to the Administrative Agent, as to title to the Mortgaged Property located in Canada. 89 -81- 12.9. CERTIFICATES OF INSURANCE. The Administrative Agent shall have received (i) a certificate of insurance from an independent insurance broker dated as of the Closing Date, identifying insurers, types of insurance, insurance limits, and policy terms, and otherwise describing the insurance obtained in accordance with the provisions of the Security Agreements and (ii) certified copies of all policies evidencing such insurance (or certificates therefore signed by the insurer or an agent authorized to bind the insurer). 12.10. BANK AGENCY AGREEMENTS. The Administrative Agent shall have received an agreement, in form and substance satisfactory to the Administrative Agent, from each bank at which TransTechnology or any of its Subsidiaries maintains depository accounts (including bank agency or lock box agreements) concerning the Administrative Agent's interest for the benefit of the Lenders and the Administrative Agent in such accounts. 12.11. HAZARDOUS WASTE ASSESSMENTS. The Administrative Agent shall have received hazardous waste site assessments from environmental engineers or other documentation in form and substance satisfactory to the Administrative Agent, covering all Mortgaged Property and all other real property in respect of which TransTechnology or any of its Subsidiaries may have material liability, whether contingent or otherwise, for dumping or disposal of Hazardous Substances. 12.12. SOLVENCY CERTIFICATE. Each of the Lenders shall have received an officer's certificate of TransTechnology dated as of the Closing Date as to the solvency of TransTechnology and its Subsidiaries following the consummation of the transactions contemplated herein and in form and substance satisfactory to the Lenders. 12.13. OPINIONS OF COUNSEL. Each of the Lenders and the Administrative Agent shall have received a favorable legal opinion addressed to the Lenders and the Administrative Agent, dated as of the Closing Date, in form and substance satisfactory to the Lenders and the Administrative Agent, from: (a) Hahn Loeser & Parks LLP, counsel to TransTechnology and its Subsidiaries in the United States; (b) Jones, Day, Reavis & Pogue, counsel to TransTechnology and its Subsidiaries in the Federal Republic of Germany; (c) Simmons & Simmons, solicitors to Limited; and (d) if requested by the Administrative Agent such other local counsel to TransTechnology in any jurisdiction where any Collateral (including but not limited to the Mortgaged Property) is located. 12.14. PAYMENT OF FEES. TransTechnology shall have paid to the Administrative Agent the fees payable pursuant to Section 6.1, and shall have paid the reasonable fees and expenses of the Administrative Agent's Special Counsel incurred 90 -82- in connection with the preparation and negotiation of this Credit Agreement and the other Loan Documents. 12.15. SENIOR SUBORDINATED LOANS. The Senior Subordinated Loan Agreement shall be in full force and effect, and all of the conditions precedent to the borrowing by TransTechnology of Senior Subordinated Loans in the principal amount of $75,000,000 (other than the effectiveness of this Agreement) shall have been fulfilled. 12.16. TINNERMAN ACQUISITION. All of the conditions precedent to the completion of the Tinnerman Acquisition in accordance with the Tinnerman Acquisition Agreement shall have been fulfilled. 12.17. DISBURSEMENT INSTRUCTIONS. The Administrative Agent shall have received disbursement instructions from TransTechnology indicating that (a) the proceeds of the Senior Subordinated Loans, the Term Loan and a portion of the proceeds of the initial Revolving Credit Loans are to be paid to Eaton Corporation in payment of the purchase price under the Tinnerman Acquisition Agreement, and (b) that a portion of the proceeds of the initial Revolving Credit Loans, in an aggregate amount equal to the total amount of all Indebtedness under the Prior Credit Agreement, are to be paid to the lenders thereunder. 12.18. MINIMUM EBITDA. Consolidated Adjusted EBITDA for Trans-Technology and its Subsidiaries (assuming for the purposes of this Section 12.18, completion of the Tinnerman Acquisition) for the Reference Period most recently ended prior to the Closing Date for which such information is available shall be at least $63,000,000. 12.19. MAXIMUM LEVERAGE RATIO. After giving effect to the transactions described herein, in the Senior Subordinated Loan Documents and in the Tinnerman Acquisition Documents, the Leverage Ratio as of the Closing Date shall not exceed 4.75:1. 12.20. COMPLIANCE CERTIFICATE. The Administrative Agent shall have received a statement certified on behalf of TransTechnology by the principal financial or accounting officer of TransTechnology in substantially the form of Exhibit D hereto and setting forth in reasonable detail computations evidencing compliance with the closing conditions set forth in Sections 12.18 and 12.19, and compliance of TransTechnology and its Subsidiaries as of the Closing Date, on a pro forma basis assuming completion of the transactions contemplated hereby, by the Senior Subordinated Loan Documents and by the Tinnerman Acquisition Documents, with the financial covenants set forth in Section 11. 13. CONDITIONS TO ALL BORROWINGS. The obligations of the Lenders to make any Revolving Credit Loans, of the Fronting Banks to make any International Facility Loans, and of the Issuing Bank to issue, extend or renew any Letter of Credit, in each case whether on or after the 91 -83- Closing Date, shall also be subject to the satisfaction of the following conditions precedent: 13.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the representations and warranties of any of TransTechnology and its Subsidiaries contained in this Credit Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Credit Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan or the issuance, extension or renewal of such Letter of Credit, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such individual representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing. Upon the request of the Administrative Agent, TransTechnology shall have delivered to the Administrative Agent a certificate of TransTechnology signed by an authorized officer of TransTechnology to such effect. 13.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Lender would make it illegal for such Lender to make such Loan pursuant to the provisions of this Credit Agreement, or to participate in the issuance, extension or renewal of such Letter of Credit or in the reasonable opinion of the Issuing Bank would make it illegal for the Issuing Bank to issue, extend or renew such Letter of Credit. 13.3. GOVERNMENTAL REGULATION. Each Lender shall have received such statements in substance and form reasonably satisfactory to such Lender as such Lender shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System or any other applicable regulatory or supervisory body. 13.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the transactions contemplated by this Credit Agreement, the other Loan Documents, the Acquisition Documents and all other documents incident thereto shall be satisfactory in substance and in form to the Lenders and to the Administrative Agent and the Administrative Agent's Special Counsel, and the Lenders, the Administrative Agent and such counsel shall have received all information and such counterpart originals or certified or other copies of such documents as the Administrative Agent may reasonably request. 14. EVENTS OF DEFAULT; ACCELERATION; ETC. 14.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events ("EVENTS OF DEFAULT" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "DEFAULTS") shall occur: 92 -84- (a) any of the Borrowers shall fail to pay any principal of the Loans or any Reimbursement Obligation when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) any of the Borrowers or their Subsidiaries shall fail to pay any interest on the Loans, the commitment fee, any Letter of Credit Fee, the Administrative Agent's fee, the fronting fee, or other sums due hereunder or under any of the other Loan Documents, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (c) any of the Borrowers or their Subsidiaries shall fail to comply with any of its covenants contained in Section 9, 10 or 11 or any of the covenants contained in any of the Mortgages or in the Debenture; (d) any of the Borrowers or their Subsidiaries shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this Section 14.1 or those which by their terms expressly exclude any grace period for any non-compliance therewith) for fifteen (15) days after written notice of such failure has been given to TransTechnology by the Administrative Agent; (e) any representation or warranty of or any of the Borrowers or their Subsidiaries in this Credit Agreement or any of the other Loan Documents or in any other document or instrument delivered pursuant to or in connection with this Credit Agreement shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (f) any of the Borrowers or their Subsidiaries shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received, or in respect of any Capitalized Leases as to which the aggregate principal amount of lease obligations then outstanding exceed $1,000,000, or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing borrowed money or credit received or in respect of any such Capitalized Leases for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; (g) any of the Borrowers or their Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of such Borrower or Subsidiary or of any substantial part of the assets of such Borrower or Subsidiary or shall commence any case or other proceeding relating to any of the Borrowers or their Subsidiaries 93 -85- under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against or any of the Borrowers or their Subsidiaries and any of the Borrowers or their Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within forty-five (45) days following the filing thereof; (h) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating any of the Borrowers or their Subsidiaries bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any of the Borrowers or their Subsidiaries in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (i) there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive, any final judgment against any of the Borrowers or their Subsidiaries that, with other outstanding final judgments, undischarged, against the Borrowers and their Subsidiaries exceeds in the aggregate $2,000,000; (j) if any of the Loan Documents shall be cancelled, terminated, revoked or rescinded or the Administrative Agent's security interests, mortgages or liens in a substantial portion of the Collateral shall cease to be perfected, or shall cease to have the priority contemplated by the Security Documents, in each case otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Lenders (and, notwithstanding anything herein to the contrary, if any guaranty shall be cancelled, terminated, revoked or rescinded without the consent of the Lenders), or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of any of the Borrowers or their Subsidiaries party thereto or any of their respective stockholders, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof; (k) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Majority Lenders shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of TransTechnology or any of its Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $250,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United 94 -86- States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan; (l) any of the Borrowers or their Subsidiaries shall be enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting any material part of its business and such order has a material adverse effect on the business or financial condition of such Borrower or Subsidiary; (m) there shall occur any material damage to, or loss, theft or destruction of, any Collateral, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty, which in any such case causes, for more than fifteen (15) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of any of the Borrowers or their Subsidiaries if such event or circumstance is not covered by business interruption insurance and would have a material adverse effect on the business or financial condition of such Borrower or Subsidiary; (n) there shall occur the loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by any of the Borrowers or their Subsidiaries if such loss, suspension, revocation or failure to renew would have a material adverse effect on the business or financial condition of such Borrower or Subsidiary; (o) any of the Borrowers or their Subsidiaries shall be indicted for a state or federal crime, or any civil or criminal action shall otherwise have been brought against any of the Borrowers or their Subsidiaries, a punishment for which in any such case could include the forfeiture of any assets of such Borrower or Subsidiary having a fair market value in excess of $2,000,000; (p) any person or group of persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 35% or more of the outstanding shares of common stock of TransTechnology; or, during any period of twelve consecutive calendar months, individuals who were directors of TransTechnology on the first day of such period shall cease to constitute a majority of the board of directors of TransTechnology; then, and in any such event, so long as the same may be continuing, the Administrative Agent may, and upon the request of the Majority Lenders shall, by notice in writing to the Borrowers declare all amounts owing with respect to this Credit Agreement, the Loans, the Notes and the other Loan Documents and all Reimbursement Obligations to be, and they shall thereupon forthwith become, 95 -87- immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each of the Borrowers; PROVIDED that in the event of any Event of Default specified in Section 14.1(g) or 14.1(h), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Administrative Agent or any Lender. 14.2. TERMINATION OF COMMITMENT. If any one or more of the Events of Default specified in Section 14.1(g), Section 14.1(h) or Section 14.1(j) shall occur, any unused portion of the credit hereunder shall forthwith terminate and each of the Lenders (including the Fronting Banks) shall be relieved of all further obligations to make Loans to any of the Borrowers and the Issuing Bank shall be relieved of all further obligations to issue, extend or renew Letters of Credit. If any other Event of Default shall have occurred and be continuing, or if on any Drawdown Date or other date for issuing, extending or renewing any Letter of Credit the conditions precedent to the making of the Loans to be made on such Drawdown Date or (as the case may be) to issuing, extending or renewing such Letter of Credit on such other date are not satisfied the Administrative Agent may and, upon the request of the Majority Lenders, shall, by notice to the Borrowers, terminate the Commitments hereunder, and upon such notice being given such Commitments shall terminate immediately and each of the Lenders (including the Fronting Banks) shall be relieved of all further obligations to make Loans and the Issuing Bank shall be relieved of all further obligations to issue, extend or renew Letters of Credit. No termination of the Commitments shall relieve any of the Borrowers or their Subsidiaries of any of the Obligations. 14.3. REMEDIES. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Administrative Agent or the Majority Lenders shall have accelerated the maturity of the Loans pursuant to Section 14.1, each Lender, if owed any amount with respect to the Loans or the Reimbursement Obligations, may, with the consent of the Majority Lenders but not otherwise, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Credit Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Lender are evidenced, including as permitted by applicable law the obtaining of the EX PARTE appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Lender. No remedy herein conferred upon any Lender or the Administrative Agent or the holder of any Note or purchaser of any Letter of Credit Participation is intended to be exclusive of any other remedy herein or in any of the other Loan Documents and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under any of the other Loan Documents or now or hereafter existing at law or in equity or by statute or any other provision of law. 14.4. DISTRIBUTION OF COLLATERAL PROCEEDS. In the event that, following the occurrence or during the continuance of any Default or Event of Default, the Administrative Agent or any Lender, as the case may be, receives any monies in connection with the enforcement of any the Security Documents, or otherwise with 96 -88- respect to the realization upon any of the Collateral, such monies shall be distributed for application as follows: (a) First, to the payment of, or (as the case may be) the reimbursement of the Administrative Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Administrative Agent in connection with the collection of such monies by the Administrative Agent, for the exercise, protection or enforcement by the Administrative Agent of all or any of the rights, remedies, powers and privileges of the Administrative Agent under this Credit Agreement or any of the other Loan Documents or in respect of the Collateral or in support of any provision of adequate indemnity to the Administrative Agent against any taxes or liens which by law shall have, or may have, priority over the rights of the Administrative Agent to such monies; (b) Second, to all other Obligations in such order or preference as the Majority Lenders may determine; PROVIDED, HOWEVER, that distributions in respect of such obligations shall be made (i) PARI PASSU among Obligations with respect to the Administrative Agent's fee payable pursuant to Section 6.2 and all other Obligations and (ii) Obligations owing to the Lenders with respect to each type of Obligation such as interest, principal, fees and expenses, shall be made among the Lenders PRO RATA; and PROVIDED, FURTHER, that the Administrative Agent may in its discretion make proper allowance to take into account any Obligations not then due and payable; (c) Third, upon payment and satisfaction in full or other provisions for payment in full satisfactory to the Lenders and the Administrative Agent of all of the Obligations, to the payment of any obligations required to be paid pursuant to Section 9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of Massachusetts; and (d) Fourth, the excess, if any, shall be returned to the Borrowers or to such other Persons as are entitled thereto. 15. SETOFF. Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits or other sums credited by or due from any of the Lenders to any of the Borrowers and any securities or other property of the Borrowers in the possession of such Lender may be applied to or set off by such Lender against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, of the Borrowers to such Lender. Each of the Lenders agrees with each other Lender that (i) if an amount to be set off is to be applied to Indebtedness of a Borrower to such Lender, other than Indebtedness evidenced by the Notes held by such Lender or constituting Reimbursement 97 -89- Obligations owed to such Lender, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by all such Notes held by such Lender or constituting Reimbursement Obligations owed to such Lender, and (ii) if such Lender shall receive from any of the Borrowers, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim evidenced by the Notes held by, or constituting Reimbursement Obligations owed to, such Lender by proceedings against any of the Borrowers at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the Note or Notes held by, or Reimbursement Obligations owed to, such Lender any amount in excess of its ratable portion of the payments received by all of the Lenders with respect to the Notes held by, and Reimbursement Obligations owed to, all of the Lenders, such Lender will make such disposition and arrangements with the other Lenders with respect to such excess, either by way of distribution, PRO TANTO assignment of claims, subrogation or otherwise as shall result in each Lender receiving in respect of the Notes held by it or Reimbursement Obligations owed it, its proportionate payment as contemplated by this Credit Agreement; PROVIDED that if all or any part of such excess payment is thereafter recovered from such Lender, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. 16. THE AGENTS. 16.1. AUTHORIZATION. (a) The Administrative Agent is authorized to take such action on behalf of each of the Lenders and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Administrative Agent, together with such powers as are reasonably incident thereto, PROVIDED that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Administrative Agent. (b) The relationship between the Administrative Agent and each of the Lenders is that of an independent contractor. The use of the term "Administrative Agent" is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Administrative Agent and each of the Lenders. Nothing contained in this Credit Agreement nor the other Loan Documents shall be construed to create an agency, trust or other fiduciary relationship between the Administrative Agent and any of the Lenders. (c) As an independent contractor empowered by the Lenders to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Loan Documents, the Administrative Agent is nevertheless a "representative" of the Lenders, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Lenders and the Administrative Agent with respect to all collateral security and guaranties contemplated by the Loan Documents. Such actions include the designation of the Administrative Agent as "secured 98 -90- party", "mortgagee" or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Obligations, all for the benefit of the Lenders and the Administrative Agent. 16.2. EMPLOYEES AND AGENTS. The Administrative Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Credit Agreement and the other Loan Documents. The Administrative Agent may utilize the services of such Persons as the Administrative Agent in its sole discretion may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Borrowers. Without limiting the foregoing, the Administrative Agent may appoint the Sterling Fronting Bank or any other financial institution with an office located within the United Kingdom as its agent to exercise within the United Kingdom, under the Administrative Agent's direction, any or all of the Administrative Agent's rights and duties under this Credit Agreement and the other Loan Documents, and the Administrative Agent may appoint the DM Fronting Bank or any other financial institution with an office located within Germany as its agent to exercise within Germany, under the Administrative Agent's direction, any or all of the Administrative Agent's rights and duties under this Credit Agreement and the other Loan Documents. Any Fronting Bank or other financial institution so appointed shall be entitled to the benefits of the provisions of Sections 16 - 18 to the same extent, and subject to the same limitations, as the Administrative Agent, for so long as such Fronting Bank or other financial institution acts in such capacity. 16.3. NO LIABILITY. Neither the Agents nor any of their shareholders, directors, officers or employees nor any other Person assisting them in their duties, nor any agent or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that an Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. 16.4. NO REPRESENTATIONS. The Administrative Agent shall not be responsible for the execution or validity or enforceability of this Credit Agreement, the Notes, the Letters of Credit, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrowers or any of their Subsidiaries, or be bound to ascertain or inquire as to the performance or observance of any of the terms, 99 -91- conditions, covenants or agreements herein or in any instrument at any time constituting, or intended to constitute, collateral security for the Notes or to inspect any of the properties, books or records of the Borrowers or any of their Subsidiaries. The Administrative Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by any of the Borrowers or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Administrative Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Lenders, with respect to the credit worthiness or financial conditions of the Borrowers or any of their Subsidiaries. Each Lender acknowledges that it has, independently and without reliance upon any Agent or Lender, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Credit Agreement. 16.5. PAYMENTS. 16.5.1. PAYMENTS TO ADMINISTRATIVE AGENT. A payment by any of the Borrowers to the Administrative Agent hereunder or any of the other Loan Documents for the account of any Lender shall constitute a payment to such Lender. The Administrative Agent agrees promptly to distribute to each Lender such Lender's pro rata share of payments received by the Administrative Agent for the account of the Lenders except as otherwise expressly provided herein or in any of the other Loan Documents. 16.5.2. DISTRIBUTION BY ADMINISTRATIVE AGENT. If in the opinion of the Administrative Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Administrative Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Administrative Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. 16.5.3. DELINQUENT LENDERS. Notwithstanding anything to the contrary contained in this Credit Agreement or any of the other Loan Documents, any Lender that fails (i) to make available to the Administrative Agent its pro rata share of any Loan or to purchase any Letter of Credit Participation, (ii) to make payment on the due date therefor of any amount due to any of the Fronting Banks under Section 6.12.2, or (iii) to comply with the provisions of Section 15 with respect to making dispositions and arrangements with the other Lenders, where such Lender's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders, in each case as, when and to the full extent required by the provisions of this Credit Agreement, shall be deemed delinquent (a "DELINQUENT LENDER") and shall be deemed a 100 -92- Delinquent Lender until such time as such delinquency is satisfied. A Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Borrowers, whether on account of outstanding Loans, Unpaid Reimbursement Obligations, interest, fees or otherwise, to the remaining nondelinquent Lenders for application to, and reduction of, their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. The Delinquent Lender hereby authorizes the Administrative Agent to distribute such payments to the nondelinquent Lenders in proportion to their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent Lender shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans and Unpaid Reimbursement Obligations of the nondelinquent Lenders, the Lenders' respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. 16.6. HOLDERS OF NOTES. The Administrative Agent may deem and treat the payee of any Note or the purchaser of any Letter of Credit Participation as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. 16.7. INDEMNITY. The Lenders ratably agree hereby to indemnify and hold harmless the Administrative Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Administrative Agent has not been reimbursed by the Borrowers as required by Section 17), and liabilities of every nature and character arising out of or related to this Credit Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Administrative Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Administrative Agent's willful misconduct or gross negligence. 16.8. AGENTS AS LENDERS. In its individual capacity, each of the Lenders which is also an Agent hereunder shall have the same obligations and the same rights, powers and privileges in respect of its Revolving Credit Commitment and the Loans made by it, and as the holder of any of the Notes and as the purchaser of any Letter of Credit Participations, as it would have were it not also an Agent. 16.9. RESIGNATION OF ADMINISTRATIVE AGENT. The Administrative Agent may resign at any time by giving sixty (60) days prior written notice thereof to the Lenders and TransTechnology. Upon any such resignation, the Majority Lenders shall have the right to appoint a successor Administrative Agent. Unless a Default or Event of Default shall have occurred and be continuing, such successor Administrative Agent shall be reasonably acceptable to TransTechnology. If no successor Administrative Agent shall have been so appointed by the Majority 101 -93- Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent's giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be a financial institution having a rating of not less than A or its equivalent by Standard & Poor's Corporation. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation, the provisions of this Credit Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. 16.10. DUTIES OF CERTAIN AGENTS. Neither the Syndication Agent nor the Documentation Agent shall have any duties or responsibilities under this Credit Agreement in its capacity as such. 17. EXPENSES. The Borrowers jointly and severally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) agree to pay (i) the reasonable costs of producing and reproducing this Credit Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (ii) any taxes (including any interest and penalties in respect thereto) payable by the Administrative Agent or any of the Lenders (other than taxes based upon the Administrative Agent's or any Lender's net income) on or with respect to the transactions contemplated by this Credit Agreement (the Borrowers hereby agreeing to indemnify the Administrative Agent and each Lender with respect thereto), (iii) the reasonable fees, expenses and disbursements of the Administrative Agent's Special Counsel or any local counsel to the Administrative Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (iv) the fees, expenses and disbursements of the Administrative Agent incurred by the Administrative Agent in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, including all title insurance premiums, asset and/or collateral examiners' and commercial finance examiners' fees and surveyor, engineering and appraisal charges, (v) any fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by the Administrative Agent in establishing, maintaining or handling agency accounts, lock box accounts and other accounts for the collection of any of the Collateral; (vi) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys' fees and costs, which attorneys may be employees of any Lender or the Administrative Agent, and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by any Lender or the Administrative Agent in connection with (A) the enforcement of or preservation of rights under any of the Loan Documents against any of the Borrowers or their 102 -94- Subsidiaries or the administration thereof after the occurrence of a Default or Event of Default and (B) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to any Lender's or the Administrative Agent's relationship with any of the Borrowers or their Subsidiaries and (vii) all reasonable fees, expenses and disbursements of any Lender or the Administrative Agent incurred in connection with UCC searches, searches of registers of charges and commercial or companies registers, UCC filings, mortgage recordings or other filings on recordings of security documents evidencing the Administrative Agent's lien on the Collateral. The covenants of this Section 17 shall survive payment or satisfaction of all other Obligations. 18. INDEMNIFICATION. The Borrowers jointly and severally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) agree to indemnify and hold harmless the Agents, the Arranger and the Lenders, and their respective shareholders, directors, agents, officers, Subsidiaries and Affiliates (each, an "INDEMNIFIED PARTY") from and against any and all claims, actions, suits or causes of action whether groundless or otherwise, and from and against any and all liabilities, losses, damages, settlement payments, obligations, and reasonable costs and expenses of every nature and character arising out of this Credit Agreement or any of the other Loan Documents or the transactions contemplated hereby including, without limitation, (i) any actual or proposed use by any of the Borrowers or their Subsidiaries of the proceeds of any of the Loans or Letters of Credit, (ii) the reversal or withdrawal of any provisional credits granted by the Administrative Agent or any Lender upon the transfer of funds from bank agency or lock box accounts or in connection with the provisional honoring of checks or other items, (iii) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of any of the Borrowers or their Subsidiaries comprised in the Collateral, (iv) any of the Borrowers or their Subsidiaries entering into or performing this Credit Agreement or any of the other Loan Documents, or (v) with respect to the Borrowers and their Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threatened release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding, but excluding any such liabilities, losses, damages, settlement payments, obligations, costs and expenses resulting from the gross negligence or willful misconduct of the applicable Indemnified Party. In litigation, or the preparation therefor, each of the Lenders, the Agents and the Arranger shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Borrowers jointly and severally (but, in the case of GmbH, subject to Section 30 of the GmbH Act of Germany) agree to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Borrowers under this Section 18 are unenforceable for any reason, the Borrowers hereby jointly and severally (but, in the case of GmbH, 103 -95- subject to Section 30 of the GmbH Act of Germany) agree to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The covenants contained in this Section 18 shall survive payment or satisfaction in full of all other Obligations. 19. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of any of the Borrowers or their Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Lenders and the Administrative Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by any of the Lenders of any of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any Letter of Credit or any amount due under this Credit Agreement or the Notes or any of the other Loan Documents remains outstanding or any Lender has any obligation to make any Loans or the Issuing Bank has any obligation to issue, extend or renew any Letter of Credit, and for such further time as may be otherwise expressly specified in this Credit Agreement. All statements contained in any certificate or other paper delivered to any Lender or the Administrative Agent at any time by or on behalf of TransTechnology or any of its Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by TransTechnology or such Subsidiary hereunder. 20. ASSIGNMENT AND PARTICIPATION. 20.1. CONDITIONS TO ASSIGNMENT. Except as provided herein, each Lender may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations as a Lender under this Credit Agreement (including all or a portion of its Commitment Percentage and Revolving Credit Commitment and the same portion of the applicable Loans at the time owing to it, the Notes held by it and, in the case of its Revolving Credit Commitment, the same portion of its participating interest in the risk relating to any Letters of Credit or Fronted Loans); PROVIDED that (i) each of the Administrative Agent and, so long as no Default or Event of Default shall have occurred and be continuing, TransTechnology, shall have given its prior written consent to such assignment (such consent not to be unreasonably withheld), PROVIDED, FURTHER, however, that no such consent and no fee for the Administrative Agent shall be required for any assignment to a Lender or an Affiliate or Related Fund of a Lender, (ii) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Lender's rights and obligations as a Lender under this Credit Agreement, (iii) each assignment, other than an assignment to a Lender or an Affiliate or Related Fund of a Lender (as to which no such minimum amount shall apply), shall be in an amount that is at least $2,500,000 or a greater multiple of $500,000, PROVIDED, HOWEVER, that assignments that are made on the same day to two or more Related Funds may be treated as a single assignment for purposes of the minimum amount, and (iv) the parties to such assignment shall execute and 104 -96- deliver to the Administrative Agent, for recording in the Register (as hereinafter defined), an Assignment and Acceptance, substantially in the form of EXHIBIT E hereto (an "ASSIGNMENT AND ACCEPTANCE"), together with any Notes subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in any such Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (i) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender hereunder, and (ii) the assigning Lender shall, to the extent provided in such assignment and upon payment to the Administrative Agent of the registration fee referred to in Section 20.3, be released from its obligations under this Credit Agreement. 20.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By executing and delivering an Assignment and Acceptance, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Lender makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or the attachment, perfection or priority of any security interest or mortgage, (b) the assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of TransTechnology and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by any of the Borrowers and their Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Credit Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (c) such assignee confirms that it has received a copy of this Credit Agreement, together with copies of the most recent financial statements referred to in Section 8.4 and Section 9.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (d) such assignee will, independently and without reliance upon the assigning Lender, the Agents or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement; 105 -97- (e) such assignee represents and warrants that it is an Eligible Assignee; (f) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Credit Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (g) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Credit Agreement are required to be performed by it as a Lender; (h) such assignee and such assignor each represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; and (i) such assignee acknowledges that it has made arrangements with the assigning Lender satisfactory to such assignee with respect to its pro rata share of Letter of Credit Fees in respect of outstanding Letters of Credit. 20.3. REGISTER. The Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register or similar list (the "REGISTER") for the recordation of (a) the names and addresses of the Lenders, and (b) the Commitment Percentages and the principal amounts of the Revolving Credit Loans and portions of the Term Loan owing to, and the Letter of Credit Participations and participations in the risk related to the Fronted Loans purchased by, the Lenders from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrowers, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrowers and the Lenders at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, other than the recordations of transfers from a Lender to an Affiliate or a Related Fund of such Lender, the assigning Lender agrees to pay to the Administrative Agent a registration fee in the sum of $3,500. 20.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Administrative Agent shall (i) record the information contained therein in the Register, and (ii) give prompt notice thereof to TransTechnology and the Lenders (other than the assigning Lender). Within five (5) Business Days after receipt of such notice, TransTechnology, at its own expense, shall execute and deliver to the Administrative Agent in exchange for each surrendered Note, a new Note to the order of such Eligible Assignee in an amount equal to the amount assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the assigning Lender has retained some portion of its obligations hereunder, a new Note or Notes to the order of the assigning Lender in an amount equal to the 106 -98- amount retained by it hereunder as a Lender. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such in Assignment and Acceptance and shall otherwise be substantially the form of the assigned Notes. Upon the request of the recipient of new Notes or the Administrative Agent, within five (5) days of issuance of such new Notes pursuant to this Section 20.4, TransTechnology shall deliver an opinion of counsel, which may be the general counsel of TransTechnology, addressed to the recipients of the new Notes and the Administrative Agent, relating to the due authorization, execution and delivery of such new Notes and the legality, validity and binding effect thereof, in form and substance satisfactory to the recipients of the new Notes, the Administrative Agent and the Administrative Agent's Special Counsel. The surrendered Notes shall be cancelled and returned to TransTechnology. 20.5. PARTICIPATIONS. Each Lender may sell participations to one or more banks or other entities in all or a portion of such Lender's rights and obligations under this Credit Agreement and the other Loan Documents; PROVIDED that (i) each such participation shall be in an amount of not less than $1,000,000, (ii) any such sale or participation shall not affect the rights and duties of the selling Lender hereunder to the Borrowers, and (iii) the only rights granted to the participant pursuant to such participation arrangements with respect to waivers, amendments or modifications of the Loan Documents shall be the rights to approve waivers, amendments or modifications that would reduce the principal of or the interest rate on any Loans, extend the term or increase the amount of any of the Commitments of such Lender as it relates to such participant, reduce the amount of any commitment fees or Letter of Credit Fees to which such participant is entitled or extend any regularly scheduled payment date for principal or interest. 20.6. DISCLOSURE. The Borrowers agree that in addition to disclosures made in accordance with standard and customary banking practices any Lender may disclose information obtained by such Lender pursuant to this Credit Agreement to assignees or participants and potential assignees or participants hereunder; PROVIDED that such assignees or participants or potential assignees or participants shall agree (i) to treat in confidence such information unless such information otherwise becomes public knowledge, (ii) not to disclose such information to a third party, except as required by law or legal process and (iii) not to make use of such information for purposes of transactions unrelated to such contemplated assignment or participation. 20.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH TRANSTECHNOLOGY. If any assignee Lender is an Affiliate of TransTechnology, then any such assignee Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Section 14.1 or Section 14.2, and the determination of the Majority Lenders shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to such assignee Lender's interest in any of the Loans. If any Lender sells a participating 107 -99- interest in any of the Loans or Reimbursement Obligations to a participant, and such participant is TransTechnology or an Affiliate of TransTechnology, then such transferor Lender shall promptly notify the Administrative Agent of the sale of such participation. A transferor Lender shall have no right to vote as a Lender hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Section 14.1 or Section 14.2 to the extent that such participation is beneficially owned by TransTechnology or any Affiliate of TransTechnology, and the determination of the Majority Lenders shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to the interest of such transferor Lender in the Loans to the extent of such participation. 20.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Lender shall retain its rights to be indemnified pursuant to Section 17 with respect to any claims or actions arising prior to the date of such assignment. If any assignee Lender is not incorporated under the laws of the United States of America or any state thereof, it shall, prior to the date on which any interest or fees are payable hereunder or under any of the other Loan Documents for its account, deliver to TransTechnology and the Administrative Agent certification as to its exemption from deduction or withholding of any United States federal income taxes. If the Reference Bank transfers all of its interest, rights and obligations under this Credit Agreement, the Administrative Agent shall, in consultation with TransTechnology and with the consent of TransTechnology and the Majority Lenders, appoint another Lender to act as the Reference Bank hereunder, and in the absence of such consent the Administrative Agent shall act as Reference Bank. Anything contained in this Section 20 to the contrary notwithstanding, any Lender may at any time pledge all or any portion of its interest and rights under this Credit Agreement (including all or any portion of its Notes) to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall release the pledgor Lender from its obligations hereunder or under any of the other Loan Documents. 20.9. ASSIGNMENT BY THE BORROWERS. None of the Borrowers shall assign or transfer any of its rights or obligations under any of the Loan Documents, without the prior written consent of each of the Lenders. 20.10. SYNDICATION. The Borrowers shall provide all information reasonably requested by the Arranger in form and substance reasonably satisfactory to the Arranger to complete the syndication of BankBoston's initial Commitment, including, without limitation, all information that is reasonably available and all projections prepared by or on behalf of the Borrowers relating to the transactions contemplated hereby. The Borrowers and their respective directors, officers, employees and agents shall, at the reasonable request of the Arranger meet with potential Lenders and provide such additional information as such Persons might reasonably request. The Borrowers agree that the option to borrow Eurocurrency Rate Loans under the loan facilities set forth herein prior to completion of the 108 -100- syndication of BankBoston's initial Commitment is subject to the provisions of the second sentence of Section 6.13. 21. NOTICES, ETC. Except as otherwise expressly provided in this Credit Agreement, all notices and other communications made or required to be given pursuant to this Credit Agreement or the Notes or any Letter of Credit Applications shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail or, if either the Person giving the notice or the Person being notified is outside the United States, by registered or recorded-delivery air mail, in each case postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows: (a) if to any of the Borrowers, at TransTechnology Corporation, 150 Allen Road, Liberty Corner, New Jersey 07938, U.S.A., Attention: Gerald C. Harvey, Esq., Vice President, Secretary and General Counsel, or at such other address for notice as TransTechnology shall last have furnished in writing to the Person giving the notice; (b) if to the Administrative Agent, at 100 Federal Street, Boston, Massachusetts 02110, USA, Attention: Maura C. Wadlinger, Vice President, or such other address for notice as the Administrative Agent shall last have furnished in writing to the Person giving the notice; (c) if to any Lender or Fronting Bank, at such Lender's or Fronting Bank's address set forth on SCHEDULE 1 hereto, or such other address for notice as such Lender or Fronting Bank shall have last furnished in writing to the Person giving the notice; and Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile, (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof, and (iii) if sent by registered or recorded-delivery air mail, on the fifth Business Day following the mailing thereof. 22. GOVERNING LAW. THIS CREDIT AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE BORROWERS AGREE THAT ANY SUIT FOR THE 109 -101- ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND EACH OF THE BORROWERS CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON IT BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 21. IN ADDITION, ANY SUIT OR OTHER REMEDY UNDER ANY OF THE SECURITY DOCUMENTS MAY BE BROUGHT IN THE JURISDICTION IN WHICH THE RESPECTIVE COLLATERAL OR MORTGAGED PROPERTY THEREUNDER IS LOCATED. EACH OF GMBH AND LIMITED HEREBY EXPRESSLY APPOINTS TRANSTECHNOLOGY AT THE ADDRESS SPECIFIED IN SECTION 21 AS ITS AGENT FOR SERVICE OF PROCESS. EACH OF THE BORROWERS HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. 23. HEADINGS. The captions in this Credit Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 24. COUNTERPARTS. This Credit Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Credit Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. 25. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Credit Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 27. 26. WAIVER OF JURY TRIAL. Each of the Borrowers and the Lenders hereby waives its right to a jury trial with respect to any action or claim arising out of any dispute in connection with this Credit Agreement, the Notes or any of the other Loan Documents, any rights or obligations hereunder or thereunder or the performance of which rights and obligations. Except as prohibited by law, each of the Borrowers hereby waives any right it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. Each of the Borrowers (i) certifies 110 -102- that no representative, agent or attorney of any Lender or the Administrative Agent has represented, expressly or otherwise, that such Lender or the Administrative Agent would not, in the event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges that each of the Administrative Agent and the Lenders has been induced to enter into this Credit Agreement, the other Loan Documents to which it is a party by, among other things, the waivers and certifications contained herein. 27. CONSENTS, AMENDMENTS, WAIVERS, ETC. 27.1. VOTING PROCEDURES. (a) Except as set forth in clauses (b) - (f) below, any term, covenant, agreement or condition of this Agreement or any of the Loan Documents may be amended or waived and any departure therefrom may be consented to by the Majority Lenders if, but only if, such amendment, waiver or consent is in writing signed by the Majority Lenders and, in the case of an amendment (other than an amendment described in Section 27.2), by the Borrowers and, in any such event, the failure to observe, perform oR discharge any such term, covenant, agreement or condition (whether such amendment is executed or such waiver or consent is given before or after such failure) shall not be construed as a breach of such term, covenant, agreement or condition or as a Default or an Event of Default. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. Anything herein to the contrary notwithstanding, the Majority Lenders shall have the right to waive any Default or Event of Default and the consequences hereunder of such Default or Event of Default and shall have the right to enter into an agreement with the Borrowers providing for the forbearance from the exercise of any remedies provided hereunder or under the other Loan Documents without waiving any Default or Event of Default. The making of Loans hereunder by the Lenders during the existence of a Default or Event of Default shall not be deemed to constitute a waiver of such Default or Event of Default. (b) Except as otherwise set forth in this Agreement, without the prior unanimous written consent of the Lenders, no amendment, consent or waiver shall affect the amount or extend the time of the obligation of the Lenders to make Loans or extend the originally scheduled time or times of payment of the principal of any Loan or alter the time or times of payment of interest on any Loan or the amount of the principal thereof or the rate of interest thereon or the amount of any revolving credit commitment fee payable hereunder or permit any subordination of the principal or interest on any Loan. (c) Except as otherwise set forth in this Agreement, without the prior unanimous written consent of the Lenders and the Fronting Banks, no amendment, consent or waiver shall affect the amount or extend the time of the obligation of the Fronting Banks to make International Facility Loans or extend the originally scheduled time or times of payment of the principal of any such Loan or alter the time or times of payment of interest on any such Loan or the amount of the principal thereof or the rate of interest thereon or the amount of the fronting fee referred to in 111 -103- Section 6.12.1 or permit any subordination of the principal or interest on any such Loan or alter the apportionment of any repayments or prepayment of any such Loans to which a Fronting Bank is entitled. (d) Except as otherwise set forth in this Agreement, (i) without the prior written consent of the Issuing Bank, no amendment, consent or waiver shall affect the rights or duties of the Issuing Bank, including without limitation the amount of any Letter of Credit Fees payable hereunder, (ii) without the prior written consent of a Fronting Bank, no amendment, consent or waiver shall affect the rights or duties of such Fronting Bank, including without limitation the amount of any fronting fees payable hereunder and (iii) without the prior written consent of the applicable Agent, no amendment, consent or waiver shall affect the right or duties of an Agent, including without limitation the amount of any Administrative Agent's fees payable hereunder, or the provisions of Section 16. (e) Neither TransTechnology nor any of its Subsidiaries which is a "significant subsidiary" (as defined in Regulation S-X under the Securities Exchange Act of 1934) shall be released from any of the Guaranties, other than as specifically permitted by such Guaranty, without the prior unanimous written consent of the Lenders pursuant to this Section 27.1(e), and no portion of the Collateral with a book value at the time of such release which, when aggregated with the book value of all other portions of the Collateral released by the Administrative Agent in any fiscal year without the prior unanimous consent of the Lenders pursuant to this Section 27.1(e), exceeds $1,000,000, shall be released by the Administrative Agent, other than as specifically permitted by this Agreement or in the other Loan Documents, without the prior unanimous written consent of the Lenders for such release, PROVIDED, however, that any other release of Collateral may be agreed to by the Administrative Agent alone, unless specifically prohibited by this Agreement or any of the other Loan Documents. (f) Neither the definition of "Majority Lenders", nor the provisions of this Section 27.1, may be amended without the prior unanimous written consent of the Lenders. 27.2. BORROWERS' CONSENT NOT REQUIRED FOR CERTAIN AMENDMENTS. Notwithstanding any provision of this Agreement or the other Loan Documents to the contrary, no consent, written or otherwise, of the Borrowers shall be necessary or required in connection with any amendment to Section 6.12.2 or Section 16, and Any amendment to such provisions shall be effected solely by and among the Administrative Agent, the Fronting Banks and the Lenders (with respect to any amendment to Section 6.12.2) or the Administrative Agent and the Lenders (with respect to any amendment of Section 16), PROVIDED that no such amendment shall impose any obligation on the Borrowers. 27.3. COURSE OF DEALING. No course of dealing or delay or omission on the part of the Administrative Agent or any Lender in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon any of the Borrowers shall entitle any of the Borrowers to other or further notice or demand in similar or other circumstances. 112 -104- 28. SEVERABILITY. The provisions of this Credit Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Credit Agreement in any jurisdiction. 29. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION. 29.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. Trans-Technology acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to TransTechnology or one or more of its Subsidiaries, in connection with this Credit Agreement or otherwise, by a Section 20 Subsidiary. TransTechnology, for itself and each of its Subsidiaries, hereby authorizes (a) such Section 20 Subsidiary to share with the Administrative Agent and each Lender any information delivered to such Section 20 Subsidiary by TransTechnology or any of its Subsidiaries, and (b) the Administrative Agent and each Lender to share with such Section 20 Subsidiary any information delivered to the Administrative Agent or such Lender by TransTechnology or any of its Subsidiaries pursuant to this Credit Agreement, or in connection with the decision of such Lender to enter into this Credit Agreement; it being understood, in each case, that any such Section 20 Subsidiary receiving such information shall be bound by the confidentiality provisions of this Credit Agreement. Such authorization shall survive the payment and satisfaction in full of all of Obligations. 29.2. CONFIDENTIALITY. Each of the Lenders and the Administrative Agent agrees, on behalf of itself and each of its affiliates, directors, officers, employees and representatives, to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of the same nature and in accordance with safe and sound banking practices, any non-public information supplied to it by TransTechnology or any of its Subsidiaries pursuant to this Credit Agreement that is identified by such Person as being confidential at the time the same is delivered to any of the Lenders or the Administrative Agent, PROVIDED that nothing herein shall limit the disclosure of any such information (a) after such information shall have become public other than through a violation of this Section 29, (b) tO the extent required by statute, rule, regulation or judicial process, (c) to counsel, auditors or accounts for any of the Lenders or the Administrative Agent, (d) to bank examiners or any other regulatory authority having jurisdiction over any of the Lenders or the Administrative Agent, (e) to the Administrative Agent, any Lender or any Section 20 Subsidiary, (f) in connection with any litigation to which any one or more of the Lenders, the Administrative Agent or any Section 20 Subsidiary is a party, or in connection with the enforcement of rights or remedies hereunder or under any other Loan Document, (g) to a Subsidiary or affiliate of such Lender as provided in Section 29.1 or (h) to any assignee oR participant (or prospective assignee or participant) so long as such assignee or participant agrees to be bound by the provisions of Section 20.6. 113 -105- 29.3. PRIOR NOTIFICATION. Unless specifically prohibited by applicable law or court order, each of the Lenders and the Administrative Agent shall, prior to disclosure thereof, notify TransTechnology of any request for disclosure of any such non-public information by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender or the Administrative Agent by such governmental agency) or pursuant to legal process, and shall consult with TransTechnology on the advisability of taking legally available steps to resist or narrow any such request. In the event that such steps are not available or effective, or are deemed inadvisable by counsel to such Lender or the Administrative Agent, as the case may be, or in the event that TransTechnology waives compliance with the provisions of this Section 29.3, such Lender or the Administrative Agent, and/or its respective representatives, as the case may be, may disclose to any tribunal only that portion of such non-public information which it is advised by counsel is legally required to be disclosed, and shall exercise reasonable efforts to obtain assurances that confidential treatment will be accorded such non-public information. 29.4. OTHER. In no event shall any Lender or the Administrative Agent be obligated or required to return any materials furnished to it or any Section 20 Subsidiary by TransTechnology or any of its Subsidiaries which such Lender, Section 20 Subsidiary or Administrative Agent is required to retain pursuant to any requirement of law or rule or regulation of any governmental agency. The obligations of each Lender under this Section 29 shall supersede and replace the obligations of such Lender under any confidentiality letter in respect of this financing signed and delivered by such Lender to TransTechnology prior to the date hereof and shall be binding upon any assignee of, or purchaser of any participation in, any interest in any of the Loans or Reimbursement Obligations from any Lender. 30. TRANSITIONAL ARRANGEMENTS. 30.1. PRIOR CREDIT AGREEMENT SUPERSEDED. This Credit Agreement shall on the Closing Date amend and restate the Prior Credit Agreement in its entirety, except as provided in this Section 30. On the Closing Date, the rights and obligations of the parties evidenced by the Prior Credit Agreement shall be evidenced by the Credit Agreement and the other Loan Documents, as defined herein, and the Loans as defined in the Prior Credit Agreement, collectively, shall be converted to the Loans as defined herein. 30.2. INTEREST AND FEES UNDER PRIOR CREDIT AGREEMENT. All interest and fees and expenses, if any, owing or accruing under or in respect of the Prior Credit Agreement through the Closing Date shall be calculated as of the Closing Date (prorated in the case of any fractional periods), and shall be paid in accordance with the method, for the periods, and on the dates, specified in the Prior Credit Agreement, as if the Prior Credit Agreement were still in effect. Commencing on the Closing Date, the commitment fee shall be payable by the Borrowers to the Administrative Agent for the account of the Lenders in accordance with Section 2.2. 114 IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement as a sealed instrument as of the date first set forth above. TRANSTECHNOLOGY CORPORATION By: /s/ Joseph F. Spanier -------------------------------- Name: Joseph F. Spanier Title: Vice President and CFO TRANSTECHNOLOGY SEEGER-ORBIS GMBH By: /s/ Ulf Jemsby -------------------------------- Name: Ulf Jemsby Title: Geschaftsfuhrer TRANSTECHNOLOGY (GB) LIMITED By: /s/ Ulf Jemsby -------------------------------- Name: Ulf Jemsby Title: Director By: /s/ Gerald C. Harvey -------------------------------- Name: Gerald C. Harvey Title: Director BANKBOSTON, N.A., individually and as Administrative Agent, Issuing Bank and Sterling Fronting Bank By: /s/ Robert W. MacElhiney -------------------------------- Name: Robert W. MacElhiney Title: Vice President 115 BHF-BANK AKTIENGESELLSCHAFT, as DM Fronting Bank By: /s/ Michael Leitzbach -------------------------------- Name: Michael Leitzbach Title: Assistant Treasurer By: /s/ Matthias Landskron -------------------------------- Name: Matthias Landskron Title: Vice President ABN AMRO BANK N.V., individually and as Syndication Agent By: /s/ Lisa Megeaski -------------------------------- Name: Lisa Megeaski Title: Vice President By: /s/ Edward D. Puckhaber -------------------------------- Name: Edward D. Puckhaber Title: Assistant Vice President THE FIRST NATIONAL BANK OF CHICAGO, individually and as Documentation Agent By: /s/ Jeffrey Lubatkin -------------------------------- Name: Jeffrey Lubatkin Title: Vice President 116 THE BANK OF NEW YORK By: /s/ Steven P. Castellucci -------------------------------- Name: Steven P. Castellucci Title: Vice President KEY CORPORATE CAPITAL INC. By: /s/ Alex Strazzella -------------------------------- Name: Alex Strazzella Title: Vice President BANK OF NOVA SCOTIA By: /s/ Brian Allen -------------------------------- Name: Brian Allen Title: Senior Relationship Manager COMERICA BANK By: /s/ Kimberly S. Kersten -------------------------------- Name: Kimberly S. Kersten Title: Vice President DRESDNER BANK, AG, NEW YORK AND GRAND CAYMAN BRANCHES By: /s/ Christopher E. Sarisky -------------------------------- Name: Christopher E. Sarisky Title: Assistant Vice President By: /s/ John R. Morrison -------------------------------- Name: John R. Morrison Title: Vice President 117 SUMMIT BANK By: /s/ Richard J. Banning -------------------------------- Name: Richard J. Banning Title: Vice President 118 EXHIBIT A --------- FORM OF [AMENDED AND RESTATED] REVOLVING CREDIT NOTE $[_______] ________ __, ______ FOR VALUE RECEIVED, the undersigned TRANSTECHNOLOGY CORPORATION, a Delaware corporation ("TransTechnology"), hereby promises to pay (without setoff or counterclaim) to the order of [INSERT LENDER], a [insert entity] (the "Lender"), at the Administrative Agent's Head Office (as defined in the Credit Agreement referred to below): (a) prior to or on August __, 2004 the principal amount of [INSERT AMOUNT] DOLLARS ($_____) or, if less, the aggregate unpaid principal amount of Revolving Credit Loans advanced by the Lender to TransTechnology pursuant to the Second Amended and Restated Credit Agreement dated as of June 30, 1995 and amended and restated as of July 24, 1998 and as further amended and restated as of August __, 1999 (as amended, restated, modified, varied and in effect from time to time, the "Credit Agreement"), by and among TransTechnology, TransTechnology Seeger-Orbis GmbH, TransTechnology (GB) Limited (collectively, the "Borrowers"), the lending institutions party thereto (the "Lenders"), BankBoston, N.A. acting through its London Branch as Sterling Fronting Bank, BHF-BANK Aktiengesellschaft acting as DM Fronting Bank, BankBoston, N.A., as Issuing Bank, ABN AMRO Bank N.V., as Syndication Agent, The First National Bank of Chicago, as Documentation Agent, and BankBoston, N.A., as administrative agent for itself, the Lenders, the Sterling Fronting Bank, the DM Fronting Bank and the Issuing Bank (the "Administrative Agent"); (b) the principal outstanding hereunder from time to time at the times provided in the Credit Agreement; and (c) interest on the principal balance hereof from time to time outstanding from the Closing Date under the Credit Agreement through and including the maturity date hereof at the times and at the rate provided in the Credit Agreement. This Note evidences borrowings under and has been issued by TransTechnology in accordance with the terms of the Credit Agreement. The Lender and any holder hereof is entitled to the benefits of the Credit Agreement, the Security Documents and the other Loan Documents, and may enforce the agreements of TransTechnology contained therein, and any holder hereof may exercise the respective remedies provided for thereby or otherwise available in respect thereof, all in accordance with the respective terms thereof. All 119 -2- capitalized terms used in this Note and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement. [This Note constitutes the amendment and restatement in its entirety of the [amended and restated] revolving credit note of TransTechnology to the Lender dated as of July 24, 1998.] TransTechnology irrevocably authorizes the Lender to make or cause to be made, at or about the time of the Drawdown Date of any Revolving Credit Loan or at the time of receipt of any payment of principal of this Note, an appropriate notation on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, reflecting the making of such Revolving Credit Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Revolving Credit Loans set forth on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Lender with respect to any Revolving Credit Loans shall be prima facie evidence of the principal amount thereof owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such amount on any such grid, continuation or other record shall not limit or otherwise affect the obligation of TransTechnology hereunder or under the Credit Agreement to make payments of principal of and interest on this Note when due. TransTechnology has the right in certain circumstances and the obligation under certain other circumstances to prepay the whole or part of the principal of this Note on the terms and conditions specified in the Credit Agreement. If any one or more of the Events of Default shall occur, the entire unpaid principal amount of this Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement. No delay or omission on the part of the Lender or any holder hereof in exercising any right hereunder shall operate as a waiver of such right or of any other rights of the Lender or such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar or waiver of the same or any other right on any further occasion. TransTechnology and every endorser and guarantor of this Note or the obligation represented hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or person primarily or secondarily liable. 120 -3- THIS NOTE AND THE OBLIGATIONS OF TRANSTECHNOLOGY HEREUNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). TRANSTECHNOLOGY AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON TRANSTECHNOLOGY BY MAIL AT THE ADDRESS SPECIFIED IN ss.21 OF THE CREDIT AGREEMENT. TRANSTECHNOLOGY HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. TRANSTECHNOLOGY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS NOTE, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. This Note shall be deemed to take effect as a sealed instrument under the laws of the Commonwealth of Massachusetts. IN WITNESS WHEREOF, the undersigned has caused this Revolving Credit Note to be signed under seal in its corporate name by its duly authorized officer as of the day and year first above written. TRANSTECHNOLOGY CORPORATION By: _____________________________ Name: Title: 121
- ------------------ -------------------- ----------------------- -------------------- --------------------- Amount of Balance of Amount Principal Paid Principal Notation Date of Loan or Prepaid Unpaid Made By: - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- ---------------------
122 EXHIBIT B --------- FORM OF LOAN REQUEST [TRANSTECHNOLOGY CORPORATION] [TRANSTECHNOLOGY SEEGER-ORBIS GmbH] [TRANSTECHNOLOGY (GB) LIMITED] _______ __, ____ [BankBoston, N.A., as Administrative Agent 100 Federal Street Boston, Massachusetts 02110 Attention: ] or [BankBoston, N.A., as Sterling Fronting Bank BankBoston House 39 Victoria Street London SW1H 0EE Attention: ] or [BHF-BANK Aktiengesellschaft, as DM Fronting Bank insert branch address Attention:] Ladies and Gentlemen: Reference is hereby made to that certain Second Amended and Restated Credit Agreement, dated as of June 30, 1995 and amended and restated as of July 24, 1998 and as further amended and restated as of August __, 1999 (as the same may be amended, restated, modified, varied and in effect from time to time, the "Credit Agreement"), among TransTechnology Corporation ("TransTechnology"), TransTechnology Seeger-Orbis GmbH ("GmbH"), TransTechnology (GB) Limited ("Limited"), BankBoston, N.A. ("BankBoston") and the other lending institutions party thereto (the "Lenders"), BankBoston, acting through its London Branch as Sterling Fronting Bank, BHF-BANK Aktiengesellschaft, acting as DM Fronting Bank, BankBoston, as issuing bank (in such capacity, the "Issuing Bank"), ABN AMRO Bank N.V., as Syndication Agent, The First National Bank of Chicago, as Documentation Agent, and BankBoston, as administrative agent for itself, the Lenders, the Sterling Fronting Bank, the DM Fronting Bank and the Issuing Bank (in such capacity, the "Administrative Agent"). Capitalized terms which are used herein without definition 123 BankBoston, N.A., as Administrative Agent Page 2 and which are defined in the Credit Agreement shall have the same meanings herein as in the Credit Agreement. Pursuant to Section ___ of the Credit Agreement, we hereby request that a _______________ Loan [**IN THE CASE OF A REVOLVING CREDIT LOAN ** consisting of a Base Rate Loan in the principal amount of $__________, or a Eurocurrency Rate Loan in the principal amount of $__________] with an Interest Period of _________] [**IN THE CASE OF AN INTERNATIONAL FACILITY LOAN** in the principal amount of ____________ with an Interest Period of __________] be made on __________ __, ____. We understand that this request is irrevocable and binding on us and obligates us to accept the requested _____________ Loan on such date. We hereby certify (a) that the aggregate outstanding principal amount of the Revolving Credit Loans on today's date is $_________, (b) that the aggregate outstanding principal amount of the International Facility Loans on today's date is the DM Equivalent of $_________ and the Sterling Equivalent of $________, (c) that we will use the proceeds of the requested ________________ Loan in accordance with the provisions of the Credit Agreement, (d) that each of the representations and warranties contained in the Credit Agreement or in any document or instrument delivered pursuant to or in connection with the Credit Agreement was true as of the date as of which it was made and is true at and as of the date hereof (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties related expressly to an earlier date) and (e) that no Default or Event of Default has occurred and is continuing. Very truly yours, [TRANSTECHNOLOGY CORPORATION] By: --------------------------- Name: Title: or 124 BankBoston, N.A., as Administrative Agent Page 3 [TRANSTECHNOLOGY SEEGER-ORBIS GmbH] By: -------------------------------- Name: Title: or [TRANSTECHNOLOGY (GB) LIMITED] By: -------------------------------- Name: Title: 125 EXHIBIT C --------- FORM OF TERM NOTE $[___________] _____________ __, ____ FOR VALUE RECEIVED, the undersigned TRANSTECHNOLOGY CORPORATION, a Delaware corporation ("TransTechnology"), hereby promises to pay (without setoff or counterclaim) to the order of [INSERT LENDER], a [insert entity] (the "Lender"), at the Administrative Agent's Head Office (as defined in the Credit Agreement referred to below): (a) prior to or on August __, 2004" \@ "MMMM d, yyyy" \* charformat August __, 2004 the principal amount of [INSERT AMOUNT] DOLLARS ($____), evidencing the portion of the Term Loan made by the Lender to TransTechnology pursuant to the Second Amended and Restated Credit Agreement dated as of June 30, 1995 and amended and restated as of July 24, 1998 and as further amended and restated as of August __, 1999 (as amended, restated, modified, varied and in effect from time to time, the "Credit Agreement"), by and among TransTechnology, TransTechnology Seeger-Orbis GmbH, TransTechnology (GB) Limited (collectively, the "Borrowers"), the lending institutions party thereto (the "Lenders"), BankBoston, N.A. acting through its London Branch as Sterling Fronting Bank, BHF-BANK Aktiengesellschaft acting as DM Fronting Bank, BankBoston, N.A., as Issuing Bank, ABN AMRO Bank N.V., as Syndication Agent, The First National Bank of Chicago, as Documentation Agent, and BankBoston, N.A., as administrative agent for itself, the Lenders, the Sterling Fronting Bank, the DM Fronting Bank and the Issuing Bank (the "Administrative Agent"); (b) the principal outstanding hereunder from time to time at the times provided in the Credit Agreement; and (c) interest from the date hereof on the principal amount from time to time outstanding to and including the maturity hereof at the rates and terms and in all cases in accordance with the terms of the Credit Agreement. This Note evidences borrowings under and has been issued by TransTechnology in accordance with the terms of the Credit Agreement. The Lender and any holder hereof is entitled to the benefits of the Credit Agreement, the Security Documents and the other Loan Documents, and may enforce the agreements of TransTechnology contained therein, and any holder hereof may exercise the respective remedies provided for thereby or otherwise available in respect thereof, all in accordance with the respective terms thereof. All capitalized terms used in this Note and not otherwise defined herein shall have the same meanings herein as in the Credit Agreement. TransTechnology irrevocably authorizes the Lender to make or cause to be made, at the time of receipt of any payment of principal of this Note, an appropriate notation on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, reflecting the receipt of such payment. The outstanding 126 -2- amount of the Lender's portion of the Term Loan set forth on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Lender with respect to its portion of the Term Loan shall be prima facie evidence of the principal amount of the Lender's portion of the Term Loan owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such amount on any such grid, continuation or other record shall not limit or otherwise affect the obligation of TransTechnology hereunder or under the Credit Agreement to make payments of principal of and interest on this Note when due. TransTechnology has the right in certain circumstances and the obligation under certain other circumstances to prepay the whole or part of the principal of this Note on the terms and conditions specified in the Credit Agreement. If any one or more of the Events of Default shall occur, the entire unpaid principal amount of this Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Credit Agreement. No delay or omission on the part of the Lender or any holder hereof in exercising any right hereunder shall operate as a waiver of such right or of any other rights of the Lender or such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar or waiver of the same or any other right on any future occasion. TransTechnology and every endorser and guarantor of this Note or the obligation represented hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or person primarily or secondarily liable. THIS NOTE AND THE OBLIGATIONS OF TRANSTECHNOLOGY HEREUNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). TRANSTECHNOLOGY AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON TRANSTECHNOLOGY BY MAIL AT THE ADDRESS SPECIFIED IN ss.21 OF THE CREDIT AGREEMENT. TRANSTECHNOLOGY HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. TRANSTECHNOLOGY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS NOTE, ANY RIGHTS OR OBLIGATIONS 127 -3- HEREUNDER, OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. This Note shall be deemed to take effect as a sealed instrument under the laws of the Commonwealth of Massachusetts. 128 -4- IN WITNESS WHEREOF, the undersigned has caused this Note to be signed under seal in its corporate name by its duly authorized officer as of the day and year first above written. TRANSTECHNOLOGY CORPORATION By: ___________________________ Name: Title: 129 -5-
- ------------------ -------------------- ----------------------- -------------------- --------------------- Amount Amount of Balance of of Term Loan Principal Paid Principal Notation Date or Prepaid Unpaid Made By: - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- --------------------- - ------------------ -------------------- ----------------------- -------------------- ---------------------
130 EXHIBIT D --------- FORM OF ------- COMPLIANCE CERTIFICATE ---------------------- ___________ __, ___ To each of the Lenders party to the Credit Agreement referred to below c/o BankBoston, N.A., as Administrative Agent 100 Federal Street Boston, Massachusetts 02110 Ladies and Gentlemen: Reference is made to the Second Amended and Restated Credit Agreement, dated as of June 30, 1995 and amended and restated as of July 24, 1998 and as further amended and restated as of August __, 1999 (as amended, restated, modified, varied and in effect from time to time, the "Credit Agreement"), by and among TransTechnology Corporation ("TransTechnology"), TransTechnology Seeger-Orbis GmbH ("GmbH"), TransTechnology (GB) Limited ("Limited"), BankBoston, N.A., acting through its London Branch as Sterling Fronting Bank, BHF-BANK Aktiengesellschaft, acting as DM Fronting Bank, BankBoston, N.A., as issuing bank (in such capacity, the "Issuing Bank") ABN AMRO Bank N.V., as Syndication Agent, The First National Bank of Chicago, as Documentation Agent, and BankBoston, N.A., as administrative agent for itself, the Lenders, the Sterling Fronting Bank, the DM Fronting Bank and the Issuing Bank (in such capacity the "Administrative Agent"). Capitalized terms which are used herein without definition and which are defined in the Credit Agreement shall have the respective meanings assigned to such terms in the Credit Agreement. Pursuant to Section 9.4(c) of the Credit Agreement, the principal financial or accounting officer of TransTechnology hereby certifies to each of you as follows: (a) the information furnished in the calculations attached hereto was true and correct as of the last day of the fiscal [year] [quarter] next preceding the date of this certificate; (b) as of the date of this certificate, there exists no Default or Event of Default or condition which would, with either or both the giving of notice or the lapse of time, result in a Default or an Event of Default; and (c) the financial statements delivered herewith were prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods (except, in the case of quarterly statements, for year-end adjustments and provisions for footnotes and, in all cases, except as disclosed therein). IN WITNESS WHEREOF, the undersigned officer has executed this Compliance Certificate as of the date first written above. TRANSTECHNOLOGY CORPORATION By:_______________________________ Title: [Worksheet to be attached] 131 EXHIBIT E --------- FORM OF ------- ASSIGNMENT AND ACCEPTANCE ------------------------- Dated as of _____ __, ____ Reference is made to the Second Amended and Restated Credit Agreement dated as of June 30, 1995 and amended and restated as of July 24, 1998 and as further amended and restated as of August __, 1999 (as amended, restated, modified, varied and in effect from time to time, the "Credit Agreement"), by and among TransTechnology Corporation, a Delaware corporation ("TransTechnology"), TransTechnology Seeger-Orbis GmbH, a German limited liability company ("GmbH"), TransTechnology (GB) Limited, an English limited liability company ("Limited" and, together with TransTechnology and GmbH, the "Borrowers" and each individually, a "Borrower"), BankBoston, N.A. ("BankBoston") and the other lending institutions listed on Schedule 1 thereto (collectively, the "Lenders"), BankBoston, acting through its London Branch, as Sterling Fronting Bank, BHF-BANK Aktiengesellschaft, as DM Fronting Bank, BankBoston, as issuing bank (in such capacity, the "Issuing Bank"), ABN AMRO Bank N.V., as Syndication Agent, The First National Bank of Chicago, as Documentation Agent, and BankBoston, as administrative agent for itself, the Lenders, the Sterling Fronting Bank, the DM Fronting Bank and the Issuing Bank (the "Administrative Agent"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Credit Agreement. _______________ (the "Assignor") and _______________ (the "Assignee") hereby agree as follows: 1. ASSIGNMENT. Subject to the terms and conditions of this Assignment and Acceptance, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes without recourse to the Assignor, [(a)] a $_______ interest in and to the rights, benefits, indemnities and obligations of the Assignor under the Credit Agreement equal to _______% in respect of the Total Revolving Credit Commitment [and (b) a $_____________ interest in and to the rights, benefits, indemnities and obligations of the Assignor under the Credit Agreement equal to ____________% in respect of the Term Loan] immediately prior to the Effective Date (as hereinafter defined). 2. ASSIGNOR'S REPRESENTATIONS. The Assignor (i) represents and warrants that (A) it is legally authorized to enter into this Assignment and Acceptance, (B) as of the Effective Date (as hereinafter defined), immediately after giving effect to this Assignment and Acceptance, its Revolving Credit Commitment is $_______, its Commitment Percentage with respect to the 132 -2- Revolving Credit Loans is _______%, [the outstanding principal balance of its Term Loan Commitment is $________________, its Commitment Percentage with respect to the Term Loan is _____________%], the aggregate outstanding principal balance of its Loans equals $_______________, and the aggregate amount of its Letter of Credit Participations equals $_______, and (C) immediately after giving effect to all assignments which have not yet become effective, the Assignor's Commitment Percentage with respect to the Revolving Credit Loans [and Commitment Percentage with respect to the Term Loan] will be sufficient to give effect to this Assignment and Acceptance, (ii) makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant thereto or the attachment, perfection or priority of any security interest or mortgage, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder free and clear of any claim or encumbrance; (iii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of TransTechnology or any of its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by TransTechnology or any of its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of its obligations under the Credit Agreement or any of the other Loan Documents or any other instrument or document delivered or executed pursuant thereto; and (iv) attaches hereto the Revolving Credit Note [and Term Note] delivered to it under the Credit Agreement. The Assignor requests that TransTechnology exchange the Assignor's Revolving Credit Note [and/or Term Note] for new Revolving Credit Notes [and/or Term Notes] payable to the Assignor and Assignee as follows:
Notes payable to Amount of Revolving Credit Note: Amount of Term Note: the order of: Assignor $__________ $__________ Assignee $__________ $__________
3. ASSIGNEE'S REPRESENTATIONS. The Assignee (i) represents and warrants that (A) it is duly and legally authorized to enter into this Assignment and Acceptance, (B) the execution, delivery and performance of this Assignment and Acceptance do not conflict with any provision of law or of the charter or by-laws of the Assignee, or of any agreement binding on the Assignee, (C) all acts, conditions and things required to be done and performed and to have occurred 133 -3- prior to the execution, delivery and performance of this Assignment and Acceptance, and to render the same the legal, valid and binding obligation of the Assignee, enforceable against it in accordance with its terms, have been done and performed and have occurred in due and strict compliance with all applicable laws; (ii) confirms that it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to ss.ss.8.4 and 9.4 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (iii) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (iv) represents and warrants that it is an Eligible Assignee; (v) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (vi) agrees that it will perform in accordance with their terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender; and (vii) acknowledges that it has made arrangements with the Assignor satisfactory to the Assignee with respect to its pro rata share of Letter of Credit Fees in respect of outstanding Letters of Credit. 4. EFFECTIVE DATE. The effective date for this Assignment and Acceptance shall be _____ __, ____ (the "Effective Date"). Following the execution of this Assignment and Acceptance, each party hereto shall deliver its duly executed counterpart hereof to the Administrative Agent for acceptance by the Administrative Agent and recording in the Register by the Administrative Agent. Schedule 1 to the Credit Agreement shall thereupon be replaced as of the Effective Date by Schedule 1 annexed hereto. 5. RIGHTS UNDER CREDIT AGREEMENT. Upon such acceptance and recording, from and after the Effective Date, (i) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder, and (ii) the Assignor shall, with respect to that portion of its interest under the Credit Agreement assigned hereunder, relinquish its rights and be released from its obligations under the Credit Agreement; provided, however, that the Assignor shall retain its rights to be indemnified pursuant to ss.18 of the Credit Agreement with respect to any claims or actions arising prior to the Effective Date. 6. PAYMENTS. Upon such acceptance of this Assignment and Acceptance by the Administrative Agent and such recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the rights and interests assigned hereby (including payments of principal, interest, fees and other amounts) to the Assignee. The Assignor and the Assignee shall make any appropriate adjustments in payments for periods prior to the Effective Date 134 -4- by the Administrative Agent or with respect to the making of this assignment directly between themselves. 7. GOVERNING LAW. THIS ASSIGNMENT AND ACCEPTANCE IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). 8. COUNTERPARTS. This Assignment and Acceptance may be executed in any number of counterparts which shall together constitute but one and the same agreement. 135 -5- IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned has caused this Assignment and Acceptance to be executed on its behalf by its officer or officers thereunto duly authorized, as of the date first above written. ASSIGNOR: --------- By: ________________________________________ Name: Title: ASSIGNEE: --------- By: ________________________________________ Name: Title: CONSENTED TO: - ------------- BANKBOSTON, N.A., AS ADMINISTRATIVE AGENT By:___________________________ Name: Title: [SO LONG AS NO DEFAULT OR EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING: TRANSTECHNOLOGY CORPORATION By:___________________________ Name: Title:] 136 -6- SCHEDULE 1 EX-10.28 4 EXHIBIT 10.28 1 SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT dated as of August 31, 1999 among TRANSTECHNOLOGY CORPORATION THE LENDERS AND HOLDERS REFERRED TO HEREIN and BANKBOSTON, N.A. as Administrative Agent Arranged by: BANCBOSTON ROBERTSON STEPHENS INC. 2 TABLE OF CONTENTS 1. DEFINITIONS AND RULES OF INTERPRETATION.......................................................1 1.1. Definitions......................................................................1 1.2. Rules of Interpretation..........................................................17 2. SALE, PURCHASE AND CONVERSION OF BRIDGE NOTES.................................................18 2.1. Bridge Loan Commitment...........................................................18 2.2. The Bridge Notes.................................................................18 2.3. Scheduled Maturity of Bridge Notes...............................................19 2.4. Term Loan Commitment.............................................................19 2.5. The Term Notes...................................................................19 2.6. Scheduled Maturity of Term Notes.................................................20 2.7. Use of Proceeds..................................................................20 3. PURCHASE AND SALE OF WARRANTS.................................................................20 4. OTHER TERMS OF THE NOTES......................................................................20 4.1. Payment of Interest on Bridge and Term Notes.....................................20 4.2. Optional Redemption..............................................................22 4.3. Mandatory Prepayments from Asset Sales...........................................24 4.4. Mandatory Prepayment from Permanent Financing....................................24 4.5. Mandatory Prepayments from New Debt or Equity ...................................24 4.6. Mandatory Prepayment upon Change of Control......................................25 4.7. Terms of Redemption Offers.......................................................25 5. THE EXCHANGE NOTES............................................................................27 6. CERTAIN GENERAL PROVISIONS....................................................................29 6.1. Fees.............................................................................29 6.2. Payment Provisions...............................................................29 6.2.1. Currency of Account.....................................................29 6.2.2. Application of Interest Payments........................................29 6.2.3. Judgment Currency.......................................................29 6.2.4. Time of Payment.........................................................29 6.2.5. Payments by Administrative Agent........................................29 6.2.6. No Offset, etc..........................................................30 6.3. Computations.....................................................................30 6.4. Illegality; Inability to Determine LIBOR Rate....................................30 6.5. Additional Costs, etc............................................................31 6.6. Capital Adequacy.................................................................32 6.7. Certificate......................................................................33 6.8. Indemnity........................................................................33 6.9. Interest After Default...........................................................33 6.9.1. Overdue Amounts.........................................................33 6.9.2. Amounts Not Overdue.....................................................33 7. GUARANTY......................................................................................33 7.1. Subsidiary Guaranty..............................................................33 7.2. Subordination....................................................................33 8. REPRESENTATIONS AND WARRANTIES................................................................34 8.1. Corporate Authority..............................................................34
3 -ii- 8.1.1. Incorporation; Good Standing............................................34 8.1.2. Authorization...........................................................34 8.1.3. Enforceability..........................................................34 8.2. Governmental Approvals...........................................................35 8.3. Title to Properties; Leases......................................................35 8.4. Financial Statements and Projections.............................................35 8.4.1. Financial Statements....................................................35 8.4.2. Projections.............................................................35 8.5. No Material Changes, etc.........................................................35 8.6. Franchises, Patents, Copyrights, etc.............................................36 8.7. Litigation.......................................................................36 8.8. No Materially Adverse Contracts, etc.............................................36 8.9. Compliance with Other Instruments, Laws, etc.....................................37 8.10. Tax Status.......................................................................37 8.11. No Event of Default..............................................................37 8.12. Holding Company and Investment Company Acts......................................37 8.13. Absence of Financing Statements, etc.............................................37 8.14. Disclosure.......................................................................37 8.15. Certain Transactions.............................................................38 8.16. Employee Benefit Plans...........................................................38 8.16.1. In General..............................................................38 8.16.2. Terminability of Welfare Plans..........................................38 8.16.3. Guaranteed Pension Plans................................................38 8.16.4. Multiemployer Plans.....................................................39 8.16.5. Compliance with Employment Benefit Laws.................................39 8.17. Use of Proceeds..................................................................39 8.18. Environmental Compliance.........................................................40 8.19. Subsidiaries, etc................................................................41 8.20. Bank Accounts....................................................................41 8.21. Year 2000 Compliance.............................................................41 9. AFFIRMATIVE COVENANTS OF THE COMPANY..........................................................41 9.1. Punctual Payment.................................................................41 9.2. Maintenance of Offices...........................................................41 9.3. Records and Accounts.............................................................41 9.4. Financial Statements, Certificates and Information...............................42 9.5. Notices..........................................................................43 9.5.1. Defaults................................................................43 9.5.2. Environmental Events....................................................43 9.5.3. Notice of Litigation and Judgments......................................43 9.6. Corporate Existence; Maintenance of Properties...................................44 9.7. Insurance........................................................................44 9.8. Taxes............................................................................44 9.9. Inspection of Properties and Books, etc..........................................45 9.9.1. General.................................................................45 9.9.2. Environmental Assessments...............................................45 9.9.3. Communications with Accountants.........................................46 9.10. Compliance with Laws, Contracts, Licenses, and Permits...........................46 9.11. Employee Benefit Plans...........................................................46
4 -iii- 9.12. Use of Proceeds..................................................................47 9.13. Additional Guarantors............................................................47 9.14. Permanent Financing..............................................................47 9.15. Further Assurances...............................................................47 10. CERTAIN NEGATIVE COVENANTS OF THE COMPANY.....................................................48 10.1. Restrictions on Indebtedness and Preferred Stock.................................48 10.2. Restrictions on Liens............................................................49 10.3. Restrictions on Investments......................................................50 10.4. Restricted Payments..............................................................50 10.5. Merger, Consolidation and Disposition of Assets..................................53 10.5.1. Mergers and Acquisitions................................................53 10.5.2. Disposition of Assets...................................................53 10.6. Sale and Leaseback...............................................................54 10.7. Compliance with Environmental Laws...............................................54 10.8. Employee Benefit Plans...........................................................54 10.9. Maintenance of Business..........................................................55 11. SUBORDINATION.................................................................................55 11.1 Agreement to Subordinate.........................................................55 11.2. Liquidation; Dissolution; Bankruptcy.............................................55 11.3. Default on Designated Senior Debt................................................56 11.4. Acceleration.....................................................................56 11.5. When Distribution Must Be Paid Over..............................................56 11.6. Notice by Company................................................................57 11.7. Subrogation......................................................................57 11.8. Relative Rights..................................................................57 11.9. No Impairment by Company.........................................................58 11.10. Distribution or Notice to Representative.........................................58 11.11. Rights of Administrative Agent...................................................59 11.12. Authorization to Effect Subordination............................................59 11.13. Amendments.......................................................................59 12. CLOSING CONDITIONS............................................................................59 12.1. Loan Documents...................................................................60 12.2. Certified Copies of Charter Documents............................................60 12.3. Corporate Action.................................................................60 12.4. Incumbency Certificate...........................................................60 12.5. Senior Loan Documents; Availability..............................................60 12.6. Tinnerman Acquisition............................................................60 12.7. Solvency Certificate.............................................................61 12.8. Opinions of Counsel..............................................................61 12.9. Payment of Fees..................................................................61 12.10. Disbursement Instructions........................................................61 13. CONDITIONS TO CLOSING AND CONVERSION..........................................................61 13.1. Representations True; No Event of Default........................................61 13.2. No Legal Impediment..............................................................62 13.3. Governmental Regulation..........................................................62 13.4. Proceedings and Documents........................................................62 14. EVENTS OF DEFAULT; ACCELERATION; ETC..........................................................62 14.1. Events of Default and Acceleration...............................................62
5 -iv- 14.2. Remedies.........................................................................65 14.3. Distribution of Proceeds.........................................................65 15. SETOFF........................................................................................66 16. THE ADMINISTRATIVE AGENT......................................................................67 16.1. Authorization....................................................................67 16.2. Employees and Agents.............................................................68 16.3. No Liability.....................................................................68 16.4. No Representations...............................................................68 16.5. Payments.........................................................................68 16.5.1. Payments to Administrative Agent........................................68 16.5.2. Distribution by Administrative Agent....................................69 16.5.3. Delinquent Lenders......................................................69 16.6. Holders of Notes.................................................................69 16.7. Indemnity........................................................................70 16.8. Administrative Agent as Lender and Holder........................................70 16.9. Resignation of Administrative Agent..............................................70 17. EXPENSES......................................................................................70 18. INDEMNIFICATION...............................................................................71 19. SURVIVAL OF COVENANTS, ETC....................................................................72 20. ASSIGNMENT AND PARTICIPATION..................................................................72 20.1. Conditions to Assignment.........................................................72 20.2. Certain Representations and Warranties; Limitations; Covenants......................................................................73 20.3. Register.........................................................................74 20.4. New Notes........................................................................74 20.5. Participations...................................................................75 20.6. Disclosure.......................................................................75 20.7. Assignee or Participant Affiliated with the Company..............................75 20.8. Miscellaneous Assignment Provisions..............................................76 20.9. Assignment by the Company........................................................76 21. NOTICES, ETC..................................................................................76 22. GOVERNING LAW.................................................................................77 23. HEADINGS......................................................................................77 24. COUNTERPARTS .................................................................................78 25. ENTIRE AGREEMENT, ETC.........................................................................78 26. WAIVER OF JURY TRIAL..........................................................................78 27. CONSENTS, AMENDMENTS, WAIVERS, ETC............................................................78 27.1. Voting Procedures................................................................78 27.2. Company's Consent Not Required for Certain Amendments............................79 27.3. Course of Dealing................................................................79 28. SEVERABILITY..................................................................................79 29. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION.................................................80 29.1. Sharing of Information with Section 20 Subsidiary................................80 29.2. Confidentiality..................................................................80 29.3. Prior Notification...............................................................81 29.4. Other............................................................................81
6 List of Schedules and Exhibits ------------------------------ Exhibits - -------- Exhibit A - Form of Bridge Note Exhibit B - Form of Term Note Exhibit C - Form of Exchange Note Exhibit D - Indenture Exhibit E - Registration Rights Agreement Exhibit F - Compliance Certificate Exhibit G - Subsidiary Guaranty Exhibit H - Assignment and Acceptance Schedules - --------- Schedule 1 The Lenders Schedule 8.3 Title to Properties Schedule 8.7 Litigation Schedule 8.10 Tax Compliance Schedule 8.16.5 Compliance with Employee Benefit Laws Schedule 8.18 Environmental Compliance Schedule 8.19 Subsidiaries Schedule 8.20 Bank Accounts Schedule 10.1 Existing Indebtedness Schedule 10.2 Existing Liens Schedule 10.3 Existing Investments 7 SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT ------------------------------------------- This SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT is made as of August 31, 1999, by and among TRANSTECHNOLOGY CORPORATION, a Delaware corporation having its principal place of business at 150 Allen Road, Liberty Corner, New Jersey 07938, USA (the "COMPANY" or "TRANSTECHNOLOGY"), BANKBOSTON, N.A., a United States national banking association ("BANKBOSTON") and the other lending institutions listed on SCHEDULE 1 (BankBoston and such other institutions, collectively, the "Lenders"), and BANKBOSTON, N.A., as Administrative Agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT"). WHEREAS, pursuant to an Asset Purchase Agreement dated as of July 9, 1999, by and between the Company and Eaton Corporation (the "TINNERMAN ACQUISITION AGREEMENT"), the Company has agreed to acquire the assets of Eaton Corporation's Engineered Fasteners Division (referred to herein as "TINNERMAN"); and WHEREAS, the Company has requested that the Lenders extend a credit facility on the terms and conditions set forth herein in order to provide financing for the completion of the transactions contemplated by the Tinnerman Acquisition Agreement; NOW, THEREFORE, in consideration for the foregoing premises and the promises and covenants set forth herein, the parties hereto hereby agree as follows. 1. DEFINITIONS AND RULES OF INTERPRETATION. ---------------------------------------- 1.1. DEFINITIONS. The following terms shall have the meanings set forth in this Section 1 or elsewhere in the provisions of this Agreement referred to below: ACQUIRED DEBT. With respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. ACQUISITION CLOSING DATE. The date of completion of the Tinnerman Acquisition. AFFILIATE. With respect to any Person, any other Person that would be considered to be an affiliate of such Person under Rule 144(a) of the Rules and Regulations of the Securities and Exchange Commission, as in effect on the date hereof, if such Person were issuing securities. ADMINISTRATIVE AGENT'S HEAD OFFICE. The Administrative Agent's head office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Administrative Agent may designate from time to time. 8 -2- ADMINISTRATIVE AGENT'S SPECIAL COUNSEL. Bingham Dana LLP, or such other counsel as may be approved by the Administrative Agent. AGREEMENT. This Senior Subordinated Note Purchase Agreement, including the Schedules and Exhibits hereto. APPLICABLE MARGIN. For each period set forth in the chart below, the Applicable Margin shall be the applicable percentage set forth in the chart below opposite such period: ------------------------------------ ---------------------------------- PERIOD APPLICABLE MARGIN ------------------------------------ ---------------------------------- Closing Date - 8.00% November 30, 1999 ------------------------------------ ---------------------------------- December 1, 1999 - 8.50% February 29, 2000 ------------------------------------ ---------------------------------- March 1, 2000 - 9.50% May 31, 2000 ------------------------------------ ---------------------------------- June 1, 2000 10.00% August 31, 2000 ------------------------------------ ---------------------------------- PROVIDED that, in the event that at any time during any of the periods set forth in the table above, the Company shall have defaulted on any of its obligations under Section 9.14 with respect to the Permanent Financing, such period shall be deemed to have terminated and the Applicable Margin for the next succeeding period shall immediately become effective. ARRANGER. BancBoston Robertson Stephens Inc. ASSIGNMENT AND ACCEPTANCE. See Sections 20.1.1 and 20.1.2. BALANCE SHEET DATE. March 31, 1999. BANKBOSTON. See the preamble to this Agreement. BASE RATE. The higher of (i) the annual rate of interest announced from time to time by the Administrative Agent at its Head Office in Boston, Massachusetts, as its "base rate" for loans denominated in Dollars, and (ii) one-half of one percent (1/2%) above the Federal Funds Effective Rate. For the purposes of this definition, "FEDERAL FUNDS EFFECTIVE RATE"shall mean for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three funds brokers of recognized standing selected by the Administrative Agent. 9 -3- COMPANY. See preamble. BRIDGE LOAN. See Section 2.1. BRIDGE LOAN COMMITMENT. See Section 2.1. BRIDGE NOTES. The promissory notes of the Company in the form of EXHIBIT A attached hereto issued to each of the Lenders pursuant to Section 2.1 hereof, together with any Secondary Bridge Notes issued pursuant to Section 4.l(c) hereof, and any Bridge Notes issued upon transfer or exchange thereof. BUSINESS. The businesses engaged in by the Company and its Subsidiaries at the Closing Date, and businesses reasonably related or incidental thereto. BUSINESS DAY. Any day (other than a Saturday or Sunday) on which commercial banks are open for business in Boston, Massachusetts. CAPITAL ASSETS. Fixed assets, both tangible (such as land, buildings, fixtures, machinery and equipment) and intangible (such as patents, copyrights, trademarks, franchises and good will); PROVIDED that Capital Assets shall not include any item customarily charged directly to expense or depreciated over a useful life of twelve (12) months or less in accordance with generally accepted accounting principles. CAPITAL EXPENDITURES. Amounts paid or indebtedness incurred by the Company or any of its Subsidiaries in connection with the purchase or lease by the Company or any of its Subsidiaries of Capital Assets that would be required to be capitalized and shown on the balance sheet of such Person in accordance with generally accepted accounting principles. CAPITALIZED LEASES. Leases (unless otherwise stated, under which the Company or any of its Subsidiaries is the lessee or obligor), the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with generally accepted accounting principles. CERCLA. See Section 8.18. CHANGE OF CONTROL. The occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), (ii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule l3d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 35% of the Voting Stock of the 10 -4- Company (measured by voting power rather than number of shares), or (iii) during any period of twelve consecutive calendar months, individuals who were directors of the Company on the first day of such period shall cease to constitute a majority of the board of directors of the Company. CLOSING DATE. The first date on which the conditions set forth in Section 12 and Section 13 have been satisfied and the Bridge Loan is to be made hereunder. CODE. The Internal Revenue Code of 1986. COMMITMENT. As to any Lender, such Lender's Bridge Loan Commitment or Term Loan Commitment, as the case may be, and collectively, the Bridge Loan Commitments and the Term Loan Commitments. COMMITMENT PERCENTAGE. With respect to each Lender, the percentage set forth on SCHEDULE 1 hereto as such Lender's percentage of the aggregate Bridge Loan Commitments and Term Loan Commitments of all of the Lenders. COMMISSION. The Securities and Exchange Commission. CONSOLIDATED or consolidated. With reference to any term defined herein, shall mean that term as applied to the accounts of the Company and its Subsidiaries, consolidated in accordance with generally accepted accounting principles. CONSOLIDATED EBITDA. With respect to any Reference Period, Earnings Before Interest and Taxes for such Reference Period, before provision for any depreciation and amortization, as determined in accordance with generally accepted accounting principles. CONSOLIDATED NET INCOME (OR DEFICIT). The consolidated net income (or deficit) of the Company and its Restricted Subsidiaries, after deduction of all expenses, taxes and other proper charges, determined in accordance with generally accepted accounting principles. CONSOLIDATED TOTAL INTEREST EXPENSE. For any Reference Period, the aggregate amount of interest required to be paid or accrued by the Company and its Subsidiaries during such Reference Period on all Indebtedness of the Company and its Subsidiaries outstanding during all or any part of such Reference Period, whether such interest was or is required to be reflected as an item of expense or capitalized, including payments consisting of interest in respect of the Senior Debt or Capitalized Leases and including commitment fees, agency fees, facility fees and similar fees or expenses in connection with the borrowing of money. CONVERSION DATE. The Initial Maturity Date. CONVERSION MARGIN. With respect to the first Interest Period commencing on or after the Conversion Date, zero, and for each Interest Period thereafter, an 11 -5- increase of 0.50% over the Conversion Margin in effect in the preceding Interest Period. CONVERSION RATE. With respect to any Interest Period commencing on or after the Conversion Date, the rate per annum equal to the highest of the following as determined as of the commencement of such Interest Period: (a) the Final Bridge Loan Rate PLUS 0.50%; (b) the LIBOR Rate for such Interest Period PLUS 8.00%; or (c) the Treasury Rate PLUS 8.00%. DEFAULT. See Section 14.1. DESIGNATED SENIOR DEBT. Any Indebtedness outstanding under the Senior Credit Agreement, and any other Senior Debt permitted hereunder, the principal amount of which is $25,000,000 or more and that has been designated by the Company as "Designated Senior Debt" by written notice to the Administrative Agent and each of the Lenders; PROVIDED, HOWEVER, that so long as the Senior Credit Agreement remains in effect, the Majority Lenders (as defined therein) shall have consented, in writing, to such designation of additional Indebtedness as Designated Senior Debt. DISQUALIFIED STOCK. Any equity security that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, at the option of the holder thereof), requires the issuer thereof to pay current Distributions thereon in cash, or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or at any time prior to the date that is 91 days after the date on which the Term Notes mature; PROVIDED, HOWEVER, that any equity security that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such securities upon the occurrence of a Change of Control or a sale of all or substantially all of the assets of the TransTechnology Group shall not constitute Disqualified Stock if the terms of such securities provide that the Company may not repurchase any such securities pursuant to such provisions unless such repurchase complies with Section 4 hereof. DISTRIBUTION. The declaration or payment of any dividend on or in respect of any shares of any class of capital stock of the Company, other than dividends payable solely in shares of common stock of the Company; the purchase, redemption, or other retirement of any shares of any class of capital stock of the Company, directly or indirectly through a Subsidiary of the Company or otherwise; the return of capital by the Company to its shareholders as such; or any other distribution on or in respect of any shares of any class of capital stock of the Company. DOLLARS or $. Dollars in lawful currency of the United States of America. 12 -6- DOMESTIC SUBSIDIARIES. Those Subsidiaries of the Company which are incorporated in or organized under the laws of any state, district or territory of the United States, Canada or the Commonwealth of Puerto Rico. EARNINGS BEFORE INTEREST AND TAXES. The consolidated earnings (or loss) from the operations of the Company and its Subsidiaries for any period, after all expenses and other proper charges but before payment or provision for any income taxes or interest expense for such period, determined in accordance with generally accepted accounting principles, after eliminating therefrom all non-recurring items of income (or loss) resulting from the discontinuation of operations. EMPLOYEE BENEFIT PLAN. Any employee benefit plan within the meaning of Section 3(3) of ERISA maintained or contributed to by the Company or any ERISA Affiliate, other than a Multiemployer Plan. ENVIRONMENTAL LAWS. See Section 8.18(a). EQUITY INTERESTS. Any shares of capital stock, partnership interests or membership interests in any Person, or any other equity interest that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, and all warrants, options or other rights to acquire any such shares or interests (but excluding any debt security that is convertible into, or exchangeable for, any such shares or interests). ERISA. The Employee Retirement Income Security Act of 1974. ERISA AFFILIATE. Any Person which is treated as a single employer with the Company under Section 414 of the Code. ERISA REPORTABLE EVENT. A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder as to which the requirement of notice has not been waived. ESCROW AGENT. State Street Bank and Trust Company, in its capacity as the Escrow Agent under the Exchange Escrow Agreement and the Warrant Escrow Agreement. EUROCURRENCY BUSINESS DAY. Any day (other than a Saturday or Sunday) on which commercial banks are open for international business (including dealings in Dollar deposits) in London, England. EUROCURRENCY RESERVE RATE. For any day, the maximum rate (expressed as a decimal) at which any lender subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D), if such liabilities were outstanding. The Eurocurrency Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Rate. 13 -7- EVENT OF DEFAULT. See Section 14.1. EXCHANGE ACT. The Securities Exchange Act of 1934. EXCHANGE DATE. See Section 5(a). EXCHANGE ESCROW AGREEMENT. The Escrow Agreement among the Company, the Administrative Agent and the Escrow Agent, pursuant to which the Indenture and the Exchange Notes shall be held in escrow. EXCHANGE NOTES. The promissory notes of the Company in the form of EXHIBIT C attached hereto issued in favor of each of the Lenders pursuant to Section 5(a) hereof, together with any Secondary Exchange Notes issued in connection therewith, and any Exchange Notes issued upon transfer or exchange thereof pursuant to the Indenture. FEE LETTER. The letter agreement or agreements between BankBoston, the Arranger and the Company dated or to be dated on or prior to the Closing Date with respect to the amount of certain fees payable or to be paid by the Company under or in respect of this Agreement. FINAL BRIDGE LOAN RATE. The interest rate applicable to the Bridge Loan on the Conversion Date. FIXED CHARGE COVERAGE RATIO. As of any date of testing, the ratio of (a) Consolidated EBITDA for the Reference Period most recently ended prior thereto from which internal financial statements are available, to (b) the aggregate amount of (i) Consolidated Total Interest Expense for such Reference Period, PLUS (ii) the aggregate amount of payments of principal of any Funded Indebtedness of the Company and its Subsidiaries actually made or required to be made during such Reference Period (including, for the avoidance of doubt, any such payments made or required to be made hereunder or with respect to the Term Loan under and as defined in the Senior Credit Agreement), but excluding any such amounts required to be repaid pursuant to Section 4 of the Senior Credit Agreement or Section 4 hereof. FIXED RATE. See Section 4.1(b). FIXED RATE NOTE. Any Note bearing interest at the Fixed Rate. FOREIGN SUBSIDIARIES. Those Subsidiaries of the Company other than the Domestic Subsidiaries. FUNDED INDEBTEDNESS. At any time of determination, the aggregate principal amount of all funded Indebtedness for borrowed money (including, for the avoidance of doubt, all Subordinated Debt of the Company and any of its Subsidiaries), PLUS all obligations, contingent and otherwise, to reimburse the issuer in respect of any letters of credit, performance bonds, bankers' acceptances, guarantees or other similar instruments, PLUS Capitalized Leases, of the Company and its Subsidiaries. 14 -8- GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Principles that are (a) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (b) consistently applied with past financial statements of the Company adopting the same principles, PROVIDED that a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied. GUARANTEED PENSION PLAN. Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Company or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. GUARANTOR. Each Subsidiary of the Company which is a party to the Subsidiary Guaranty. HAZARDOUS SUBSTANCES. See Section 8.18(b). HEDGING OBLIGATIONS. With respect to any Person, the obligations of such Person under interest rate swap agreements, interest rate cap agreements, interest rate cap obligations and any other agreements or arrangements designed or intended to protect such Person against fluctuations in interest rate or currency changes. HOLDER. Any Person in whose name a Note is registered on the Note Register at any given time. INDEBTEDNESS. All obligations, contingent and otherwise, that in accordance with generally accepted accounting principles should be classified upon the obligor's balance sheet as liabilities, or to which reference should be made by footnotes thereto, including in any event and whether or not so classified: (i) all debt and similar monetary obligations, whether direct or indirect; (ii) all liabilities secured by any Lien existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have been assumed; and (iii) all guarantees, endorsements and other contingent obligations whether direct or indirect in respect of indebtedness of others, including any obligation to supply funds to or in any manner to invest in, directly or indirectly, the debtor, to purchase indebtedness, or to assure the owner of indebtedness against loss, through an agreement to purchase goods, supplies, or services for the purpose of enabling the debtor to make payment of the indebtedness held by such owner or otherwise, and the obligations to reimburse the issuer in respect of any letters of credit, performance bonds, bankers' acceptances, guarantees or other similar instruments; but EXCLUDING all liabilities in respect of Operating Leases. INDENTURE. An Indenture among the Company and the Trustee substantially in the form attached hereto as EXHIBIT D, with such changes therein (a) as the 15 -9- Administrative Agent and TransTechnology shall approve, or (b) as may be required by applicable law or as may be reasonably deemed necessary by the Administrative Agent, or (c) at such time as any Exchange Notes issued thereunder are sold in an public offering, to reflect such public offering, as such Indenture may be amended and in effect from time to time. INELIGIBLE SECURITIES. Securities which may not be underwritten or dealt in by member banks of the Federal Reserve System under Section 16 of the Banking Act of 1993 (12 U.S.C. Section 24, Seventh). INITIAL MATURITY DATE. The first anniversary of the Closing Date. INTEREST PAYMENT DATE. The date that is 3 months from the Closing Date and each date 3 months thereafter. INTEREST PERIOD. Prior to the Conversion Date, a period of one month commencing with the Closing Date, and after the Conversion Date, a period of three months commencing with the Conversion Date, subject in each case to the following: (a) if any Interest Period would otherwise end on a day that is not a Eurocurrency Business Day, that Interest Period shall be extended to the next succeeding Eurocurrency Business Day, unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding Eurocurrency Business Day; (b) any Interest Period shall end on the numerically corresponding day in the calendar month at the end of such Interest Period, PROVIDED that if any Interest Period begins on the last Eurocurrency Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Eurocurrency Business Day of a calendar month; and (c) any Interest Period that would otherwise extend beyond the Conversion Date or the Term Loan Maturity Date, as the case may be, shall end on the Conversion Date or the Term Loan Maturity Date, as applicable. INVESTMENTS. All expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of stock or Indebtedness of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other commitments as described under Indebtedness), or obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (i) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (ii) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (iii) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, 16 -10- repayment, liquidating dividend or liquidating distribution); (iv) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (ii) may be deducted when paid; and (v) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. LENDERS. The Lenders referred to on SCHEDULE 1 hereto, collectively, and each individually being referred to as a "Lender". LIBOR RATE. For any Interest Period, the rate of interest equal to (i) the rate determined by the Administrative Agent at which Dollar deposits for such Interest Period are offered based on information presented on Telerate Page 3750 as of 11:00 a.m. London time on the second Eurocurrency Business Day prior to the first day of such Interest Period, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Loan or portion thereof to which such Interest Period applies, divided by (ii) a number equal to 1.00 minus the Eurocurrency Reserve Rate, if applicable. If for any reason the rate referred to in clause (i) is unavailable, then there shall be substituted therefor the rate per annum (rounded upwards to the nearest 1/16 of one percent) for the Reference Bank at which the Reference Bank's London office is offered Dollar deposits two Eurocurrency Business Days prior to the beginning of the applicable Interest Period in the London interbank eurodollar market, for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of the Loan or portion thereof to which such Interest Period applies. LIEN. With respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). LOAN DOCUMENTS. This Agreement, the Notes, the Subsidiary Guarantee, the Fee Letter, the Indenture, the Warrant Agreement, the Warrants, the Warrant Holders' Agreement, the Warrant Escrow Agreement, the Registration Rights Agreement, the Exchange Escrow Agreement, together with any other documents from time to time entered into and identified therein as a "Loan Document" hereunder. LOANS. The Bridge Loan and the Term Loan. MAJORITY HOLDERS. As of any time, so long as there is only one Holder, such Holder, and so long as there are at least two Holders, two or more Holders holding at least fifty-one percent (51%) of the outstanding principal amount of the Notes, and if no such amounts are then outstanding, two or more Holders who held at least 17 -11- fifty-one percent (51%) of the outstanding principal amount of the Notes immediately prior to no such amounts being outstanding. MAXIMUM RATE. See Section 4.1(d). MULTIEMPLOYER PLAN. Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by the Company or any ERISA Affiliate. NET CASH PROCEEDS. If from a sale of assets or of equity, the cash proceeds received from such sale, net of all costs of sale, underwriting or brokerage costs, and taxes paid or payable as a result thereof by the Company and its Subsidiaries, and if from the incurring of Indebtedness, the cash proceeds received from such incurring of Indebtedness, net of all costs thereof incurred and fees and all expenses payable in connection therewith, and taxes paid or payable as a result thereof, by the Company and its Subsidiaries. NON-RECOURSE DEBT. Indebtedness: (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise) or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than the Notes) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. NOTES. The Bridge Notes, the Term Notes and the Exchange Notes. NOTIFIED VARIABLE RATE Holder. Any Holder who is designated by written notice given to it and to the Company in connection with, and no later than one (1) Business Day prior to, the assignment to such Holder of any Term Notes or Exchange Notes by a Variable Rate Holder that such Holder is a Variable Rate Holder. OBLIGATIONS. All indebtedness, obligations and liabilities of any of the Company and its Subsidiaries to any of the Lenders and the Administrative Agent, individually or collectively, existing on the date of this Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Agreement or any of the other Loan Documents or in respect of any of the Loans made or any of the Notes or other instruments at any time evidencing any thereof. 18 -12- OPERATING LEASES. Leases (unless otherwise stated, under which the Company or any of its Subsidiaries is the lessee or obligor) of any property, whether real, personal or mixed, which are not Capitalized Leases. OUTSTANDING. With respect to any Loan or Note, the aggregate unpaid principal thereof as of any date of determination. PAYMENT BLOCKAGE NOTICE. See Section 11.3. PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities. PERMANENT FINANCING. The refinancing of the Notes through the Company's issuance of high-yield bonds or other securities, to the extent permitted hereunder and under the Senior Credit Agreement. PERMANENT FINANCING OFFERING DOCUMENTS. See Section 9.14(b). PERMITTED INVESTMENTS. See Section 10.3. PERMITTED JUNIOR SECURITIES. Equity Interests in the Company or any Guarantor or debt securities that are unsecured and subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to at least the same extent as, or to a greater extent than, the Notes are subordinated to Senior Debt pursuant hereto (without limiting the forgoing, such Permitted Junior Securities shall have no required principal payments or equity redemption requirements until at least 91 days after the final maturity of all Senior Debt). PERMITTED LIENS. Liens permitted by Section 10.2 of the Senior Credit Agreement as in effect on the date hereof. PERSON. Any individual, corporation, partnership, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. PROJECTIONS. See Section 8.4.3. REAL ESTATE. All real property at any time owned or leased (as lessee or sublessee) by the Company or any of its Subsidiaries. RECORD. The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Lender with respect to any Loan referred to in such Note. REFERENCE BANK. BankBoston. REFERENCE PERIOD. A period of four (4) consecutive fiscal quarters. 19 -13- REGISTRATION RIGHTS AGREEMENT. The Registration Rights Agreement in substantially the form of EXHIBIT E attached hereto, by and among the Company, the Guarantors referred to therein, and the Administrative Agent for and on behalf of the Holders, as such agreement may be amended, modified and supplemented and in effect from time to time. RELATED FUND. With respect to any Lender that is an investment fund that invests in commercial loans, any other such fund that is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. RESTRICTED INVESTMENTS. See Section 10.3. RESTRICTED PAYMENT. See Section 10.4. RESTRICTED SUBSIDIARY. With respect to any Person, each Subsidiary of such Person that is not an Unrestricted Subsidiary. SECONDARY BRIDGE NOTE. See Section 4.1(c). SECONDARY TERM NOTE. See Section 4.1(c). SECONDARY NOTES. Collectively, the Secondary Bridge Notes and the Secondary Term Notes, and each individually, a "SECONDARY NOTE". SECTION 20 SUBSIDIARY. A Subsidiary of the bank holding company controlling any Lender, which Subsidiary has been granted authority by the Federal Reserve Board to underwrite and deal in certain Ineligible Securities. SENIOR CREDIT AGREEMENT. The Second Amended and Restated Credit Agreement, dated of even date herewith, by and between the Company, TransTechnology Seeger Orbis GmbH, TransTechnology (GB) Limited, BankBoston and the other Senior Lenders referred to therein, BHF-BANK Aktiengesellschaft, as DM Fronting Bank, BankBoston, acting through its London branch, as Sterling Fronting Bank, BankBoston as Issuing Bank, ABN AMRO Bank N.V., as Syndication Agent, The First National Bank of Chicago, as Documentation Agent, and BankBoston as Administrative Agent, as amended, modified, restated, re-funded, replaced or refinanced from time to time. SENIOR DEBT. (a) All principal, premium, interest, fees, expenses and other obligations or liabilities of any kind together with available undrawn amounts under letters of credit issued or guaranteed under the Senior Credit Agreement (including, without limitation, post-petition interest whether or not allowed as a claim in any bankruptcy, reorganization, insolvency, receivership or similar proceeding) with respect to Indebtedness outstanding under the Senior Credit Agreement and all Hedging Obligations with respect thereto, (b) any other Indebtedness permitted to be incurred by the Company under the terms of this Agreement, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes, and (c) all 20 -14- obligations with respect to the foregoing. Senior Debt, as used herein, will not include (i) any liability for federal, state, local or other taxes owed or owing by the Company or any of its Subsidiaries, (ii) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates, excluding any Indebtedness owed to any Affiliate that was incurred prior to such Person becoming an Affiliate in connection with the acquisition by the Company or any Subsidiary of a business or Person from such Affiliate, (iii) any trade payables, or (iv) any Indebtedness that is incurred in violation of this Agreement. SENIOR LENDERS. The "Lenders" under and as defined in the Senior Credit Agreement, together with any other holders from time to time of any Senior Debt. SENIOR LENDER REPRESENTATIVE. The "Administrative Agent" under and as defined in the Senior Credit Agreement, together with any other representative or agent from time to time of any Senior Lender. SENIOR LOAN DOCUMENTS. The "Loan Documents" under and as defined in the Senior Credit Agreement. SUBORDINATED DEBT. Unsecured Indebtedness of the Company or any of its Subsidiaries in an amount, containing other terms and conditions, and expressly subordinated and made junior to the payment and performance in full of the Senior Debt pursuant to a written instrument containing subordination provisions in each respect satisfactory to and approved by the Majority Holders and the Administrative Agent in writing. SUBSIDIARY. Any corporation, association, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Stock. SUBSIDIARY GUARANTY. The Guaranty dated of even date herewith and in substantially the form of EXHIBIT G hereto, entered into by the Company's Domestic Subsidiaries in favor of the Administrative Agent and the Lenders. TERM LOAN. See Section 2.4. TERM LOAN COMMITMENT. See Section 2.4. TERM LOAN MATURITY DATE. The tenth anniversary of the Closing Date. TERM NOTES. The promissory notes of the Company in the form of EXHIBIT B attached hereto issued to each of the Lenders pursuant to Section 2.4 hereof, together with any Secondary Term Notes issued pursuant to Section 4.1(c) hereof, and any Term Notes issued upon transfer or exchange thereof. TERM. NOTE RECORD. A Record with respect to a Term Note. TINNERMAN. See preamble. 21 -15- TINNERMAN ACQUISITION. The acquisition by the Company or certain Subsidiaries of the Company of substantially all of Eaton Corporation's Engineered Fastener Division pursuant to in accordance with the Tinnerman Acquisition Agreement dated as of July 9, 1999 by and between the Company and Eaton Corporation. TINNERMAN ACQUISITION AGREEMENT. See preamble. TINNERMAN ACQUISITION DOCUMENTS. The Tinnerman Acquisition Agreement and each of the other documents entered into by the Company or any of its Subsidiaries pursuant thereto. TRANSTECHNOLOGY GROUP. The Company and all of its Subsidiaries on a consolidated basis. TREASURY RATE. At any time, the highest rate per annum payable at such time on any of the direct obligations of the United States of America having a maturity of ten (10) years or less. TRUSTEE. State Street Bank and Trust Company, or any other bank or trust company which the Company may nominate prior to the Conversion Date to act as Trustee under the Indenture, so long as at the time of such nomination and for so long as such Trustee shall serve in such capacity, such bank or trust company is (a) organized and does business in and under the laws of the United States of America or any of the states thereof, (b) is authorized under applicable federal and/or state laws to exercise corporate trust powers, (c) is subject to supervision, examination and regulation by federal and/or state authority, (d) is in good standing under applicable federal and/or state authorities, and (e) has a combined capital and surplus of at least $50,000,000, and is otherwise reasonably acceptable to the Majority Holders. UNRESTRICTED SUBSIDIARY. Any Subsidiary that is designated by the Board of Directors of the Company as an Unrestricted Subsidiary, but only to the extent that such Subsidiary: (i) has no Indebtedness other than Non-Recourse Debt; (ii) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (iii) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (A) to subscribe for additional Equity Interests or (B) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (iv) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (v) has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such 22 -16- designation by the Board of Directors of the Company shall be evidenced by the Company's delivering to the Administrative Agent a certified copy of the board resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by Section 10.4 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Agreement and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 10.1 hereof, the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 10.1 hereof calculated on a pro forma basis as if such designation had occurred at the beginning of the applicable Reference Period, and (ii) no Default or Event of Default would be in existence following such designation. VARIABLE RATE HOLDER. The original Lenders, any Affiliate or Related Fund of an original Lender, and any Notified Variable Rate Holder. VARIABLE RATE NOTE. Any Note which is, at the relevant time of determination, held by a Variable Rate Holder. VOTING STOCK. Stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, trust or other business entity involved, whether or not the right so to vote exists by reason of the happening of a contingency. WARRANTS. The Common Stock Purchase Warrants of the Company issued from time to time under and in accordance with the Warrant Agreement. WARRANT AGENT. State Street Bank and Trust Company, in its capacity as Warrant Agent under the Warrant Agreement. WARRANT AGREEMENT. The Warrant Agreement between the Company and the Warrant Agent, pursuant to which the Company agrees to issue to the Lenders on the date hereof the Warrants, as such agreement may be amended, modified and supplemented and in effect from time to time. WARRANT ESCROW AGREEMENT. The Warrant Escrow Agreement among the Company, the Administrative Agent for and on behalf of the Lenders, and the Escrow Agent, pursuant to which the Company agrees to deliver the Warrants to the Escrow Agent to be retained until the Initial Maturity Date, as such agreement may be amended, modified and supplemented and in effect from time to time. 23 -17- WARRANT HOLDERS' AGREEMENT. The Warrant Holders' Agreement between the Company, the Lenders and the Administrative Agent for and on behalf of the Lenders. YEAR 2000 PROBLEM. See Section 8.20. 1.2. RULES OF INTERPRETATION. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Agreement. (b) The singular includes the plural and the plural includes the singular. (c) A reference to any law includes any amendment or modification to such law. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by generally accepted accounting principles applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) All terms not specifically defined herein or by generally accepted accounting principles, which terms are defined in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts, have the meanings assigned to them therein, with the term "instrument" being that defined under Article 9 of the Uniform Commercial Code. (h) Reference to a particular "Section " refers to that section of this Agreement unless otherwise indicated. (i) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Agreement as a whole and not to any particular section or subdivision of this Agreement. 2. SALE, PURCHASE AND CONVERSION OF BRIDGE NOTES --------------------------------------------- 2.1. BRIDGE LOAN COMMITMENT. Subject to the terms and conditions set forth herein and in reliance on the Company's covenants, representations and warranties set forth herein, each of the Lenders hereby agrees to purchase from the Company, and the Company agrees to issue and sell to each of the Lenders, on the Closing Date, Bridge Notes in the aggregate principal amount of seventy-five million dollars ($75,000,000) (such aggregate amount, the "BRIDGE LOAN"), with each Lender committing to purchase its Commitment Percentage of such aggregate principal amount of Bridge Notes. The Lenders' commitment to purchase the Bridge Notes 24 -18- hereunder is called individually such Lender's "BRIDGE LOAN COMMITMENT", and collectively the "BRIDGE LOAN COMMITMENTS". 2.2. THE BRIDGE NOTES. The Bridge Loan shall be evidenced by separate Bridge Notes dated the Closing Date, which the Company shall execute and deliver to each Lender completed with appropriate insertions. One Bridge Note shall be payable to the order of each Lender in a principal amount equal to such Lender's Bridge Loan Commitment, representing the obligation of the Company to pay to such Lender such principal amount or, if less, the outstanding amount of such Lender's Bridge Loan, plus interest accrued thereon. The Company irrevocably authorizes each Lender to make or cause to be made a notation on such Lender's Bridge Note Record reflecting the original principal amount of such Lender's Bridge Loan Commitment and, at or about the time of such Lender's receipt of any principal payment on such Lender's Bridge Note, an appropriate notation on such Lender's Bridge Note Record reflecting such payment. The aggregate unpaid amount set forth on such Lender's Bridge Note Record shall be PRIMA FACIE evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender's Bridge Note Record shall not affect the obligations of the Company hereunder or under any Bridge Note to make payments of principal of and interest on any Bridge Note when due. The Bridge Notes (i) will be subordinated to the Senior Debt in accordance with Section 11, (ii) will bear interest as set forth in Section 4 hereof (including the payment of certain interest in the form of Secondary Bridge Notes), (iii) will be subject to optional or mandatory redemption under certain circumstances as described in Section 4, and (iv) will be subject to conversion into the Term Loan as provided in Section 2.4. 2.3. SCHEDULED MATURITY OF BRIDGE NOTES. The Company shall pay in full, or convert to the Term Loan pursuant to Section 2.4, the outstanding amount of the Bridge Notes and all interest thereon then outstanding and unpaid no later than the Initial Maturity Date. 2.4. TERM LOAN COMMITMENT. Subject to the terms and conditions set forth herein and in reliance on the Company's covenants, representations and warranties set forth herein, each of the Lenders hereby agree, if the Bridge Notes have not been repaid in full before the Initial Maturity Date and no Default or Event of Default has occurred and is then continuing, to convert on the Initial Maturity Date the then outstanding principal amount of the Bridge Notes, together with all accrued and unpaid interest thereon then outstanding, into Term Notes, the aggregate principal amount of which (such aggregate amount, the "TERM LOAN") shall equal the outstanding principal amount of the Bridge Notes on the Initial Maturity Date, PLUS the amount of all interest on the Bridge Notes outstanding and unpaid on the Initial Maturity Date, with each Lender committing to convert its Commitment Percentage of such aggregate principal amount. The Lenders' commitment to convert the Bridge Notes into the Term Notes hereunder is called individually such Lender's "TERM LOAN COMMITMENT", and collectively the "TERM LOAN COMMITMENTS". If the Bridge Notes have not been repaid in full before the Initial Maturity Date and no Default or Event of Default has occurred and is then continuing, then the Bridge Notes shall be converted into Term Notes in the 25 -19- aggregate principal amount of the Term Loan automatically on the Initial Maturity Date without further request or notice. 2.5. THE TERM NOTES. On making the Term Loan pursuant to Section 2.4, each Lender shall cancel on its records the Bridge Note held by it and all amounts outstanding thereunder, which corresponding amount shall be satisfied by the conversion to the Term Loan and the issuance by the Company of Term Notes with respect thereto. The Term Loan shall be evidenced by separate Term Notes dated the Initial Maturity Date, which the Company shall execute and deliver to each Lender completed with appropriate insertions. One Bridge Note shall be payable to the order of each Lender in a principal amount equal to such Lender's Term Loan Commitment, representing the obligation of the Company to pay to such Lender such principal amount or, if less, the outstanding amount of such Lender's Term Loan, plus interest accrued thereon. The Company irrevocably authorizes each Lender to make or cause to be made a notation on such Lender's Term Note Record reflecting the original principal amount of such Lender's Term Loan Commitment and, at or about the time of such Lender's receipt of any principal payment on such Lender's Term Note, an appropriate notation on such Lender's Term Note Record reflecting such payment. The aggregate unpaid amount set forth on such Lender's Term Note Record shall be PRIMA FACIE evidence of the principal amount thereof owing and unpaid to such Lender, but the failure to record, or any error in so recording, any such amount on such Lender's Term Note Record shall not affect the obligations of the Company hereunder or under any Term Note to make payments of principal of and interest on any Term Note when due. The Term Notes (i) will be subordinated to the Senior Debt in accordance with Section 11, (ii) will bear interest as set forth in Section 4 hereof (including the payment of certain interest in the form of Secondary Term Notes), (iii) will be subject to optional or mandatory redemption under certain circumstances as described in Section 4, and (iv) will be subject to conversion into Exchange Notes as provided in Section 5. 2.6. SCHEDULED MATURITY OF TERM NOTES. Subject to Section 5, the Term Notes shall mature and the Company shall pay in full the outstanding amount of the Term Notes and all accrued and unpaid interest thereon on the Term Loan Maturity Date. 2.7. USE OF PROCEEDS. The Company agrees that it will use the proceeds from the issuance and sale of Bridge Notes for the purpose of financing the transactions contemplated by the Tinnerman Acquisition Agreement and paying expense incurred in connection with the Tinnerman Acquisition. The proceeds from the Term Loan hereunder shall be used to cancel the outstanding amount of the Bridge Notes and all accrued and unpaid interest thereon on the Initial Maturity Date. 3. PURCHASE AND SALE OF WARRANTS ----------------------------- Subject to the terms and conditions set forth herein, and in the Warrant Agreement and the Warrant Escrow Agreement, the Company agrees that it shall issue to each of the Lenders, and the Lenders agree to acquire from the Company, on the Closing Date, simultaneously with the purchase by the Lenders of the Bridge 26 -20- Notes, Warrants to purchase 731,197 shares of the Company's common stock, representing 10.0% of the fully-diluted common stock of the Company then outstanding (assuming exercise of the Warrants and all other warrants, options, or other convertible securities exercisable for or convertible into shares of the Company's common stock). The Warrants shall be delivered to the Escrow Agent under and as defined in the Warrant Escrow Agreement on the Closing Date, duly executed by the Company, to be held by such Escrow Agent pursuant to and subject to the terms of the Escrow Agreement. 4. OTHER TERMS OF THE NOTES 4.1. PAYMENT OF INTEREST ON BRIDGE AND TERM NOTES. (a) Subject to all other provisions of this Section 4 and Section 14.10, from the Closing Date until the Initial Maturity Date, the Bridge Notes (including, for the avoidance of doubt, any Secondary Bridge Notes issued pursuant to clause (c) below) outstanding from time to time shall bear interest, payable in cash to the Holders of record on each Interest Payment Date, in arrears, at an annual rate equal to the LIBOR Rate PLUS the Applicable Margin then in effect. (b) Subject to all other provisions of this Section 4, Section 5 and Section 14.10, from the Initial Maturity Date until the Term Loan Maturity Date, the Notes (including, for the avoidance of doubt, any Secondary Notes issued pursuant to clause (c) below) outstanding from time to time shall bear interest, payable in cash to the Holders of record on each Interest Payment Date, in arrears, at an annual rate equal to the Conversion Rate then in effect PLUS the Conversion Margin then in effect, PROVIDED however, that in the event of any assignment of a Note or portion thereof to any Holder which is not at the time of such assignment a Variable Rate Holder, the Note issuable to such assignee Holder shall thereafter bear interest at the rate (the "FIXED RATE") in effect on the date of such assignment (subject in any event to the provisions of Section 14.10). (c) The interest rates set forth above in clauses (a) and (b) shall be subject to a maximum effective annual rate of 18% of the principal amount of such Notes then outstanding and, to the extent that the then-applicable effective annual rate of interest exceeds 14% for any Interest Period, the Company shall issue Secondary Notes as described in this clause (c) in lieu of the payment in cash of such excess portion. If the Company issues Secondary Notes in lieu of the payment of cash interest on any Interest Payment Date, the Company shall give notice to the Holders (which notice shall include the amount of interest to be paid by issuance of Secondary Notes, the reason therefor and the calculation of the amount of interest to be paid through the issuance of Secondary Notes) at least five (5) Business Days prior to the applicable Interest Payment Date (although failure to provide a timely notice shall not affect the Company's ability or competence to issue Secondary Notes), and shall execute and deliver to the Holder at the close of business on the Interest Payment Date, (i) in the event that such excess portion of interest is due with respect to a Bridge Note, an additional Bridge Note in the form of Exhibit A hereto, dated such Interest Payment Date, in a principal amount equal to such 27 -21- excess portion of interest (such additional Bridge Note being referred to herein as a "SECONDARY BRIDGE Note"), and (ii) in the event that such excess portion of interest is due with respect to a Term Note, an additional Term Note in the form of Exhibit B hereto, dated such Interest Payment Date, in a principal amount equal to such excess portion of interest (such additional Term Note being referred to herein as a "SECONDARY TERM NOTE"). The due issuance and delivery of such Secondary Notes shall constitute full payment of such excess portion of interest; PROVIDED, however, that the Company shall increase the cash component of any interest payment as required in order to avoid issuing any Secondary Note in an amount that is not $1,000 or an integral multiple of $1,000. Each issuance of Secondary Notes in lieu of the payment of cash interest on the Notes shall be made pro rata with respect to all outstanding Notes. In the event that, on any Interest Payment Date, the Company is unable to pay to the Holders an amount of interest (in the appropriate form) which is sufficient to satisfy the Company's current interest obligation under the Notes, then the Company shall pay such interest ratably among the Holders based on their respective ownership of principal amount of Notes, PROVIDED that the foregoing shall not constitute a waiver of the Default or Event of Default occasioned by the failure to pay such interest in full. (d) It is not intended by the Holders of the Notes, and nothing contained in this Agreement, the Notes or any other Loan Document shall be deemed, to establish or require the payment of a rate of interest in excess of the maximum interest rate permitted by applicable federal, state or other law (the "MAXIMUM RATE"), and to prevent such an occurrence, any agreement which may now or hereafter be in effect between the Company and the Holders of the Notes regarding the payment of fees or interest to such Holders is hereby limited by the provisions of this Section 4.1(d). If, during any period, the effective interest rate applicable to the principal outstanding under the Notes, absent the Maximum Rate limitation contained herein, would have exceeded the Maximum Rate, then the effective interest rate applicable to the Notes for that period shall be the Maximum Rate, and, if in any subsequent period, the effective interest rate would otherwise be less than the Maximum Rate, then the effective interest rate applicable to the Notes for such period shall be increased to the Maximum Rate until such time as the amount of interest paid hereunder equals the amount of interest which would have been paid in respect of the Notes if the same had not been limited by the Maximum Rate. In the event that, upon payment in full of the principal outstanding under the Notes, redemption of all of the outstanding Notes or conversion of such Notes, the total amount of interest paid or accrued in respect of the Notes under the terms of this Agreement is less than the total amount of interest which would have been paid or accrued in respect of the Notes had the interest not been limited hereby to the Maximum Rate, then the Company shall, to the extent permitted by such applicable federal, state or other law, pay to each of the Holders an amount equal to the excess, if any, of (i) the lesser of (A) the amount of interest which would have been charged in respect of the Notes held by such Holder or its transferor or assignor (whether direct or indirect) if the Maximum Rate had, at all times, been in effect with respect to the Notes and (B) the amount of interest which would have accrued in respect of the Notes held by such Holder or its transferor or assignor (whether direct or indirect) had the effective interest rate applicable with respect to the Notes at all 28 -22- times not been limited hereunder by the Maximum Rate over (ii) the amount of interest actually paid or accrued in respect of the Notes held by such Holder or its transferor or assignor (whether direct or indirect) under this Agreement. In the event that the Holders of the Notes receive, collect or apply as interest any sum in excess of the Maximum Rate, such excess amount shall be applied to the reduction of principal outstanding under the Notes until payment in full thereof, and if no such principal is then outstanding, such excess, or part thereof remaining, shall be paid to the Company. 4.2. OPTIONAL REDEMPTION. Subject to the provisions hereof and of the Senior Credit Agreement, the Company shall have the right to redeem, at any time and without premium or penalty, all or any part of the outstanding principal of the Notes at the amount of such principal PLUS any accrued but unpaid interest thereon; PROVIDED, HOWEVER, that any such redemptions shall be made pro rata to the Holders of the Notes in accordance with the amount of principal and interest outstanding thereunder, and PROVIDED, further, that any such redemption shall be made only at the end of an Interest Period, unless the Majority Holders otherwise agree. If the Company intends to redeem all or any part of the Notes, the Company shall, at least twenty (20) Business Days prior to the intended date of redemption, deliver to each of the Holders of record of Notes a notice (the "REDEMPTION NOTICE") stating such intent to redeem the Notes, the date proposed therefor, and the amounts of principal and interest on the Notes to be paid to such Holder, each partial prepayment to be in the principal amount of $100,000 or an integral multiple thereof. To the extent not inconsistent with this Section 4.2, the provisions of Section 4.7 below shall apply to the conduct of such redemption. Notwithstanding the foregoing, Notes other than the Variable Rate Notes may not be redeemed at the Company's option until the fifth anniversary of the Conversion Date, and from and after the fifth anniversary of the Conversion Date the amount required to be paid in redemption of any such Note shall be equal to the outstanding principal amount thereof, PLUS any accrued but unpaid interest thereon, plus a premium equal to the product of (a) the principal amount of such Note multiplied by the percentage calculated by multiplying (i) the Fixed Rate applicable to such Note by (ii) the percentage set forth in the table below opposite the period in which such redemption occurs: 29 -23-
@@ Period Percentage ------ ---------- From and including the fifth anniversary of the 50% Conversion Date through the day preceding the sixth anniversary of the Conversion Date From and including the sixth anniversary of the 33.33% Conversion Date through the day preceding the seventh anniversary of the Conversion Date From and including the seventh anniversary of the 16.66% Conversion Date through the day preceding the eighth anniversary of the Conversion Date From and including the eighth anniversary of the 0% Conversion Date through the Term Loan Maturity Date @@
4.3. MANDATORY PREPAYMENTS FROM ASSET SALES. in the event that any member of the TransTechnology Group shall sell any of its assets (other than inventory sold in the ordinary course of business) or group of related assets, whether by sale of such assets or sale of the stock of any member of the TransTechnology Group, where such asset sale would either be permitted pursuant to Section 10.5.2 upon compliance with this Section 4.3 or is previously consented to in writing by the Majority Holders, then, within 180 days after the receipt of any Net Cash Proceeds from any such asset sale, the Company may apply such Net Cash Proceeds, at its option (subject to the provisions of the Senior Credit Agreement), (a) to repay Senior Debt, or (b) to the completion of any Approved Acquisition under and as defined in the Senior Credit Agreement. Pending the final application of any such Net Cash Proceeds, the Company may temporarily reduce revolving credit borrowings, or otherwise invest such Net Cash Proceeds in any manner permitted under Section 10.3. Any Net Cash Proceeds from asset sales that are not applied or invested as provided in the first sentence of this paragraph within 180 days after the receipt thereof will be deemed to constitute "EXCESS PROCEEDS." When the aggregate amount of Excess Proceeds exceeds $5,000,000, the Company will be required to make an offer to all Holders of Notes (an "ASSET SALE OFFER") to purchase the maximum principal amount of Notes that may be purchased out of the Excess Proceeds, at an offer price in cash equal to 100% of the principal amount thereof PLUS accrued and unpaid interest thereon, if any, to the date of purchase, in accordance with the procedures set forth in Section 4.7. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not 30 -24- otherwise prohibited by this Agreement. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. 4.4. MANDATORY PREPAYMENT FROM PERMANENT FINANCING. In the event that the Company issues any Subordinated Debt pursuant to the Permanent Financing, the Company will be required to make an offer to all Holders of Notes to purchase the maximum principal amount of Notes that may be purchased with all of the Net Cash Proceeds of such Permanent Financing at an offer price in cash equal to 100% of the principal amount thereof, PLUS accrued and unpaid interest thereon, if any, to the date of purchase, in accordance with the procedures set forth in Section 4.7, and the Holders of all of the Variable Rate Notes then outstanding shall be required to sell such Notes to the Company pursuant to such offer. To the extent any Net Cash Proceeds of such Permanent Financing remain after consummation of such offer, the Company shall apply such excess Net Cash Proceeds in accordance with the provisions of the Senior Credit Agreement. 4.5. MANDATORY PREPAYMENTS FROM NEW DEBT OR EQUITY. In the event that the Company or any of its Restricted Subsidiaries shall after the Closing Date either (a) incur any Indebtedness other than Subordinated Debt and which is permitted under the Senior Credit Agreement, or (b) sell or issue any shares of its stock, options (other than stock options awarded to employees and directors pursuant to incentive compensation plans operated by members of the TransTechnology Group) or warrants for the purchase of its stock or other equity or equity instruments, then, and to the extent that (i) the Net Cash Proceeds of such incurrence, sale or issuance are not required to be applied in prepayment of amounts outstanding under the Senior Credit Agreement pursuant to Section 4 thereof and (ii) no Default or Event of Default is then continuing or would arise as a result of such prepayment, the Company will be required to make an offer to purchase the maximum principal amount of Notes that may be purchased at an offer price in cash equal to 100% of the principal amount thereof, PLUS accured and unpaid interest thereon, if any, out of the Net Cash Proceeds to the TransTechnology Group from such incurrence of Indebtedness or sale or issuance of new equity, in accordance with the procedures set forth in Section 4.7. To the extent any Net Cash Proceeds of such incurrence, sale or issuance remain after consummation of such offer, the Company may use such excess Net Cash Proceeds for any purpose not otherwise prohibited by this Agreement. 4.6. MANDATORY PREPAYMENT UPON CHANGE OF CONTROL. Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes at an offer price in cash equal to 101% of the aggregate principal amount then outstanding, PLUS accrued and unpaid interest thereon to the date of completion of such repurchase. Within ten (10) Business Days following the completion of a Change of Control, the Company shall send, by first class mail, a notice to each of the Holders and to the Administrative Agent describing the Change of Control and offering to purchase the Notes then outstanding on a date specified in such notice, which shall be not earlier than ten (10) Business Days and not later than thirty (60) days from the date such notice is 31 -25- mailed. The Holders wishing to sell in such repurchase shall tender their respective Notes to the Administrative Agent prior to the date so specified together with instructions on the amount thereof to be sold, and upon payment of the repurchase price for such amount, new Notes in the principal amount remaining outstanding (if any) to each such Holder shall be executed and delivered by the Company to each such Holder. Prior to complying with this Section 4.6, the Company shall first have repaid in full all Senior Debt then outstanding, or obtained the consent of the holders of such Senior Debt for such repurchase. 4.7. TERMS OF REDEMPTION OFFERS. In the event that, pursuant to Sections 4.3. 4.4 or 4.5 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Offer"), it shall follow the procedures specified in this Section 4.7. The Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "OFFER PERIOD"). No later than five Business Days after the termination of the Offer Period (the "PURCHASE DATE"), the Company shall purchase the principal amount of Notes required to be purchased pursuant to Sections 4.3. 4.4 or 4.5 hereof, as applicable (the "OFFER AMOUNT"), or, if a principal amount of Notes less than the Offer Amount has been tendered, all Notes tendered in response to the Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. Upon the commencement of an Offer, the Company shall send, by first class mail, a notice to each of the Holders and the Administrative Agent. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Offer. The Offer shall be made to all Holders. The notice, which shall govern the terms of the Offer, shall state: (a) the Section of this Agreement pursuant to which the Offer is being made and the length of time the Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Offer shall cease to accrete or accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuant to any Offer shall be required to surrender the Note to Company or a depositary, if appointed by the Company, at the address specified in the notice at least three days before the Purchase Date; 32 -26- (g) that Holders shall be entitled to withdraw their election if the Company, or the depositary, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note such Holder delivered for purchase and a statement that such Holder is withdrawing its election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered. On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a PRO RATA basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Offer, or if less than the Offer Amount has been tendered, all Notes tendered. In the case of an Offer pursuant to Section 4.4, all Variable Rate Notes shall be tendered by the Holders thereof. No Holder of a Fixed Rate Note shall be required to tender any such Notes pursuant to any Offer under this Section 4.7. The Company shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. 5. THE EXCHANGE NOTES. (a) Subject to the terms and conditions set forth herein and in reliance on the Company's covenants, representations and warranties set forth herein, on the tenth (10th) Business Day following the written request to the Company and the Administrative Agent of any Holder of a Term Note (as to any such request, the "EXCHANGE DATE"), and so long as no Default or Event of Default has occurred and is continuing, such Holder's Term Note(s) shall be converted automatically into the right to receive (i) an Exchange Note due 2009 of the Company in the equivalent principal amount to such Term Note(s) and (ii) the accrued and unpaid amount of interest then outstanding on such Term Note. Upon the Exchange Date in accordance with the Exchange Escrow Agreement, the Administrative Agent shall direct the Escrow Agent to release (A) to the Trustee, in its capacity as Custodian under the Indenture, a global Exchange Note, to be completed in the appropriate principal amount in accordance with the Indenture and the Exchange Escrow Agreement, and (B) to the Trustee and to the Company the original Indenture, each as fully executed by the Company and the Guarantors on the Closing Date and 33 -27- retained in escrow by the Escrow Agent pursuant to the Exchange Escrow Agreement. (b) Subject to the conditions contained herein and in the Indenture, the Company shall, on each Exchange Date, issue Exchange Notes under the Indenture against delivery to the Company of the Term Notes, registered in the names of the Holders surrendering such Term Notes. The Company shall issue $1,000 principal amount of Exchange Notes for each $1,000 of principal outstanding on the Exchange Date under the Term Notes then being exchanged, and shall pay in full to the Holders of such Term Notes the aggregate amount of interest accrued and outstanding thereon. To the extent that any Term Notes so converted have, with respect to a single Holder and all of its Affiliates, a principal amount plus interest that is not evenly divisible by $1,000, the Company shall pay cash in the amount that is less than $1,000 in lieu of issuing an Exchange Note. (c) If a Default or an Event of Default under this Agreement has occurred and is continuing at the time that the Term Notes are converted into Exchange Notes and the facts, circumstances or events constituting such Default or Event of Default would also constitute a default or event of default under the Exchange Notes, (i) such Default or Event of Default shall continue to constitute a default or an event of default under the Exchange Notes and (ii) any grace or notice periods applicable to such default or event of default under the Exchange Notes shall be reduced by any time elapsed under any such grace or notice period prior to such exchange and any notice actually given under the Term Notes shall be deemed to have been given with respect to the Exchange Notes. (d) In addition to the foregoing provisions in this Section 5 and the conditions set forth in Section 13, the right of any Holder to convert Term Notes is subject to the satisfaction of the following additional conditions precedent: (i) such conversion would not violate any law or regulation or any order or decree of any Governmental Authority applicable to the Company or such Holder; PROVIDED, HOWEVER, that the Holders agree to cooperate with the Company, to the extent practicable, to attempt to make such violation inapplicable to such conversion, but no such cooperation shall entail making the terms of the Exchange Notes, the Indenture or the Registration Rights Agreement any less favorable to the Holders, in the reasonable judgment of such Holders; (ii) the Indenture shall have been duly authorized, executed and delivered by the Company, and the Exchange Notes to be issued thereunder shall, upon any exchange, have been duly authorized, executed, authenticated and issued, and the Indenture and the Exchange Notes shall constitute valid and legally binding obligations of the Company, enforceable in accordance with their respective terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, and other laws of general applicability relating to or affecting creditors' rights and to general principles of equity, and each Holder converting Term Notes shall have received 34 -28- evidence satisfactory to such Holder of the foregoing, including officers' certificates, trustee's certificates and opinions of counsel to the Company to the foregoing effect; (iii) the Registration Rights Agreement shall have been duly authorized, executed and delivered by the Company and shall constitute a valid and legally binding obligation of the Company, enforceable in accordance with its terms, subject, as to enforcement, to bankruptcy, insolvency, reorganization, and other laws of general applicability relating to or affecting creditors' rights and to general principles of equity; (iv) the Trustee shall have executed and delivered to the Escrow Agent signature pages for the Indenture; and (v) all fees and other amounts owing to the Holder and/or to the Administrative Agent hereunder shall have been paid in full. (e) From and after the Exchange Date with respect to any Term Note, the terms and provisions of the Indenture shall apply to and govern such Note as an Exchange Note, and to the extent that there may be any inconsistencies between the requirements of the Indenture and any requirement purporting to be applicable to such Exchange Notes hereunder, the terms and provisions of the Indenture shall control. 6. CERTAIN GENERAL PROVISIONS. 6.1. FEES. The Company agrees to pay on the Closing Date the fees in the amounts agreed in the Fee Letter. 6.2. PAYMENT PROVISIONS. 6.2.1. CURRENCY OF ACCOUNT. Dollars are the currency of account and payment for each and every sum at any time due from the Company hereunder, under the Notes or under any other Loan Document. 6.2.2. APPLICATION OF INTEREST PAYMENTS. Interest payable by the Company on the Notes shall be paid to the Administrative Agent for the account of the Holders in the proportion of the respective principal amount of each Holder's Note or Notes. 6.2.3. JUDGMENT CURRENCY. If any sum due from the Company under this Agreement, the Notes, any other Loan Document or any order or judgment given or made in relation hereto or thereto has to be converted from the currency (the "FIRST CURRENCY") in which the same is payable hereunder or under such order or judgment into another currency (the "SECOND CURRENCY") for the purpose of (i) making or filing a claim or proof against the Company, (ii) obtaining an order or judgment in any court or other tribunal or (iii) enforcing any order or judgment given or made in relation hereto, the Company shall indemnify and hold harmless each of the Persons to whom 35 -29- such sum is due from and against any loss suffered as a result of any discrepancy between (A) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (B) the rate or rates of exchange at which such Person may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. 6.2.4. TIME OF PAYMENT. On each date on which this Agreement, the Notes or any other Loan Document requires an amount to be paid by the Company or any of the Lenders hereunder, the Company or such Lender shall make the same available to the Administrative Agent to such account as the Administrative Agent shall have notified to the Company or to such Lender, as the case may be. Each such payment which is made for the account of a Person other than the Administrative Agent shall be made in time to enable the Administrative Agent to make available such other Person's portion thereof for value the same day. 6.2.5. PAYMENTS BY ADMINISTRATIVE AGENT. Where a sum is to be paid hereunder to the Administrative Agent for the account of another Person, the Administrative Agent shall not be obliged to make the same available to that other Person until the Administrative Agent has been able to establish to its satisfaction that it has actually received such sum, but if the Administrative Agent does so and it proves to be the case that the Administrative Agent has not actually received the sum it paid out, then the Person to whom such sum was so made available shall on request refund the same to the Administrative Agent, together with an amount sufficient to reimburse the Administrative Agent for any amount it may have been required to pay out by way of interest on moneys borrowed to fund the sum in question during the period beginning on the due date for payment thereof and ending on the date on which it receives the same. 6.2.6. NO OFFSET, ETC. All payments by the Company hereunder, under the Notes or under any other Loan Document shall be made without setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Company is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Company with respect to any amount payable by it hereunder, under the Notes or under any other Loan Document, the Company will make such deduction or withholding, will pay the full amount deducted or withheld to the applicable authority, and will also pay to the Administrative Agent, for its own account or for the account of the Holders, on the date on which such amount is due and payable hereunder, under the Notes or under such other Loan Document, such additional amount as shall be necessary to enable the Holders or the Administrative Agent (as the case may be) to receive the same 36 -30- net amount in the same currency which the Holders or the Administrative Agent would have received on such due date had no such obligation been imposed upon the Company. The Company will deliver, within thirty (30) days of any such deduction or payment, to the Administrative Agent certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Company hereunder, under the Notes or under such other Loan Document. 6.3. COMPUTATIONS. All computations of interest on the Notes shall, unless otherwise expressly provided herein, be based on a 360-day year and paid for the actual number of days elapsed. Whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Loans as reflected on the applicable Note Records from time to time shall be considered correct and binding on the Company unless within five (5) Business Days after receipt of any notice by the Administrative Agent or any of the Holders of such outstanding amount, the Administrative Agent or such Holder shall notify the Company to the contrary. 6.4. ILLEGALITY; INABILITY TO DETERMINE LIBOR RATE. In the event that any present or future law, regulation, treaty or directive or the interpretation or application thereof shall make it unlawful for any of the Lenders or Holders to make Loans or hold promissory notes bearing interest at rates based on the LIBOR Rate, or if prior to the commencement of any Interest Period, the Administrative Agent shall determine that adequate and reasonable methods do not exist for ascertaining the LIBOR Rate, then the applicable Lender(s) or Holder(s) or the Administrative Agent, as the case may be, shall forthwith give notice of such determination (which shall be conclusive and binding on the Company and the other Holders) to the Company and the other Holders. In such event the Treasury Rate shall be substituted for the LIBOR Rate in any calculation of interest payable for such Interest Period. 6.5. ADDITIONAL COSTS, ETC. If any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Lender or Holder or the Administrative Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Lender or Holder or the Administrative Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Agreement, the Notes, the other Loan Documents, such Lender's Commitment, the Loans or any payment of interest or fees payable with respect to the Loans or any Notes (other than taxes based upon 37 -31- or measured by the income or profits of such Lender, Holder or Administrative Agent, or bank franchise taxes), or (b) materially change the basis of taxation (except for changes in taxes on income or profits or bank franchise taxes) of payments to any Lender or Holder of the principal of or the interest on any Loans or any other amounts payable to any Lender or Holder or the Administrative Agent under this Agreement, the Notes or any of the other Loan Documents, or (c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of any office of any Lender or Holder, or (d) impose on any Lender or Holder or the Administrative Agent any other conditions or requirements with respect to this Agreement, the Notes, the other Loan Documents, the Loans, such Lender's Commitment, or any class of loans or commitments of which any of the Loans, the Notes or such Lender's Commitment forms a part, and the result of any of the foregoing is: (i) to increase the cost to any such Lender or Holder of making, funding, issuing, renewing, extending or maintaining any of the Loans or such Lender's Commitment or any Note, or (ii) to reduce the amount of principal, interest, or other amount payable to such Lender or Holder or the Administrative Agent hereunder on account of such Lender's Commitment, any Note or any of the Loans, or (iii) to require such Lender or Holder or the Administrative Agent to make any payment or to forego any interest or other sum payable hereunder or under any of the Notes, the amount of which payment or foregone interest or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Lender or Holder or the Administrative Agent from the Company hereunder, then, and in each such case, within fifteen (15) days after demand made by such Lender or Holder or the Administrative Agent at any time and from time to time and as often as the occasion therefor may arise, the Company will pay to such Lender, Holder or Administrative Agent such additional amounts as will be sufficient to compensate such Lender, Holder or Administrative Agent, as the case may be, for such additional cost, reduction, payment or foregone interest or other sum. 38 -32- 6.6. CAPITAL ADEQUACY. If after the date hereof any Lender or Holder determines that (i) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, or (ii) compliance by such Lender or Holder or any corporation controlling such Lender or Holder with any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect of reducing the return on such Lender's Commitment or such Holder's Notes to a level below that which such Lender or Holder could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or Holder's then existing policies with respect to capital adequacy and assuming full utilization of such entity's capital) by any amount deemed by such Lender or Holder to be material, then such Lender or Holder may notify the Company of such fact. To the extent that the amount of such reduction in the return on capital is not reflected in the applicable interest rate hereunder, the Company agrees to pay such Lender or Holder for the amount of such reduction in the return on capital as and when such reduction is determined upon presentation by such Lender or Holder of a certificate in accordance with Section 6.8 hereof. Each Lender and Holder shall allocate such cost increases among its customers in good faith and on an equitable basis. 6.7. CERTIFICATE. A certificate setting forth any additional amounts payable pursuant to Sections 6.6 or 6.7 and a brief explanation of such amounts which are due, submitted by any Lender, Holder or the Administrative Agent to the Company, shall be conclusive, absent manifest error, that such amounts are due and owing. 6.8. INDEMNITY. The Company agrees to indemnify each Lender and Holder and to hold each Lender and Holder harmless from and against any loss, cost or expense (including loss of anticipated profits) that such Lender or Holder may sustain or incur as a consequence of (i) default by a the Company in payment of the principal amount of or any interest on any Notes as and when due and payable, including any such loss or expense arising from interest or fees payable by any such Lender to lenders of funds obtained by it in order to make or maintain its Loans, (ii) default by the Company in making a borrowing or conversion after such Company has given (or is deemed to have given) a request therefor, or (iii) the making of any payment on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by any such Lender to lenders of funds obtained by it in order to maintain any such Loans. 6.9. INTEREST AFTER DEFAULT. 6.9.1. OVERDUE AMOUNTS. Subject in any event to the provisions of Sections 4.1(c) and (d), overdue principal and (to the extent permitted by applicable law) interest on the Notes and all other overdue amounts payable hereunder or under any of the other Loan Documents shall bear interest compounded monthly and payable on demand at a rate per annum. equal to the sum of two 39 -33- percent (2%) per annum, PLUS the interest rate otherwise applicable thereto, until such amount shall be paid in full (after as well as before judgment). 6.9.2. AMOUNTS NOT OVERDUE. Subject in any event to the provisions of Sections 4.1(c) and (d), during the continuance of a Default or an Event of Default, the principal of the Notes not overdue shall, until such Default or Event of Default has been cured or remedied or such Default or Event of Default has been waived by the Majority Holders pursuant to Section 27, bear interest at a rate per annum equal to the sum of two percent (2%) PLUS the interest rate otherwise applicable thereto. 7. GUARANTY. 7.1. SUBSIDIARY GUARANTY. The Obligations shall be guaranteed by each of the Company's Domestic Subsidiaries pursuant to the terms of the Subsidiary Guaranty. In the event that any Subsidiary of the Company (including any Foreign Subsidiary) enters into any guaranty of any Senior Debt, the Company shall procure that such Subsidiary promptly thereafter joins as a Guarantor under the Subsidiary Guarantee. 7.2. SUBORDINATION. The obligations of the Guarantors under the Subsidiary Guaranty shall be subordinate to the obligations of such Guarantors under their respective guaranties of the Senior Debt on the same terms and subject to the same provisions as are set forth in Section 11. 8. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the Lenders, the Holders and the Administrative Agent, at the Closing Date and the Conversion Date, as follows: 8.1. CORPORATE AUTHORITY. 8.1.1. INCORPORATION; GOOD STANDING. The Company and each of its Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of its place of incorporation, (ii) has all requisite corporate power to own its property and conduct its business as now conducted and as presently contemplated, and (iii) is in good standing as a foreign corporation and is duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified would not have a materially adverse effect on the business, assets or financial condition of the Company or such Subsidiary. 8.1.2. AUTHORIZATION. The execution, delivery and performance of this Agreement, the Notes and the other Loan Documents to which the Company or any of its Subsidiaries are or are to become a party and the transactions contemplated hereby and thereby (i) are within the corporate authority of such Person, (ii) have been duly authorized by all necessary corporate proceedings, (iii) do not conflict with or result in any breach or contravention of any provision of law, statute, rule or regulation to which the 40 -34- Company or any of its Subsidiaries, or any of the assets of the Company or any of its Subsidiaries, are subject or any judgment, order, writ, injunction, license or permit applicable to the Company or any of its Subsidiaries and (iv) do not conflict with any provision of the corporate charter, bylaws or memorandum and articles of association of, or any agreement or other instrument binding upon, the Company or any of its Subsidiaries. 8.1.3. ENFORCEABILITY. The execution and delivery of this Agreement, the Notes and the other Loan Documents to which the Company or any of its Subsidiaries are or are to become a party will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. 8.2. GOVERNMENTAL APPROVALS. Except as set forth on SCHEDULE 8.2 hereto, the execution, delivery and performance by the Company and its Subsidiaries of this Agreement, the other Loan Documents and the Tinnerman Acquisition Documents to which the Company or any of its Subsidiaries are or are to become a party and the transactions contemplated hereby and thereby do not require the approval or consent of, or filing with, any governmental agency or authority other than those already obtained. 8.3. TITLE TO PROPERTIES; LEASES. Except as indicated on SCHEDULE 8.3 hereto, (a) the Company and its Subsidiaries own all of the assets reflected in the consolidated balance sheet of the Company and its Subsidiaries as at the Balance Sheet Date or acquired since that date (except property and assets sold or otherwise disposed of in the ordinary course of business since that date) subject to no Liens or rights of others, except Permitted Liens, and (b) all of the Company's and its Subsidiaries' assets are reflected in the consolidated balance sheet as at the Balance Sheet Date described in Section 8.4.1. 8.4. FINANCIAL STATEMENTS AND PROJECTIONS. 8.4.1. FINANCIAL STATEMENTS. There has been furnished to each of the Lenders a consolidated balance sheet of the Company and its Subsidiaries as at the Balance Sheet Date, and a consolidated statement of income of the Company and its Subsidiaries for the fiscal year then ended, certified by Deloitte & Touche LLP. Such balance sheet and statement of income have been prepared in accordance with generally accepted accounting principles and fairly present the financial condition of the Company as at the close of business on the date thereof and the results of operations for the fiscal year then ended. There are no liabilities of the Company or any of its Subsidiaries, contingent or otherwise, as of such date involving material amounts, known 41 -35- to the officers of the Company, which were not disclosed in such balance sheet and the notes related thereto. 8.4.2. PROJECTIONS. There has been furnished to each of the Lenders projections (dated July 23, 1999) of the annual operating budgets of the Company and its Subsidiaries on a consolidated basis, balance sheets and cash flow statements for the 2000 to 2004 fiscal years (the "PROJECTIONS"), which fairly disclose all assumptions made with respect to general economic, financial and market conditions used in their formulation. To the knowledge of the Company, no facts exist that (individually or in the aggregate) would result in any material change in any of the Projections. The Projections are based upon reasonable estimates and assumptions, have been prepared on the basis of the assumptions stated therein and reflect the reasonable estimates of the Company of the results of operations and other information projected therein. 8.5. NO MATERIAL CHANGES, ETC. (a) Since the Balance Sheet Date there has occurred no materially adverse change in the financial condition or business of the Company or any of its Subsidiaries or any material assets of the Company or any of its Subsidiaries as shown on or reflected in the consolidated balance sheet of the Company and its Subsidiaries as at the Balance Sheet Date, or the consolidated statement of income for the fiscal year then ended, other than changes in the ordinary course of business that have not had any materially adverse effect either individually or in the aggregate on the business or financial condition of the Company or any of its Subsidiaries or any material assets of the Company or any of its Subsidiaries. (b) The Company and each of its Subsidiaries (before and after giving effect to the transactions contemplated by this Agreement and the other Loan Documents) (i) is solvent, (ii) has assets having a fair value in excess of its liabilities, (iii) has assets having a fair value in excess of the amount required to pay its liabilities on existing debts as such debts become absolute and matured, and (iv) has, and expects to continue to have, access to adequate capital for the conduct of its business and the ability to pay its debts from time to time incurred in connection with the operation of its business as such debts mature. 8.6. FRANCHISES, PATENTS, COPYRIGHTS, ETC . The Company and each of its Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of its business substantially as now conducted without known conflict with any rights of others. 8.7. LITIGATION. Except as set forth in SCHEDULE 8.7 hereto, there are no actions, suits, proceedings or investigations of any kind pending or threatened against the Company or any of its Subsidiaries before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, materially adversely affect the properties, assets, financial 42 -36- condition or business of the Company or any of its Subsidiaries or materially impair the right of the Company or any of its Subsidiaries to carry on business substantially as now conducted by them, or result in any substantial liability not adequately covered by insurance, or for which adequate reserves are not maintained on the consolidated balance sheet of the Company and its Subsidiaries, or which question the validity of this Agreement or any of the other Loan Documents, or any action taken or to be taken pursuant hereto or thereto. 8.8. NO MATERIALLY ADVERSE CONTRACTS, ETC. None of the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected in the future to have a materially adverse effect on the business, assets or financial condition of the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement that is in default or has or is expected, in the judgment of the Company's officers, to have any materially adverse effect on the business of the Company or any of its Subsidiaries. 8.9. COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC. Neither the Company nor any of its Subsidiaries is in violation of any provision of its charter documents, bylaws, or any agreement or instrument to which it may be subject or by which it or any of its properties may be bound or any decree, order, judgment, act, statute, license, rule, regulation or other law, in any of the foregoing cases in a manner that could result in the imposition of substantial penalties or materially and adversely affect the financial condition, properties or business of the Company or any of its Subsidiaries. 8.10. TAX STATUS. Except as disclosed on SCHEDULE 8.10 hereto, the Company and each of its Subsidiaries (i) has made or filed all federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which any of them is subject, (ii) has paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings and (iii) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim. 8.11. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing. 8.12. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the Company nor any of its Subsidiaries is a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", as such terms are defined in the Public Utility Holding Company Act of 1935; nor are the Company or any of its Subsidiaries an "investment company", or an "affiliated company" or a "principal underwriter" of an "investment company", as such terms are defined in the Investment Company Act of 1940. 43 -37- 8.13. ABSENCE OF FINANCING STATEMENTS, ETC. There is no financing statement, security agreement, chattel mortgage, real estate mortgage, lease or other document filed or recorded with any filing records, registry or other public office, or otherwise, that purports to cover, affect or give notice of any present or possible future Lien on any assets or property of the Company or any of its Subsidiaries or any rights relating thereto, except with respect to Permitted Liens. 8.14. DISCLOSURE. The written information, reports, financial statements, exhibits and schedules furnished by the Company or any of its Subsidiaries to the Administrative Agent or the Lenders in connection with the preparation and negotiation of the Loan Documents and the Senior Loan Documents, or included therein or delivered pursuant thereto (but excluding the Projections), do not contain any material misstatement of fact and do not omit to state any material fact necessary to make the statements made therein, in the light of the circumstances in which made, not materially misleading. 8.15. CERTAIN TRANSACTIONS. Except for arm's length transactions pursuant to which the Company or any of its Subsidiaries or any officer, director or employee of the Company or such Subsidiary makes payments in the ordinary course of business upon terms no less favorable than the Company, such Subsidiary, officer, director or employees could obtain from third parties, none of the officers, directors, or employees of the Company or any of its Subsidiaries is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. 8.16. EMPLOYEE BENEFIT PLANS. 8.16.1. IN GENERAL. Each Employee Benefit Plan has been maintained and operated in compliance in all material respects with the provisions of ERISA and, to the extent applicable, the Code, including but not limited to the provisions thereunder respecting prohibited transactions. The Company has heretofore delivered to the Administrative Agent the most recently completed annual report, Form 5500, with all required attachments, and actuarial statement required to be submitted under Section 103(d) of ERISA, with respect to each Guaranteed Pension Plan. 8.16.2. TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit Plan which is an employee welfare benefit plan within the meaning of Section 3(l) or Section 3(2)(B) of ERISA, no benefits are due unless the event giving rise to the benefit entitlement occurs prior to plan termination (except as required by Title I, Part 6 of ERISA or as provided in the Tinnerman Acquisition Agreement). Except as provided in the Tinnerman Acquisition Agreement, the Company or an ERISA Affiliate, as appropriate, may terminate each such 44 -38- Plan at any time (or at any time subsequent to the expiration of any applicable bargaining agreement) in the discretion of the Company or such ERISA Affiliate without liability to any Person. 8.16.3. GUARANTEED PENSION PLANS. Each contribution required to be made to a Guaranteed Pension Plan, whether required to be made to avoid the incurrence of an accumulated funding deficiency, the notice or lien provisions of Section 302(f) of ERISA, or otherwise, has been timely made. No waiver of an accumulated funding deficiency or extension of amortization periods has been received with respect to any Guaranteed Pension Plan. No liability to the PBGC (other than required insurance premiums, all of which have been paid) has been incurred by the Company or any ERISA Affiliate with respect to any Guaranteed Pension Plan and there has not been any ERISA Reportable Event, or any other event or condition which presents a material risk of termination of any Guaranteed Pension Plan by the PBGC. Except with respect to the Guaranteed Pension Plan to be established by TransTechnology as described in, and to the extent provided in, the Tinnerman Acquisition Agreement, based on the latest valuation of each Guaranteed Pension Plan (which in each case occurred within twelve months of the date of this representation), and on the actuarial methods and assumptions employed for that valuation, the aggregate benefit liabilities of all such Guaranteed Pension Plans within the meaning of Section 4001 of ERISA did not exceed the aggregate value of the assets of all such Guaranteed Pension Plans, disregarding for this purpose the benefit liabilities and assets of any Guaranteed Pension Plan with assets in excess of benefit liabilities. 8.16.4. MULTIEMPLOYER PLANS. Other than (a) the Electronics Local 431 Pension Fund relating to employees of Seeger Inc., a Subsidiary of the Company, and (b) the Western Pennsylvania Teamster and Employers Pension Fund relating to employees of the Company's Breeze-Industrial division, neither the Company nor any ERISA Affiliate is a member of any Multiemployer Plan. Neither the Company nor any ERISA Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of assets described in Section 4204 of ERISA. Neither the Company nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of Section 4241 or Section 4245 of ERISA or that any Multiemployer Plan intends to terminate or has been terminated under Section 4041A of ERISA. 8.16.5. COMPLIANCE WITH EMPLOYMENT BENEFIT LAWS. Except as set forth in SCHEDULE 8.16.5 hereto, neither the Company nor any of its Subsidiaries is in violation of any material provision of any applicable pension, retirement funding or employee benefit legislation in any jurisdiction. 45 -39- 8.17. USE OF PROCEEDS. No portion of any Loan is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. No portion of the proceeds of any Loans is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of (a) knowingly purchasing, or providing credit support for the purchase of, Ineligible Securities from a Section 20 Subsidiary during any period in which such Section 20 Subsidiary makes a market in such Ineligible Securities, (b) knowingly purchasing, or providing credit support for the purchase of, during the underwriting or placement period, any Ineligible Securities being underwritten or privately placed by a Section 20 Subsidiary, or (c) making, or providing credit support for the making of, payments of principal or interest on Ineligible Securities underwritten or privately placed by a Section 20 Subsidiary and issued by or for the benefit of the Company or any Subsidiary or other Affiliate of the Company. 8.18. ENVIRONMENTAL COMPLIANCE Each of the Company and its Subsidiaries has taken all necessary steps to investigate the past and present condition and usage of the Real Estate and the operations conducted thereon and, based upon such diligent investigation, has determined that, except as set forth on SCHEDULE 8.18 attached hereto: (a) none of the Company, its Subsidiaries or any operator of the Real Estate or any operations thereon is in violation, or alleged violation, of any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including without limitation, those arising under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any European Union, national, federal, state or local statute, regulation, ordinance, order or decree relating to health, safety or the environment (hereinafter "ENVIRONMENTAL LAWS"), which violation would have a material adverse effect or the business, assets or financial condition of any of the Company or its Subsidiaries or the consummation of the transactions referred to in this Agreement; (b) the Company and its Subsidiaries have conducted all business operations on the Real Estate and continue to operate and maintain their businesses in compliance in all material respects with all applicable Environmental Laws and any other European Union, national, federal, state and local laws, rules and regulation relating to air emissions, water discharge, noise emissions, solid, or liquid waste disposal, hazardous waste, or materials, or other environmental, health or safety matters and there are no outstanding citations, notices, or order of non-compliance issued to the Company or any of its Subsidiaries, or relating to the respective businesses, assets, Real Estate, other property, leaseholds, or equipment of the Company or any of its Subsidiaries under any such laws, rules or regulations; and 46 -40- (c) None of the Company or its Subsidiaries or any of the Real Estate is subject to any applicable environmental law requiring the performance of Hazardous Substances site assessments, or the removal or remediation of Hazardous Substances, or the giving of notice to any governmental agency or the recording or delivery to other Persons of an environmental disclosure document or statement by virtue of the transactions set forth herein and contemplated hereby. 8.19. SUBSIDIARIES, ETC. A complete and correct list of the Subsidiaries of the Company and the jurisdictions of their incorporation as of the Closing Date is set forth on Schedule 8.19 hereto. Except as set forth on SCHEDULE 8.19 hereto, neither the Company nor any of its Subsidiaries is engaged in any joint venture or partnership with any other Person. 8.20. BANK ACCOUNTS. SCHEDULE 8.20 sets forth the account numbers and location of all bank accounts of the Company and its Subsidiaries. 8.21. YEAR 2000 COMPLIANCE. The Company and its Subsidiaries have undertaken a review, the extent of which the Company believe to be commercially reasonable, of their critical business and operational systems which could be adversely affected by, and have developed a program to address on a timely basis, the "Year 2000 Problem" (i.e., the risk that computer applications used by the Company or any of its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999). Based upon such review and the implementation of such program, the Company reasonably believe that the "Year 2000 Problem" will not have any materially adverse effect on the business or financial condition of the Company or any of its Subsidiaries. 9. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company covenants and agrees that, so long as any Loan or Note is outstanding or any Lender has any obligation to make or convert any Loans: 9.1. PUNCTUAL PAYMENT. The Company will duly and punctually pay or cause to be paid the principal and interest on the Notes, the fees and all other amounts provided for in this Agreement, the Notes and the other Loan Documents to which the Company or any of its Subsidiaries is a party, all in accordance with the terms of this Agreement, the Notes and such other Loan Documents. 9.2. MAINTENANCE OF OFFICES. The Company will maintain its chief executive office in Liberty Corner, New Jersey, or at such other place in the United States of America as the Company shall designate upon written notice to the Administrative Agent, where notices, presentations and demands to or upon the Company in respect of the Notes and the other Loan Documents to which the Company is a party may be given or made. 47 -41- 9.3. RECORDS AND ACCOUNTS. The Company will, and will cause each of its Subsidiaries to, (a) with respect to the Company and any such Subsidiary located in the United States, keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles and (b) with respect to any such Subsidiary located outside the United States, keep true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles in the country in which such Subsidiary is located. The Company will maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves. 9.4. FINANCIAL STATEMENTS, CERTIFICATES AND INFORMATION. The Company will deliver to each of the Holders: (a) as soon as practicable, but in any event not later than one hundred (100) days after the end of each fiscal year of the Company, the consolidated balance sheet of the Company and its Subsidiaries and the consolidating balance sheet of the Company and its Subsidiaries, each as at the end of such year, and the related consolidated and consolidating statements of income and consolidated statement of cash flow for such year, each setting forth in comparative form the figures for the previous fiscal year and all such consolidated and consolidating statements to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and certified (as to the consolidated statements) without qualification by Deloitte & Touche LLP or by other independent certified public accountants satisfactory to the Administrative Agent, together with a written statement from such accountants to the effect that they have read a copy of this Agreement, and that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; PROVIDED that such accountants shall not be liable to the Holders for failure to obtain knowledge of any Default or Event of Default; (b) as soon as practicable, but in any event not later than forty-five (45) days after the end of each of the fiscal quarters of the Company, copies of the unaudited consolidated balance sheet of the Company and its Subsidiaries and the unaudited consolidating balance sheet of the Company and its Subsidiaries, each as at the end of such quarter, and the related consolidated and consolidating statements of income and consolidated statement of cash flow for the portion of the Company's fiscal year then elapsed, all in reasonable detail and prepared in accordance with generally accepted accounting principles, together with a certification by the principal financial or accounting officer of the Company that the information contained in such financial statements fairly presents the financial position of the 48 -42- Company and its Subsidiaries on the date thereof (subject to year-end adjustments); (c) simultaneously with the delivery of the financial statements referred to in subsections (a) and (b) above, a statement certified by the principal financial or accounting officer of the Company in substantially the form of EXHIBIT F hereto and setting forth in reasonable detail computations evidencing compliance with the covenants contained in Section 11 and (if applicable) reconciliations to reflect changes in generally accepted accounting principles since the Balance Sheet Date; (d) contemporaneously with the filing or mailing thereof, copies of all material filed with the Securities and Exchange Commission or sent to the stockholders of the Company which is either of a financial nature or addresses the Year 2000 Problem; (e) by April 30 of each year, the annual budget of the Company and its Subsidiaries for the next fiscal year; and (f) from time to time such other financial data and information (including accountants' management letters) as the Administrative Agent or any Holder may reasonably request. 9.5. NOTICES. 9.5.1. DEFAULTS. The Company will promptly notify the Administrative Agent and each of the Holders in writing of the occurrence of any Default or Event of Default. If any Person shall give any notice or take any other action in respect of a claimed default (whether or not constituting an Event of Default) under this Agreement or any other note, evidence of indebtedness, indenture or other obligation to which or with respect to which any of the Company or its Subsidiaries is a party or obligor, whether as principal, guarantor, surety or otherwise, The Company shall forthwith give written notice thereof to the Administrative Agent and each of the Holders of record, describing the notice or action and the nature of the claimed default. 9.5.2. ENVIRONMENTAL EVENTS. The Company will promptly give notice to the Administrative Agent and each of the Holders of record (i) of any violation of any Environmental Law that any of the Company or its Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (ii) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, or any federal, state or local environmental agency or board, that has the potential to materially affect the assets, liabilities, financial conditions or operations of any of the Company or its Subsidiaries, or the Administrative Agent's 49 -43- mortgages, deeds of trust or security interests pursuant to the Security Documents. 9.5.3. NOTICE OF LITIGATION AND JUDGMENTS. The Company will, and will cause each of its Subsidiaries to, give notice to the Administrative Agent and each of the Holders of record in writing within fifteen (15) days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Company or any of its Subsidiaries or to which the Company or any of its Subsidiaries is or becomes a party involving an uninsured claim against the Company or any of its Subsidiaries that could reasonably be expected to have a materially adverse effect on the Company or any of its Subsidiaries and stating the nature and status of such litigation or proceedings. The Company will, and will cause each of its, Subsidiaries to, give notice to the Administrative Agent and each of the Holders of record, in writing, in form and detail satisfactory to the Administrative Agent, within ten (10) days of any judgment not covered by insurance, final or otherwise, against the Company or any of its Subsidiaries in an amount in excess of $1,000,000. 9.6. CORPORATE EXISTENCE; MAINTENANCE OF PROPERTIES. The Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and franchises and those of its Subsidiaries. The Company (i) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times, and (iii) will, and will cause each of its Subsidiaries to, continue to engage primarily in the businesses now conducted by them and in related businesses; PROVIDED that nothing in this Section 9.6 shall prevent the Company from discontinuing the operation and maintenance of any of its properties or any of those of its Subsidiaries if such discontinuance is, in the judgment of the Company, desirable in the conduct of its or their business and that do not in the aggregate materially adversely affect the business of any of the Company and its Subsidiaries on a consolidated basis. 9.7. INSURANCE. The Company will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts, containing such terms, in such forms and for such periods as may be reasonable and prudent. Upon reasonable request from the Administrative Agent, the Company shall furnish the Administrative Agent from time to time with information concerning the Company's and its Subsidiaries' insurance, including (when requested) copies of the certificates of insurance evidencing such insurance. 50 -44- 9.8. TAXES. The Company will, and will cause each of its Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon it and its real properties, sales and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies that if unpaid might by law become a Lien on any of its property; PROVIDED that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Company or such Subsidiary shall have set aside on its books adequate reserves with respect thereto; and PROVIDED further that the Company and its Subsidiaries will pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any Lien that may have attached as security therefor. 9.9. INSPECTION OF PROPERTIES AND BOOKS, ETC. 9.9.1. GENERAL. The Company shall permit the Holders, through the Administrative Agent or any of the Holders' other designated representatives, to visit and inspect any of the properties of the Company and any of its Subsidiaries, to examine the books of account of the Company and its Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of the Company and its Subsidiaries with, and to be advised as to the same by, its and their officers, all at such reasonable times and intervals as the Administrative Agent or any Holder may reasonably request. If an Event of Default shall have occurred and be continuing, the Company upon the request of the Administrative Agent will obtain and deliver to the Administrative Agent appraisal reports in form and substance and from appraisers satisfactory to the Administrative Agent, stating (i) the then current fair market, orderly liquidation and forced liquidation values of all or any portion of the equipment or real estate owned by the Company or any of its Subsidiaries and (ii) the then current business value of the Company and its Subsidiaries. All such appraisals shall be conducted and made at the expense of the Company obtaining and delivering such appraisal reports. 9.9.2. ENVIRONMENTAL ASSESSMENTS. Whether or not an Event of Default shall have occurred, the Administrative Agent may, from time to time, in its discretion for the purpose of assessing and ensuring the value of any Real Estate, obtain one or more environmental assessments or audits of such Real Estate prepared by a hydrogeologist, an independent engineer or other qualified consultant or expert approved by the Administrative Agent to evaluate or confirm (i) whether any Hazardous Materials are present in the soil or water at such Real Estate and (ii) whether the use and operation of such Real Estate complies with all Environmental Laws. Environmental assessments may include without limitation detailed visual inspections of such Real Estate including any and all storage areas, storage tanks, drains, dry wells and leaching areas, and the taking of soil samples, surface water samples and ground water samples, as well as such other investigations or 51 -45- analyses as the Administrative Agent deems appropriate. All such environmental assessments shall be conducted at the expense of the Company. 9.9.3. COMMUNICATIONS WITH ACCOUNTANTS. The Company authorizes the Administrative Agent and, if accompanied by the Administrative Agent, any of the Holders to communicate directly with the Company's independent certified public accountants, PROVIDED that the Company shall have received advance notice of any such communications, and authorizes such accountants to disclose to the Administrative Agent and the Holders any and all financial statements and other supporting financial documents and schedules including copies of any management letter with respect to the business, financial condition and other affairs of the Company or any of its Subsidiaries. At the request of the Administrative Agent, the Company shall deliver a letter addressed to such accountants instructing them to comply with the provisions of this Section 9.9.3. 9.10. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS. The Company will, and will cause each of its Subsidiaries to, comply in all material respects with (i) the applicable laws and regulations wherever its business is conducted, including all Environmental Laws, (ii) the provisions of its charter documents and, in the event such by-laws exist, its by-laws, (iii) all agreements and instruments by which it or any of its properties may be bound and (iv) all applicable decrees, orders, and judgments. If any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Company or any of its Subsidiaries may fulfill any of its obligations hereunder or any of the other Loan Documents to which the Company or such Subsidiary is a party, the Company will, or (as the case may be) will cause such Subsidiary to, immediately take or cause to be taken all reasonable steps within the power of the Company or such Subsidiary to obtain such authorization, consent, approval, permit or license and furnish the Administrative Agent and the Holders with evidence thereof. 9.11. EMPLOYEE BENEFIT PLANS. The Company will (i) promptly upon filing the same with the United States Department of Labor or Internal Revenue Service, upon request of the Administrative Agent, furnish to the Administrative Agent a copy of the most recent actuarial statement required to be submitted under Section 103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch, furnish to the Administrative Agent any notice, report or demand sent or received in respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan, under Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA. The Company and each of its Subsidiaries shall comply with all applicable pension, retirement funding or employee benefit legislation in any jurisdiction. 52 -46- 9.12. USE OF PROCEEDS. The proceeds of the issuance of the Bridge Notes shall be used to finance the Tinnerman Acquisition and to pay certain expenses incurred in connection therewith. 9.13. ADDITIONAL GUARANTORS. If, after the Closing Date, the Company or any of its Subsidiaries acquires or creates any Subsidiary, such newly acquired or created Subsidiary shall promptly join the Subsidiary Guaranty as Guarantor thereunder, PROVIDED that any Subsidiary which is (a) both a Foreign Subsidiary and not a guarantor of more than $30,000,000 in aggregate principal amount of Designated Senior Debt, or (b) an Unrestricted Subsidiary, shall not be required to so join the Subsidiary Guaranty, and, PROVIDED FURTHER at the time any Subsidiary becomes an Unrestricted Subsidiary, such Subsidiary may be released from its obligations under the Subsidiary Guaranty. 9.14. PERMANENT FINANCING. The Company hereby agrees, for the benefit of the Administrative Agent and the Holders, that it shall comply with the following provisions regarding the Permanent Financing: (a) within sixty (60) days after the Closing Date, supply to the Arranger, in a form reasonably acceptable for inclusion in a registration statement to be filed under the Securities Act audited financial statements for Tinnerman for the three years immediately preceding the completion of the Tinnerman Acquisition; (b) within sixty (60) days after the Closing Date, supply to the Arranger, in form reasonably satisfactory to the Arranger, either an offering memorandum for a private placement of debt securities pursuant to Rule 144A under the Securities Act, or a registration statement under the Securities act with respect to a public offering of such securities, together with such other documentation in customary form for transactions of this type, including an indenture and registration rights agreement, as the Arranger may in its sole discretion require in connection with the Permanent Financing (collectively, the documentation referred to in this clause (b) being referred to as the "PERMANENT FINANCING OFFERING DOCUMENTS"); and (c) within thirty (30) days after the delivery to the Arranger of the Permanent Financing Offering Documents, the Company shall have made available to the Arranger such officers and executive personnel of the Company and its Subsidiaries as the arranger shall have requested for the purpose of (i) meetings with rating agencies, (ii) meetings with prospective purchasers of the securities to be issued in the Permanent Financing, and (iii) preparing and presenting to such potential investors "road show" materials in a manner consistent with and customary in the issuance and sale of high-yield debt securities. 9.15. FURTHER ASSURANCES. The Company will, and will cause each of its Subsidiaries to, cooperate with the Lenders and Holders and the Administrative Agent and execute such further instruments and documents as the Lenders or Holders or the Administrative Agent shall reasonably request to carry out to their satisfaction the transactions contemplated by this Agreement and the other Loan Documents. 53 -47- 10. CERTAIN NEGATIVE COVENANTS OF THE COMPANY. The Company covenants and agrees that, so long as any Loan or Note is outstanding or any Lender has any obligation to make or convert any Loans: 10.1. RESTRICTIONS ON INDEBTEDNESS AND PREFERRED STOCK. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt), or issue any Disqualified Stock (other than any such issuance to the Company or another Restricted Subsidiary); PROVIDED, HOWEVER, that the Company may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most recently ended Reference Period for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0:1, determined on a pro forma basis (including a PRO FORMA application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such Reference Period; PROVIDED that if such additional Indebtedness was incurred or such Disqualified Stock issued in the financing of any Approved Acquisition (as defined in the Senior Credit Agreement), the Earnings Before Interest and Taxes of the acquired Target (as defined in the Senior Credit Agreement) shall also be included in calculating such PRO FORMA Fixed Charge Coverage Ratio as though the applicable Acquisition Closing Date had occurred at the beginning of such Reference Period. The provisions of the first paragraph of this Section 10.1 shall not apply to the incurrences of any of the following (collectively, "PERMITTED INDEBTEDNESS"). (a) the Designated Senior Debt; (b) Indebtedness to the Holders and the Administrative Agent arising under any of the Loan Documents; (c) current liabilities of any of the Company or its Subsidiaries incurred in the ordinary course of business not incurred through (i) the borrowing of money, or (ii) the obtaining of credit except for credit on an open account basis customarily extended and in fact extended in connection with normal purchases of goods and services; (d) Indebtedness in respect of taxes, assessments, governmental charges or levies and claims for labor, materials and supplies to the extent that payment therefor shall not at the time be required to be made in accordance with the provisions of Section 9.8; (e) Indebtedness in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as 54 -48- execution is not levied thereunder or in respect of which any of the Company or Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; (f) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; (g) obligations under Capitalized Leases not exceeding $8,000,000 in aggregate amount at any time outstanding; (h) Indebtedness incurred in connection with (i) the acquisition after the Closing Date of any real or personal property by any of the Company or its Subsidiaries, and (ii) the issuance by any of the Company or its Subsidiaries of any industrial revenue bonds, industrial development bonds or similar instruments, PROVIDED that the aggregate principal amount of Permitted Indebtedness of the Company and its Subsidiaries incurred pursuant to this clause (h) shall not exceed the aggregate amount of $10,000,000 at any one time; (i) Indebtedness existing on the date hereof and listed and described on SCHEDULE 10.1 hereto; (j) Indebtedness of any Restricted Subsidiary of the Company to the Company; PROVIDED that such Indebtedness shall be evidenced by promissory notes duly executed by the obligor and in form and substance satisfactory to the Administrative Agent; and (k) Indebtedness incurred in the Permanent Financing, so long as the Net Cash Proceeds thereof are applied immediately in prepayment of the Notes pursuant to and in accordance with Section 4. Without limiting the foregoing restrictions, the Company will not, and will not permit any of its Subsidiaries to, create, incur, assume, guarantee, or be or remain liable, contingently or otherwise, with respect to, any Indebtedness that is subordinate to or junior in right of payment to any Designated Senior Debt and senior in right of payment to the Notes. 10.2. RESTRICTIONS ON LIENS. The Company will not, and will not permit any of its Subsidiaries to, create or incur or suffer to be created or incurred or to exist any Lien of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom except for Permitted Liens. 10.3. RESTRICTIONS ON INVESTMENTS. Except as set forth in Section 10.4 below, the Company will not, and will not permit any of its Subsidiaries to, make or permit to exist or to remain outstanding any Investment, other than the following 55 -49- (collectively, "PERMITTED INVESTMENTS"; and all Investments other than Permitted Investments being referred to herein as "RESTRICTED INVESTMENTS"): (a) marketable direct or guaranteed obligations of the United States of America, the Federal Republic of Germany or the United Kingdom that mature within one (1) year from the date of purchase; (b) demand deposits, certificates of deposit, bankers acceptances and time deposits of United States or Canadian banks having total assets in excess of $1,000,000,000 or, with respect to Subsidiaries of the Company located outside the United States, deposit accounts with local banks having total assets in excess of $1,000,000,000 or the local currency equivalent thereof; (c) securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than "P 1" if rated by Moody's Investors Services, Inc., and not less than "A 1" if rated by Standard and Poor's; (d) Investments existing on the date hereof and listed on SCHEDULE 10.3 (e) Investments with respect to Permitted Indebtedness under Section 10.1(j) so long as such entities remain Restricted Subsidiaries of the Company; (f) Investments consisting of the Guaranties or Investments by the Company in Restricted Subsidiaries of the Company; (g) Investments consisting of promissory notes received as proceeds of asset dispositions permitted hereunder; (h) Investments consisting of loans and advances to employees for moving, entertainment, travel and other similar expenses in the ordinary course of business not to exceed $250,000 in the aggregate at any time outstanding; and (i) other Investments in an aggregate amount not in excess of $100,000. 10.4. RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) make any Distribution, (ii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes; or (iii) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iii) above being collectively referred to as "RESTRICTED PAYMENTS"), unless, at the time of and after giving effect to such Restricted Payment: 56 -50- (i) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (ii) the Company would, at the time of such Restricted Payment and after giving PRO forma effect thereto as if such Restricted Payment had been made at the beginning of the most recently completed Reference Period for which internal financial statements are available, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 10.1 above; and (iii) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the Closing Date (excluding Restricted Payments permitted by clauses (ii), (iii), (iv) and (v) of the next succeeding paragraph), is less than the sum, without duplication, of (i) 50% of Consolidated Net Income for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the Closing Date to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if there is a Consolidated Net Deficit for such period, less 100% of such Deficit), PLUS (ii) 100% of the aggregate Net Cash Proceeds received by the Company since the Closing Date as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or sale of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company), PLUS (iii) to the extent that any Restricted Investment that was made after the Closing Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment. The foregoing provisions shall not prohibit (i) the payment of any Distribution within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions hereof; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any Indebtedness that is subordinated to the Notes or Equity Interests of the Company in exchange for, or out of the Net Cash Proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such Net Cash Proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the payment of any dividend (in cash or otherwise) by a Restricted Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; (iv) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Subsidiary of the Company, PROVIDED that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests of the Company or any Subsidiary 57 -51- shall not exceed $2,000,000 in any twelve-month period and no Default or Event of Default shall have occurred and be continuing immediately after such transaction; or (v) so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the Company may declare and pay dividends in cash on or in respect of any of its Equity Interests in an aggregate amount not to exceed $2,000,000 paid in any period of twelve (12) consecutive months. The Board of Directors of the Company may designate any Restricted Subsidiary (other than TransTechnology Engineered Components, LLC, a Delaware limited liability company, or TransTechnology Canada Corporation, an Ontario corporation) to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under clause (c) of this Section 10.4. All such outstanding Investments will be deemed to constitute investments in an amount equal to the greatest of (x) the net book value of such Investments at the time of such designation, (y) the fair market value of such Investments at the time of such designation and (z) the original fair market value of such investments at the time they were made. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors of the Company, whose resolution with respect thereto shall be delivered to the Administrative Agent, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $5,000,000. Not later than the date of making any Restricted Payment, the Company shall deliver to the Administrative Agent an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 10.4 were computed, together with a copy of any opinion or appraisal required by this Section 10.4. 10.5. MERGER, CONSOLIDATION AND DISPOSITION OF ASSETS. 10.5.1. MERGERS AND ACQUISITIONS. The Company will not, and will not permit any of its Subsidiaries to, become a party to any merger or consolidation, to convert the Company or any of its Subsidiaries from one form of corporate organization or partnership to another, or agree to or effect any asset acquisition or stock acquisition, other than: (a) the acquisition of assets (other than assets which constitutes all or a substantial part of a business or division) in the ordinary course of business consistent with the past practices of the TransTechnology Group; 58 -52- (b) Approved Acquisitions under and as defined in the Senior Credit Agreement, subject to fulfillment of the conditions set forth in the definition thereof in the Senior Credit Agreement; (c) the merger or consolidation of one or more of the Subsidiaries of the Company with and into the Company; or (d) the merger, conversion or consolidation of two or more Subsidiaries of the Company, provided that no such Subsidiary which prior to such merger or consolidation was a Guarantor shall, as a result of such merger, conversion or consolidation, cease to be a Guarantor. 10.5.2. DISPOSITION OF ASSETS. The Company will not, and will not permit any of its Subsidiaries to, become a party to or agree to or effect any disposition of assets, other than: (a) the disposition of assets (other than assets which constitutes all or a substantial part of a business or division) in the ordinary course of business, consistent with the past practices of the TransTechnology Group; (b) the disposition of assets permitted under the Senior Credit Agreement; or (c) any other disposition of assets, PROVIDED that: (i) no Default or Event of Default has occurred and is continuing or would result therefrom, (ii) upon completion of such disposition and after giving PRO FORMA effect thereto as if such disposition had been made at the beginning of the most recently completed Reference Period for which internal financial statements are available, the Company would have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 10.1 hereby, and (iii) the proceeds of such disposition are applied in compliance with Section 4.3 hereof. 10.6. SALE AND LEASEBACK. The Company will not, and will not permit any of its Restricted Subsidiaries to, enter into any arrangement, directly or indirectly, whereby the Company or Restricted Subsidiary shall sell or transfer any property owned by it in order then or thereafter to lease such property or lease other property that any member of the TransTechnology Group intends to use for substantially the same purpose as the property being sold or transferred unless (i) the Company or such Restricted Subsidiary could have incurred Indebtedness in an amount equal to the Indebtedness relating to such sale and leaseback transaction pursuant to the Fixed Charge Coverage Ratio test set forth in Section 10.1 above, (ii) the gross cash proceeds of such sale and leaseback transaction are at least equal to the fair market value (as determined in good faith by the Board of Directors and set forth in an Officers' Certificate delivered to the Administrative Agent) of the property that is the subject of such sale and leaseback transaction, and (iii) the transfer of assets in such sale and leaseback transaction is permitted by, and the Company or such 59 -53- Restricted Subsidiary applies the proceeds of such transaction in compliance with, Section 4.3 above. 10.7. COMPLIANCE WITH ENVIRONMENTAL LAWS. The Company will not, and will not permit any of its Subsidiaries to, (i) construct or install on any of the Real Estate any underground tank or other underground storage receptacle for Hazardous Substances, (ii) conduct any activity at any Real Estate or use any Real Estate in any manner so as to cause any material release (i.e., releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, disposing or dumping) of Hazardous Substances on, upon or into the Real Estate, or (iii) otherwise conduct any activity at any Real Estate or use any Real Estate in any manner that would be in material violation of any Environmental Law or bring such Real Estate in material violation of any Environmental Law. 10.8. EMPLOYEE BENEFIT PLANS. Neither the Company nor any ERISA Affiliate will: (a) engage in any "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code which could result in a material liability for the Company or any of its Subsidiaries; or (b) permit any Guaranteed Pension Plan to incur an "accumulated funding deficiency", as such term is defined in Section 302 of ERISA, whether or not such deficiency is or may be waived; or (c) fail to contribute to any Guaranteed Pension Plan to an extent which, or terminate any Guaranteed Pension Plan in a manner which, could result in the imposition of a Lien on the assets of the Company or any of its Subsidiaries pursuant to Section 302(f) or Section 4068 of ERISA; or (d) permit or take any action which would result in the aggregate benefit liabilities (with the meaning of Section 4001 of ERISA) of all Guaranteed Pension Plans exceeding the value of the aggregate assets of such Plans, disregarding for this purpose the benefit liabilities and assets of any such Plan with assets in excess of benefit liabilities. 10.9. MAINTENANCE OF BUSINESS. The Company will not, and will not permit any of its Restricted Subsidiaries to, materially change the business of the Company or such Restricted Subsidiary from the Business. 11. SUBORDINATION 11.1. AGREEMENT TO SUBORDINATE. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness, interest and other Obligations of any kind evidenced by the Notes is subordinated in right of payment, to the extent and in the manner provided in this Section 11, to the prior payment in full in cash of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. 60 -54- 11.2. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company or any Guarantor whether in cash, properties, securities or otherwise, in a liquidation or dissolution of the Company or any Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company, any Guarantor, or their property, an assignment for the benefit of creditors or any marshaling of the Company's or any Guarantor's assets and liabilities, the holders of Senior Debt shall be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt whether or not allowed as a claim in any such proceeding) before the Holders of Notes will be entitled to receive any payment with respect to the Notes or under the Subsidiary Guarantee, and until all obligations with respect to Senior Debt are paid in full in cash, any distribution to which the Holders of Notes would be entitled shall be made to the holders of Senior Debt (except that Holders of Notes may receive and retain Permitted Junior Securities). To the extent any payment of Senior Debt (whether by or on behalf of the Company or any Subsidiary, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. To the extent the obligation to repay any Senior Debt is declared to be fraudulent, invalid, or otherwise set aside under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then the obligations so declared fraudulent, invalid or otherwise set aside (and all other amounts that would come due with respect thereto had such obligation not been affected) shall be deemed to be reinstated and outstanding as Senior Debt for all purposes hereof as if such declaration, invalidity or setting aside had not occurred. 11.3. DEFAULT ON DESIGNATED SENIOR DEBT. The Company and the Guarantors shall not make any payment upon or in respect of the Notes or the Subsidiary Guarantees (except in Permitted Junior Securities) if (a) a default in the payment of the principal of, or premium, if any, or interest on, Senior Debt occurs and is continuing, or (b) any other default occurs and is continuing with respect to Designated Senior Debt that currently, or with the passage of time or giving of notice, permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and, in the case of any such default described in this clause (b), the Administrative Agent receives a notice of such default of the type referred to in this clause (b) (a "PAYMENT BLOCKAGE NOTICE") from the Company, the Senior Lender Representative, or the holders of any Designated Senior Debt. Payments on the Notes may and shall be resumed (i) in the case of a payment default, upon the date on which such default is cured or waived in writing by the holders of the applicable Senior Debt, and (ii) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived in writing 61 -55- by the holders of Designated Senior Debt or 179 days after the date on which the applicable Payment Blockage Notice is received by the Administrative Agent, unless the maturity of any Designated Senior Debt has been accelerated. No new period of payment blockage may be commenced under clause (ii) above unless and until (A) 360 days have elapsed since the initial effectiveness of the immediately prior Payment Blockage Notice and (B) all scheduled payments of principal of, and premium, if any, and interest on, the Notes that have come due have been paid in full in cash. No nonpayment default that existed and was continuing on the date of delivery of any Payment Blockage Notice to the Administrative Agent shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived in writing or cured for a period of not less than 90 days. In the event that the Company or any Guarantor makes any payment to any Holder of any Note prohibited by the foregoing, such payment will be required to be held in trust for and paid over to the holders of Senior Debt (or the Senior Lender Representative on behalf thereof). 11.4. ACCELERATION. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify the holders of Senior Debt and the Senior Lender Representative of the acceleration. 11.5. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Administrative Agent or any Holder receives any payment of any Obligations with respect to the Notes at a time when the Administrative Agent or such Holder, as applicable, has actual knowledge that such payment is prohibited by Section 11.2 or Section 11.3 hereof, such payment shall be held by the Administrative Agent or such Holder, as the case may be, in trust for -the benefit of and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or the Senior Lender Representative on their behalf, for application to the payment of all obligations with respect to Senior Debt remaining unpaid, to the extent necessary to pay such obligations in full in cash in accordance with their terms after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt and the Senior Lender Representative, the Administrative Agent undertakes to perform only such obligations on the part of the Administrative Agent as are specifically set forth in this Section 11, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Agreement against the Administrative Agent. The Administrative Agent shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Administrative Agent shall pay over or distribute to or on behalf of the Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Section 11. 11.6. NOTICE BY COMPANY. The Company shall promptly notify the Administrative Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Section 11, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Section 11. 62 -56- 11.7. SUBROGATION. After all Senior Debt is paid in full in cash and until the Notes are paid in full, Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Debt. A distribution made under this Section 11 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Company and the Holders, a payment by the Company on the Notes. 11.8. RELATIVE RIGHTS. This Section 11 defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Agreement shall: (1) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; (3) prevent the Administrative Agent or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes; (4) prevent the Company from making any prepayment of the Notes required to be made pursuant to Section 4.4; or (5) limit or restrict the conversion of the Bridge Notes to Term Notes pursuant to Section 2.4 or the conversion of Term Notes to Exchange Notes pursuant to Section 5. If the Company fails because of this Section 11 to pay principal of or interest on a Note or to comply with any of the conversion provisions hereof on the due date, the failure is still a Default or Event of Default hereunder. 11.9. NO IMPAIRMENT BY COMPANY. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Agreement. The Administrative Agent and the Holders agree that they will not challenge the validity, enforceability or perfection of any Senior Debt or the Liens, guarantees and security interests securing the same and that as between the holders of the Senior Debt on the one hand and the Administrative Agent and the Holders on the other, the terms hereof shall govern even if all or part of the Senior Debt or such Liens, guarantees and security interests are avoided, disallowed, subordinated, set aside or otherwise invalidated in any judicial proceeding or otherwise, regardless of the theory upon which such action is premised. 63 -57- Without in any way limiting the generality of this Section 11.9, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Administrative Agent or the Holders, without incurring responsibility to the Administrative Agent or the Holders, and without impairing or releasing the subordination provided in this Section 11 or the obligations hereunder of the Holders to the holders of Senior Debt, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, the Senior Credit Agreement or any instrument evidencing the same or any agreement under which Senior Debt is outstanding or secured; (b) sell, exchange, release, foreclose against or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (c) release any Person liable in any manner for the collection of Senior Debt; and/or (d) exercise or refrain from exercising any rights against the Company, any Subsidiary thereof or any other Person. 11.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of any Senior Debt, the distribution may be made and the notice given to the Senior Lender Representative. Upon any payment or distribution of assets of the Company referred to in this Section 11.10, the Administrative Agent and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Senior Lender Representative(s) or of the liquidating trustee or agent or other Person making any distribution to the Administrative Agent or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, all holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section 11.10. 11.11. RIGHTS OF ADMINISTRATIVE AGENT. Notwithstanding the provisions of this Section 11 or any other provision of this Agreement, the Administrative Agent shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Administrative Agent, and the Administrative Agent may continue to distribute payments on the Notes received by it, unless the Administrative Agent shall have received at its Head Office at least two Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Section 11. Only the Company or the Senior Lender Representative may give such notice. Nothing in this Section 11.12 shall impair the claims of, or payments to, the Administrative Agent under or pursuant to Section 16 hereof. The Administrative Agent hereunder in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Administrative Agent. Any Agent may do the same with like rights. 11.12. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of Notes, by such Holder's acceptance thereof, authorizes and directs the Administrative Agent on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Section 11 and the subordination of the Subsidiary Guarantee as provided therein, and appoints the Administrative Agent to act as such Holder's attorney-in-fact for any and all such purposes, including, in 64 -58- the event of any dissolution, winding up, liquidation or reorganization of the Company or any Subsidiary (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of creditors or otherwise), the filing of a claim for the unpaid balance of its Notes in the form required in those proceedings. If the Administrative Agent does not file a proper proof of claim or proof of debt in the form required in any bankruptcy, liquidation or other insolvency proceeding at least 30 days before the expiration of the time to file such claim, the Senior Lender Representative is hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. 11.13. AMENDMENTS. The provisions of this Section 11 (including, without limitation, any definitions or other sections included by reference or incorporation) or the terms and conditions of the Subsidiary Guarantee shall not be amended or modified without the written consent of the holders of all Senior Debt. 12. CLOSING CONDITIONS. The obligations of the Lenders to make the Bridge Loan on the Closing Date shall be subject to the satisfaction of the following conditions precedent on or prior to the Closing Date: 12.1 LOAN DOCUMENTS. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto and shall be in form and substance satisfactory to each of the Lenders. Each of the Loan Documents (other than the Indenture and the Exchange Notes) shall be in full force and effect, and the Indenture and the Exchange Notes shall have been delivered in fully-executed form to the Escrow Agent. The Administrative Agent shall have received a fully executed copy of each such document. 12.2. CERTIFIED COPIES OF CHARTER DOCUMENTS. Each of the Lenders shall have received from the Company and each of its Subsidiaries a copy, certified by a duly authorized officer of such Person to be true and complete on the Closing Date, of each of (i) its charter or other incorporation documents as in effect on such date of certification, and (ii) its by-laws as in effect on such date. 12.3. CORPORATE ACTION. All corporate action necessary for the valid execution, delivery and performance by the Company and each of its Subsidiaries of this Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Lenders shall have been provided to each of the Lenders. 12.4. INCUMBENCY CERTIFICATE. Each of the Lenders shall have received from the Company and each of its Subsidiaries an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of the Company or such Subsidiary, and giving the name and bearing a specimen signature of each individual who shall be authorized: (i) to sign, in the name and on behalf of the Company and such Subsidiary, each of the Loan Documents and the Tinnerman Acquisition Documents to which the Company or such Subsidiary is or is to become a 65 -59- party; and (ii) in the case of the Company, to give notices and to take other action on behalf of the Company under the Loan Documents. 12.5. SENIOR LOAN DOCUMENTS; AVAILABILITY. The Senior Loan Documents shall be in full force and effect, all of the conditions precedent to the borrowing by the Company of a Term Loan in the principal amount of $50,000,000 and of Revolving Credit Loans of up to $200,000,00 (other than the effectiveness of this Agreement) shall have been fulfilled, and the Company shall have availability of at least $20,000,000 in Revolving Credit Loans under the Senior Credit Agreement, after completion of the Tinnerman Acquisition and the refinancing of the TransTechnology Group's existing credit facilities and all related transactions, and the drawdown of all loans in connection therewith. 12.6. TINNERMAN ACQUISITION. All of the conditions precedent to the completion of the Tinnerman Acquisition in accordance with the Tinnerman Acquisition Agreement shall have been fulfilled. 12.7. SOLVENCY CERTIFICATE. Each of the Lenders shall have received an officer's certificate of the Company dated as of the Closing Date as to the solvency of the Company and its Subsidiaries following the consummation of the transactions contemplated herein and in the Senior Loan Documents in form and substance satisfactory to the Lenders and the Administrative Agent. 12.8. OPINIONS OF COUNSEL. Each of the Lenders and the Administrative Agent shall have received a favorable legal opinion addressed to the Lenders and the Administrative Agent, dated as of the Closing Date, in form and substance satisfactory to the Lenders and the Administrative Agent, from: (a) Hahn Loeser & Parks LLP, counsel to the Company and its Subsidiaries in the United States; and (b) if requested by the Administrative Agent, such other local counsel to the Company in any jurisdiction where any of the Guarantors is organized. 12.9. PAYMENT OF FEES. The Company shall have paid to the Administrative all fees payable pursuant under the Fee Letter, and shall have paid the reasonable fees and expenses of the Administrative Agent's Special Counsel incurred in connection with the preparation and negotiation of this Agreement and the other Loan Documents. 12.10. DISBURSEMENT INSTRUCTIONS. The Administrative Agent shall have received disbursement instructions from the Company indicating that substantially all of the proceeds of the Bridge Loan are to be paid to Eaton Corporation in payment of the purchase price under the Tinnerman Acquisition Agreement. 13. CONDITIONS TO CLOSING AND CONVERSION. The obligations of the Lenders to make the Bridge Loan, to convert the Bridge Loan into the Term Loan, and to convert the Term Loan or any part thereof 66 -60- to Exchange Notes, shall also be subject to the satisfaction of the following conditions precedent: 13.1. REPRESENTATIONS TRUE; NO EVENT OF DEFAULT. Each of the representations and warranties of the Company and any of its Subsidiaries contained in this Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making or conversion of such Loan, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such individual representations and warranties relate expressly to an earlier date) and no Default or shall have occurred and be continuing. Upon the request of the Administrative Agent, the Company shall have delivered to the Administrative Agent a certificate of the Company signed by an authorized officer of the Company to such effect. 13.2. NO LEGAL IMPEDIMENT. No change shall have occurred in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Lender would make it illegal for such Lender to make or convert such Loan pursuant to the provisions of this Agreement. 13.3. GOVERNMENTAL REGULATION. Each Lender shall have received such statements in substance and form reasonably satisfactory to such Lender as such Lender shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System or any other applicable regulatory or supervisory body. 13.4. PROCEEDINGS AND DOCUMENTS. All proceedings in connection with the transactions contemplated by this Agreement, the other Loan Documents, the Acquisition Documents and all other documents incident thereto shall be satisfactory in substance and in form to the Lenders and to the Administrative Agent and the Administrative Agent's Special Counsel, and the Lenders, the Administrative Agent and such counsel shall have received all information and such counterpart originals or certified or other copies of such documents as the Administrative Agent may reasonably request. 14. EVENTS OF DEFAULT; ACCELERATION; ETC. 14.1. EVENTS OF DEFAULT AND ACCELERATION. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) the Company shall fail to pay any principal of the Notes when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; 67 -61- (b) the Company or any of its Subsidiaries shall fail to pay any interest on the Notes, any Liquidated Damages under and as defined in the Registration Rights Agreement, or any fees or other sums due hereunder or under any of the other Loan Documents, within three (3) days after the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (c) any of the Company or its Subsidiaries shall fail to comply with any of its covenants contained in Section 9 or 10 or any of the covenants contained in any of the Loan Documents; (d) the Company or any of its Subsidiaries shall fail to perform any other term, covenant or agreement contained herein (other than those specified elsewhere in this Section 14.1 or those which by their terms expressly exclude any grace period for any non-compliance therewith) for fifteen (15) days after written notice of such failure has been given to the Company by the Administrative Agent; (e) any representation or warranty the Company or any of its Subsidiaries in this Agreement or any of the other Loan Documents or in any other document or instrument delivered pursuant to or in connection with this Agreement shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (f) the Company or any of its Subsidiaries shall (i) fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or in respect of any Capitalized Leases in an aggregate amount in excess of $5,000,000, or (ii) fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing such borrowed money or credit received or in respect of such Capitalized Leases and the holder or holders thereof or of any obligations issued thereunder shall have accelerated the maturity thereof; (g) any of the Company or its Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of such Company or Subsidiary or of any substantial part of the assets of such Company or Subsidiary or shall commence any case or other proceeding relating to any of the Company or its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against or any of the Company or its Subsidiaries and any of the Company or its Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein or such 68 -62- petition or application shall not have been dismissed within forty-five (45) days following the filing thereof; (h) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating any of the Company or its Subsidiaries bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of any of the Company or its Subsidiaries in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (i) there shall remain in force, undischarged, unsatisfied and unstayed, for more than thirty (30) days, whether or not consecutive, any final judgment against any of the Company or its Subsidiaries that, with other outstanding final judgments, undischarged, against the Company and its Subsidiaries exceeds in the aggregate $5,000,000; (j) if any of the Loan Documents shall be cancelled, terminated, revoked or rescinded, in each case otherwise than in accordance with the terms thereof or with the express prior written agreement, consent or approval of the Holders (and, notwithstanding anything herein to the contrary, if any Guaranty shall be cancelled, terminated, revoked or rescinded without the consent of the Holders), or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Company or any of its Subsidiaries party thereto or any of their respective stockholders, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof; (k) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event shall have occurred and the Majority Holders shall have determined in their reasonable discretion that such event reasonably could be expected to result in liability of the Company or any of its Subsidiaries to the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $250,000 and such event in the circumstances occurring reasonably could constitute grounds for the termination of such Guaranteed Pension Plan by the PBGC or for the appointment by the appropriate United States District Court of a trustee to administer such Guaranteed Pension Plan; or a trustee shall have been appointed by the United States District Court to administer such Plan; or the PBGC shall have instituted proceedings to terminate such Guaranteed Pension Plan; (l) the Company or any of its Subsidiaries shall be enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting any material part of its 69 -63- business and such order has a material adverse effect on the business or financial condition of the Company or such Subsidiary; (m) there shall occur any material damage to, or loss, theft or destruction of, any property, whether or not insured, or any strike, lockout, labor dispute, embargo, condemnation, act of God or public enemy, or other casualty, which in any such case causes, for more than fifteen (15) consecutive days, the cessation or substantial curtailment of revenue producing activities at any facility of any of the Company or its Subsidiaries, if such event or circumstance is not also covered by business interruption insurance and would have a material adverse effect on the business or financial condition of the Company or such Subsidiary; (n) there shall occur the loss, suspension or revocation of, or failure to renew, any license or permit now held or hereafter acquired by the Company or any of its Subsidiaries if such loss, suspension, revocation or failure to renew would have a material adverse effect on the business or financial condition of the Company or such Subsidiary; or (o) any of the Company or its Subsidiaries shall be indicted for a state or federal crime, or any civil or criminal action shall otherwise have been brought against any of the Company or its Subsidiaries, a punishment for which in any such case could include the forfeiture of any assets of such Company or Subsidiary having a fair market value in excess of $5,000,000; then, and in any such event, so long as the same may be continuing, the Administrative Agent may, and upon the request of the Majority Holders shall, by notice in writing to the Company declare all amounts owing with respect to this Agreement, the Loans, the Notes and the other Loan Documents to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Company; provided that in the event of any Event of Default specified in Section 14.1(g) or 14.1(h), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Administrative Agent or any Holder. 14.2. REMEDIES. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Administrative Agent or the Majority Holders shall have accelerated the maturity of the Notes pursuant to Section 14.1, each Holder, if owed any amount with respect to the Notes, may, with the consent of the Majority Holders but not otherwise, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Holder are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Holder. No remedy herein conferred upon any Holder or 70 -64- the Administrative Agent is intended to be exclusive of any other remedy herein or in any of the other Loan Documents and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or under any of the other Loan Documents or now or hereafter existing at law or in equity or by statute or any other provision of law. 14.3. DISTRIBUTION OF PROCEEDS. In the event that, following the occurrence or during the continuance of any Default or Event of Default, the Administrative Agent or any Holder, as the case may be, receives any monies in connection with the enforcement of any of the Loan Documents, such monies shall be distributed for application as follows, subject to Section 11: (a) First, to the payment of, or (as the case may be) the reimbursement of the Administrative Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Administrative Agent in connection with the collection of such monies by the Administrative Agent, for the exercise, protection or enforcement by the Administrative Agent of all or any of the rights, remedies, powers and privileges of the Administrative Agent under this Agreement or any of the other Loan Documents or in support of any provision of adequate indemnity to the Administrative Agent against any taxes or Liens which by law shall have, or may have, priority over the rights of the Administrative Agent to such monies; (b) Second, to all other Obligations in such order or preference as the Majority Holders may determine; provided, however, that distributions in respect of such obligations shall be made Obligations owing to the Holders with respect to each type of Obligation such as interest, principal, fees and expenses, shall be made among the Holders pro rata; and provided, further, that the Administrative Agent may in its discretion make proper allowance to take into account any Obligations not then due and payable; (c) Third, upon payment and satisfaction in full or other provisions for payment in full satisfactory to the Holders and the Administrative Agent of all of the Obligations, to the payment of any obligations required to be paid pursuant to Section 9-504(1)(c) of the Uniform Commercial Code of the Commonwealth of Massachusetts; and (d) Fourth, the excess, if any, shall be returned to the Company or to such other Persons as are entitled thereto. 15. SETOFF. During the continuance of any Event of Default, any deposits or other sums credited by or due from any of the Holders to the Company and any securities or other property of the Company in the possession of such Holder may be applied to or set off by such Holder against the payment of Obligations and any and all other liabilities, direct, or indirect, absolute or contingent, due or to become due, now 71 -65- existing or hereafter arising, of the Company to such Holder. Each of the Holders agrees with each other Holder that (i) if an amount to be set off is to be applied to Indebtedness of the Company to such Holder, other than Indebtedness evidenced by the Notes held by such Holder, such amount shall be applied ratably to such other Indebtedness and to the Indebtedness evidenced by all such Notes held by such Holder, and (ii) if such Holder shall receive from the Company, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim evidenced by the Notes held by such Holder by proceedings against the Company at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the Note or Notes held by such Holder any amount in excess of its ratable portion of the payments received by all of the Holders with respect to the Notes held by all of the Holders, such Holder will make such disposition and arrangements with the other Holders with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Holder receiving in respect of the Notes held by it, its proportionate payment as contemplated by this Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Holder, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. 16. THE ADMINISTRATIVE AGENT. 16.1. AUTHORIZATION. (a) The Administrative Agent is authorized to take such action on behalf of each of the Lenders and Holders and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Administrative Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Administrative Agent. (b) The relationship between the Administrative Agent and each of the Lenders and Holders is that of an independent contractor. The use of the term "Administrative Agent" is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Administrative Agent and each of the Lenders and Holders. Nothing contained in this Agreement nor the other Loan Documents shall be construed to create an agency, trust or other fiduciary relationship between the Administrative Agent and any of the Lenders and Holders. (c) As an independent contractor empowered by the Lenders and Holders to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Loan Documents, the Administrative Agent is nevertheless a "representative" of the Lenders and Holders, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Lenders and Holders and the 72 -66- Administrative Agent with respect to all security and guaranties contemplated by the Loan Documents. Such actions include the designation of the Administrative Agent as "secured party", "mortgagee" or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Obligations, all for the benefit of the Lenders and Holders and the Administrative Agent. 16.2. EMPLOYEES AND AGENTS. The Administrative Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Agreement and the other Loan Documents. The Administrative Agent may utilize the services of such Persons as the Administrative Agent in its sole discretion may reasonably determine, and all reasonable fees and expenses of any such Persons shall be paid by the Company. 16.3. NO LIABILITY. Neither the Administrative Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any agent or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Administrative Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. 16.4. NO REPRESENTATIONS. The Administrative Agent shall not be responsible for the execution or validity or enforceability of this Agreement, the Notes, the Letters of Credit, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Company or any of its Subsidiaries, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any instrument at any time constituting, or intended to constitute, collateral security for the Notes or to inspect any of the properties, books or records of the Company or any of its Subsidiaries. The Administrative Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Company or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Administrative Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Lenders or the Holders, with respect to the credit worthiness or financial conditions of the Company or any of its Subsidiaries. Each Lender acknowledges that it has, independently and 73 -67- without reliance upon the Administrative Agent or any other Lender or Holder, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. 16.5. PAYMENTS. 16.5.1. PAYMENTS TO ADMINISTRATIVE AGENT. A payment by the Company to the Administrative Agent hereunder, under the Notes or under any of the other Loan Documents for the account of any Lender or Holder shall constitute a payment to such Lender or Holder. The Administrative Agent agrees promptly to distribute to each Holder such Holder's pro rata share of payments received by the Administrative Agent for the account of the Lenders or Holders, except as otherwise expressly provided herein or in any of the other Loan Documents. 16.5.2. DISTRIBUTION BY ADMINISTRATIVE AGENT. If in the opinion of the Administrative Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Administrative Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Administrative Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. 16.5.3. DELINQUENT LENDERS. Notwithstanding anything to the contrary contained in this Agreement or any of the other Loan Documents, any Lender that fails (i) to make available to the Administrative Agent its pro rata share of any Loan, or (iii) to comply with the provisions of Section 15 with respect to making dispositions and arrangements with the other Lenders, where such Lender's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders, in each case as, when and to the full extent required by the provisions of this Agreement, shall be deemed delinquent (a "Delinquent Lender") and shall be deemed a Delinquent Lender until such time as such delinquency is satisfied. A Delinquent Lender shall be deemed to have assigned any and all payments due to it from the Company, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Lenders for application to, and reduction of, their respective pro rata shares of all outstanding Loans. The Delinquent Lender hereby authorizes the Administrative Agent to distribute such payments to the nondelinquent Lenders in proportion to their respective pro rata shares of all outstanding Loans. A Delinquent Lender shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans of the nondelinquent Lenders, the Lenders' respective pro rata shares of all outstanding Loans have returned to 74 -68- those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. 16.6. HOLDERS OF NOTES. The Administrative Agent may deem and treat the payee of any Note as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. 16.7. INDEMNITY. The Holders ratably agree hereby to indemnify and hold harmless the Administrative Agent from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Administrative Agent has not been reimbursed by the Company as required by Section 17), and liabilities of every nature and character arising out of or related to this Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Administrative Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Administrative Agent's willful misconduct or gross negligence. 16.8. ADMINISTRATIVE AGENT AS LENDER AND HOLDER. In its individual capacity, BankBoston shall have the same obligations and the same rights, powers and privileges in respect of its Commitments and the Loans made by it and as the holder of any of the Notes, as it would have were it not also the Administrative Agent. 16.9. RESIGNATION OF ADMINISTRATIVE AGENT. The Administrative Agent may resign at any time by giving sixty (60) days prior written notice thereof to the Holders and the Company. Upon any such resignation, the Majority Holders shall have the right to appoint a successor Administrative Agent. Unless a Default or Event of Default shall have occurred and be continuing, such successor Administrative Agent shall be reasonably acceptable to the Company. If no successor Administrative Agent shall have been so appointed by the Majority Holders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent's giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Holders, appoint a successor Administrative Agent, which shall be a financial institution having a rating of not less than A or its equivalent by Standard & Poor's Corporation. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation, the provisions of this Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. 17. EXPENSES. 75 -69- The Company agrees to pay (i) the reasonable costs of producing and reproducing this Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (ii) any taxes (including any interest and penalties in respect thereto) payable by the Administrative Agent or any of the Lenders or Holders (other than taxes based upon the Administrative Agent's or any Lender's or Holder's net income) on or with respect to the transactions contemplated by this Agreement (the Company hereby agreeing to indemnify the Administrative Agent and each Lender and Holder with respect thereto), (iii) the reasonable fees, expenses and disbursements of the Administrative Agent's Special Counsel or any local counsel to the Administrative Agent incurred in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, and amendments, modifications, approvals, consents or waivers hereto or hereunder, (iv) the fees, expenses and disbursements of the Administrative Agent incurred by the Administrative Agent in connection with the preparation, administration or interpretation of the Loan Documents and other instruments mentioned herein, including all title insurance premiums, asset and/or collateral examiners' and commercial finance examiners' fees and surveyor, engineering and appraisal charges, (v) any fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by the Administrative Agent in establishing, maintaining or handling agency accounts, lock box accounts and other accounts for the collection of any funds; and (vi) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys' fees and costs, which attorneys may be employees of any Lender or Holder or the Administrative Agent, and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by any Lender or Holder or the Administrative Agent in connection with (A) the enforcement of or preservation of rights under any of the Loan Documents against the Company or any of its Subsidiaries or the administration thereof after the occurrence of a Default or Event of Default and (B) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to any Lender's or Holder's or the Administrative Agent's relationship with the Company or any of its Subsidiaries. The covenants of this Section 17 shall survive payment or satisfaction of all other Obligations. 18. INDEMNIFICATION. The Company agrees to indemnify and hold harmless the Administrative Agent, the Arranger and each of the Lenders and Holders, and their respective shareholders, directors, agents, officers, Subsidiaries and Affiliates (each, an "Indemnified Party") from and against any and all claims, actions, suits or causes of action whether groundless or otherwise, and from and against any and all liabilities, losses, damages, settlement payments, obligations, and reasonable costs and expenses of every nature and character arising out of this Agreement, the Notes or any of the other Loan Documents or the transactions contemplated hereby or thereby, including, without limitation, (i) any actual or proposed use by the Company or any of its Subsidiaries of the proceeds of any of the Loans, (ii) the reversal or withdrawal of any provisional credits granted by the Administrative Agent or any Lender or Holder upon the transfer of funds from bank agency or lock 76 -70- box accounts or in connection with the provisional honoring of checks or other items, (iii) any actual or alleged infringement of any patent, copyright, trademark, service mark or similar right of the Company or any of its Subsidiaries, (iv) the Company or any of its Subsidiaries entering into or performing this Agreement, the Notes or any of the other Loan Documents, or (v) with respect to the Company and its Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threatened release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel and allocated costs of internal counsel incurred in connection with any such investigation, litigation or other proceeding, but excluding any such liabilities, losses, damages, settlement payments, obligations, costs and expenses resulting from the gross negligence or willful misconduct of the applicable Indemnified Party. In litigation, or the preparation therefor, each of the Lenders or Holders, the Arranger and the Administrative Agent shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Company agrees to pay promptly the reasonable fees and expenses of such counsel. If, and to the extent that the obligations of the Company under this Section 18 are unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. The covenants contained in this Section 18 shall survive payment or satisfaction in full of all other Obligations. 19. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Company or any of its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Lenders, the Holders and the Administrative Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by any of the Lenders of any of the Loans as herein contemplated, and shall continue in full force and effect so long as any amount due under this Agreement or the Notes or any of the other Loan Documents remains outstanding or any Lender has any obligation to make any Loans, and for such further time as may be otherwise expressly specified in this Agreement. All statements contained in any certificate or other paper delivered to any Lender or Holder or the Administrative Agent at any time by or on behalf of the Company or any of its Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Company or such Subsidiary hereunder. 20. ASSIGNMENT AND PARTICIPATION. 20.1. CONDITIONS TO ASSIGNMENT. Except as provided herein, each Lender and/or Holder may assign all or a portion of its interests, rights and obligations as a Lender or Holder under this Agreement (including all or a portion of any such 77 -71- Lender's Commitment Percentage and Commitment, and the same portion of the Loans at the time owing to any such Lender or Holder and the Notes held by any such Lender or Holder); provided that (a) any such assignment of a Lender's Commitment Percentage and Commitment shall be of a constant, and not a varying, percentage of all the assigning Lender's rights and obligations as a Lender under this Agreement, (b) each assignment shall be in an amount that is at least $500,000 or a greater multiple of $100,000, PROVIDED, however, that assignments that are made on the same day to two or more Related Funds may be treated as a single assignment for purposes of the minimum amount, and (c) the parties to such assignment shall execute and deliver to the Administrative Agent, for recording in the Note Register (as hereinafter defined), an Assignment and Acceptance, substantially in the form of EXHIBIT H hereto (an "ASSIGNMENT AND ACCEPTANCE"), together with any Notes subject to such assignment. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in any such Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (i) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Lender and Holder hereunder, and (ii) the assigning Lender or Holder shall, to the extent provided in such assignment and upon payment to the Administrative Agent of the registration fee referred to in Section 20.3, be released from its obligations under this Agreement. 20.2. CERTAIN REPRESENTATIONS AND WARRANTIES; LIMITATIONS; COVENANTS. By executing and delivering an Assignment and Acceptance, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Lender or Holder makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the Notes, the other Loan Documents or any other instrument or document furnished pursuant hereto, (b) the assigning Lender or Holder makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Company and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Company and any of its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Agreement, the Notes or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; 78 -72- (c) such assignee confirms that it has received a copy of this Agreement, together with copies of the most recent financial statements referred to in Section 8.4 and Section 9.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (d) such assignee will, independently and without reliance upon the assigning Lender or Holder, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (e) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (f) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as a Lender or Holder; and (g) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance. 20.3. REGISTER. The Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register or similar list (the "Note Register") for the recordation of (a) the names and addresses of the Lenders and Holders, (b) the Commitment Percentages of each of the Lenders, and (c) the Notes held by each of the Holders from time to time. The entries in the Note Register shall be conclusive, in the absence of manifest error, and the Company, the Administrative Agent and each of the Lenders and Holders may treat each Person whose name is recorded in the Note Register as a Lender and Holder hereunder for all purposes of this Agreement. The Note Register shall be available for inspection by the Company and the Holders at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, other than the recordations of transfers from the original Lenders or from a Lender to an Affiliate or a Related Fund of such Lender, the assigning Holder agrees to pay to the Administrative Agent a registration fee in the sum of $3,500. 20.4. NEW NOTES. Upon its receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Administrative Agent shall (i) record the information contained therein in the Note Register, and (ii) give prompt notice thereof to the Company and the Holders (other than the assigning Holder). Within five (5) Business Days after receipt of such notice, the Company, at its own expense, shall execute and deliver to the Administrative Agent in exchange for each surrendered Note, a new Note to the order of such assignee in an amount equal to the amount assumed by such assignee 79 -73- pursuant to such Assignment and Acceptance and, if the assigning Holder has retained some portion of its obligations hereunder, a new Note or Notes to the order of the assigning Holder in an amount equal to the amount of the Loans retained by it. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such in Assignment and Acceptance and shall otherwise be substantially the form of the assigned Notes. Upon the request of the recipient of new Notes or the Administrative Agent, within five (5) days of issuance of such new Notes pursuant to this Section 20.4, the Company shall deliver an opinion of counsel, which may be the general counsel of the Company, addressed to the recipients of the new Notes and the Administrative Agent, relating to the due authorization, execution and delivery of such new Notes and the legality, validity and binding effect thereof, in form and substance satisfactory to the recipients of the new Notes, the Administrative Agent and the Administrative Agent's Special Counsel. The surrendered Notes shall be cancelled and returned to the Company. 20.5. PARTICIPATIONS. Each Holder may sell participations to one or more banks or other entities in all or a portion of such Holder's rights and obligations under this Agreement and the other Loan Documents; provided that (i) any such sale or participation shall not affect the rights and duties of the selling Holder hereunder to the Company, and (iii) the only rights granted to the participant pursuant to such participation arrangements with respect to waivers, amendments or modifications of the Loan Documents shall be the rights to approve waivers, amendments or modifications that would reduce the principal of or the interest rate on any Notes or extend any regularly scheduled payment date for principal or interest. 20.6. DISCLOSURE. The Company agrees that in addition to disclosures made in accordance with standard and customary banking practices any Lender or Holder may disclose information obtained by such Lender or Holder pursuant to this Agreement to assignees or participants and potential assignees or participants hereunder; provided that such assignees or participants or potential assignees or participants shall agree (i) to treat in confidence such information unless such information otherwise becomes public knowledge, (ii) not to disclose such information to a third party, except as required by law or legal process and (iii) not to make use of such information for purposes of transactions unrelated to such contemplated assignment or participation. 20.7. ASSIGNEE OR PARTICIPANT AFFILIATED WITH THE COMPANY. If any assignee Holder is an Affiliate of the Company, then any such assignee Holder shall have no right to vote as a Holder hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Section 14.1 or Section 14.2, and the determination of the Majority Holders shall for all purposes of this Agreement and the other Loan Documents be made without regard to such assignee Holder's interest in any of the Notes. If any Holder sells a participating interest in any of the 80 -74- Notes to a participant, and such participant is the Company or an Affiliate of the Company, then such transferor Holder shall promptly notify the Administrative Agent of the sale of such participation. A transferor Holder shall have no right to vote as a Holder hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Section 14.1 or Section 14.2 to the extent that such participation is beneficially owned by the Company or any Affiliate of the Company, and the determination of the Majority Holders shall for all purposes of this Agreement and the other Loan Documents be made without regard to the interest of such transferor Holder in the Notes to the extent of such participation. 20.8. MISCELLANEOUS ASSIGNMENT PROVISIONS. Any assigning Holder shall retain its rights to be indemnified pursuant to Section 17 with respect to any claims or actions arising prior to the date of such assignment. If any assignee Holder is not incorporated under the laws of the United States of America or any state thereof, it shall, prior to the date on which any interest or fees are payable hereunder, under the Notes or under any of the other Loan Documents for its account, deliver to the Company and the Administrative Agent certification as to its exemption from deduction or withholding of any United States federal income taxes. If the Reference Bank transfers all of its interest, rights and obligations under this Agreement, the Administrative Agent shall, in consultation with the Company and with the consent of the Company and the Majority Holders, appoint another financial institution to act as the Reference Bank hereunder, and in the absence of such consent the Administrative Agent shall act as Reference Bank. Anything contained in this Section 20 to the contrary notwithstanding, any Holder may at any time pledge all or any portion of its interest and rights under this Agreement (including all or any portion of its Notes) to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall release the pledgor Holder from its obligations hereunder or under any of the other Loan Documents. 20.9. ASSIGNMENT BY THE COMPANY. The Company shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of each of the Holders. 21. NOTICES, ETC. Except as otherwise expressly provided in this Agreement, all notices and other communications made or required to be given pursuant to this Agreement or the Notes shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail or, if either the Person giving the notice or the Person being notified is outside the United States, by registered or recorded-delivery air mail, in each case postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows: 81 -75- (a) if to the Company, at TransTechnology Corporation, 150 Allen Road, Liberty Corner, New Jersey 07938, U.S.A., Attention: Gerald C. Harvey, Esq., Vice President, Secretary and General Counsel, or at such other address for notice as the Company shall last have furnished in writing to the Person giving the notice; (b) if to the Administrative Agent, at 100 Federal Street, Boston, Massachusetts 02110, USA, Attention: Maura C. Wadlinger, Vice President, or such other address for notice as the Administrative Agent shall last have furnished in writing to the Person giving the notice; (c) if to any Lender or Holder, at such Lender's or Holder's address set forth on SCHEDULE 1 hereto, or such other address for notice as such Lender or Holder shall have last furnished in writing to the Person giving the notice; and Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile, (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof, and (iii) if sent by registered or recorded-delivery air mail, on the fifth Business Day following the mailing thereof. 22. GOVERNING LAW. THIS AGREEMENT, THE NOTES AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SAID COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE COMPANY AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT, OR THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND THE COMPANY CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON IT BY MAIL AT THE ADDRESS SPECIFIED IN SECTION 21. THE COMPANY HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. 23. HEADINGS. 82 -76- The captions in this Agreement are for convenience of reference only and shall not define or limit the provisions hereof. 24. COUNTERPARTS. This Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. 25. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 27. 26. WAIVER OF JURY TRIAL. The Company and each of the Lenders hereby waives its right to a jury trial with respect to any action or claim arising out of any dispute in connection with this Agreement, the Notes or any of the other Loan Documents, any rights or obligations hereunder or thereunder or the performance of which rights and obligations. Except as prohibited by law, the Company hereby waives any right it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Company (a) certifies that no representative, agent or attorney of any Lender, Holder or the Administrative Agent has represented, expressly or otherwise, that such Lender, Holder or the Administrative Agent would not, in the event of litigation, seek to enforce the foregoing waivers and (b) acknowledges that each of the Administrative Agent and the Lenders and Holders has been induced to enter into this Agreement, the other Loan Documents to which it is a party by, among other things, the waivers and certifications contained herein. 27. CONSENTS, AMENDMENTS, WAIVERS, ETC. 27.1. VOTING PROCEDURES. (a) Except as set forth in clauses (b) - (e) below, any term, covenant, agreement or condition of this Agreement or any of the Loan Documents may be amended or waived and any departure therefrom may be consented to by the Majority Holders if, but only if, such amendment, waiver or consent is in writing signed by the Majority Holders and, in the case of an amendment (other than an amendment described in Section 27.2), by the Company and, in any such event, the failure to observe, perform or discharge any such term, covenant, agreement or condition (whether such amendment is executed or such waiver or consent is given before or after such failure) shall not be construed as a breach of such term, covenant, 83 -77- agreement or condition or as a Default or an Event of Default. Unless otherwise specified in such waiver or consent, a waiver or consent given hereunder shall be effective only in the specific instance and for the specific purpose for which given. Anything herein to the contrary notwithstanding, the Majority Holders shall have the right to waive any Default or Event of Default and the consequences hereunder of such Default or Event of Default and shall have the right to enter into an agreement with the Company providing for the forbearance from the exercise of any remedies provided hereunder or under the other Loan Documents without waiving any Default or Event of Default. (b) Except as otherwise set forth in this Agreement, without the prior written consent of the Holders of such Note, no amendment, consent or waiver shall extend the originally scheduled time or times of payment of the principal of any Note or alter the time or times of payment of interest on such Note or the amount of the principal thereof or the rate of interest thereon or permit any subordination of the principal or interest on any such Note other than as expressly provided in Section 11. (c) Except as otherwise set forth in this Agreement, (i) without the prior written consent of each Lender, no amendment, consent or waiver shall affect the amounts or extend the time of any of the Lenders' Commitments and (ii) without the prior written consent of the Administrative Agent, no amendment, consent or waiver shall affect the right or duties of the Administrative Agent, including without limitation the provisions of Section 16. (d) No Restricted Subsidiary of the Company which is a "significant subsidiary" (as defined in Regulation S-X under the Securities Exchange Act of 1934) shall be released from the Subsidiary Guaranty without the prior unanimous written consent of each of the Holders pursuant to this Section 27.1(d). (e) Neither the definition of "Majority Holders", nor the provisions of this Section 27.1, may be amended without the prior unanimous written consent of each of the Holders. 27.2. COMPANY'S CONSENT NOT REQUIRED FOR CERTAIN AMENDMENTS. Notwithstanding any provision of this Agreement or the other Loan Documents to the contrary, no consent, written or otherwise, of the Company shall be necessary or required in connection with any amendment to Section 16, and any such amendment shall be effected solely by and among Administrative Agent and the Holders, provided that no such amendment shall impose any obligation on the Company. 27.3. COURSE OF DEALING. No course of dealing or delay or omission on the part of the Administrative Agent or any Lender or Holder in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Company shall entitle the Company to other or further notice or demand in similar or other circumstances. 28. SEVERABILITY. 84 -78- The provisions of this Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Agreement in any jurisdiction. 29. TREATMENT OF CERTAIN CONFIDENTIAL INFORMATION. 29.1. SHARING OF INFORMATION WITH SECTION 20 SUBSIDIARY. The Company acknowledges that from time to time financial advisory, investment banking and other services may be offered or provided to the Company or one or more of its Subsidiaries, in connection with this Agreement or otherwise, by a Section 20 Subsidiary. The Company, for itself and each of its Subsidiaries, hereby authorizes (a) such Section 20 Subsidiary to share with the Administrative Agent, each Lender and each Holder any information delivered to such Section 20 Subsidiary by the Company or any of its Subsidiaries, and (b) the Administrative Agent, each Lender and each Holder to share with such Section 20 Subsidiary any information delivered to the Administrative Agent, such Lender or such Holder by the Company or any of its Subsidiaries pursuant to this Agreement, or in connection with the decision of such Lender to enter into this Agreement or of such Holder to purchase any Note; it being understood, in each case, that any such Section 20 Subsidiary receiving such information shall be bound by the confidentiality provisions of this Agreement. Such authorization shall survive the payment and satisfaction in full of all of Obligations. 29.2. CONFIDENTIALITY. Each of the Lenders, the Holders and the Administrative Agent agrees, on behalf of itself and each of its affiliates, directors, officers, employees and representatives, to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of the same nature and in accordance with safe and sound banking practices, any non-public information supplied to it by the Company or any of its Subsidiaries pursuant to this Agreement that is identified by such Person as being confidential at the time the same is delivered to any of the Lenders, the Holders or the Administrative Agent, provided that nothing herein shall limit the disclosure of any such information (a) after such information shall have become public other than through a violation of this Section 29, (b) to the extent required by statute, rule, regulation or judicial process, (c) to counsel, auditors or accounts for any of the Lenders, the Holders or the Administrative Agent, (d) to bank examiners or any other regulatory authority having jurisdiction over any of the Lenders, the Holders or the Administrative Agent, (e) to the Administrative Agent, any Lender, any Holder or any Section 20 Subsidiary, (f) in connection with any litigation to which any one or more of the Lenders, the Administrative Agent or any Section 20 Subsidiary is a party, or in connection with the enforcement of rights or remedies hereunder or under any other Loan Document, (g) to a Subsidiary or affiliate of such Lender or such Holder as provided in Section 29.1 or (h) to any assignee! or participant (or prospective assignee or participant) so long as such assignee or participant agrees to be bound by the provisions of Section 20.6. 85 -79- 29.3. PRIOR NOTIFICATION. Unless specifically prohibited by applicable law or court order, each of the Lenders, the Holders and the Administrative Agent shall, prior to disclosure thereof, notify the Company of any request for disclosure of any such non-public information by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender, such Holder or the Administrative Agent by such governmental agency) or pursuant to legal process, and shall consult with the Company on the advisability of taking legally available steps to resist or narrow any such request. In the event that such steps are not available or effective, or are deemed inadvisable by counsel to such Lender, such Holder or the Administrative Agent, as the case may be, or in the event that the Company waives compliance with the provisions of this Section 29.3, such Lender, such Holder or the Administrative Agent, and/or its respective representatives, as the case may be, may disclose to any tribunal only that portion of such non-public information which it is advised by counsel is legally required to be disclosed, and shall exercise reasonable efforts to obtain assurances that confidential treatment will be accorded such non-public information. 29.4. OTHER. In no event shall any Lender, Holder or the Administrative Agent be obligated or required to return any materials furnished to it or any Section 20 Subsidiary by the Company or any of its Subsidiaries which such Lender, Holder Section 20 Subsidiary or Administrative Agent is required to retain pursuant to any requirement of law or rule or regulation of any governmental agency. The obligations of each Lender and each Holder under this Section 29 shall supersede and replace the obligations of such Lender or such Holder under any confidentiality letter in respect of this financing signed and delivered by such Lender or such Holder to the Company prior to the date hereof and shall be binding upon any assignee of, or purchaser of any participation in, any interest in any of the Notes from any Lender or any Holder. 86 IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a sealed instrument as of the date first set forth above. TRANSTECHNOLOGY CORPORATION By: /s/ Joseph F. Spanier -------------------------------------- Name: Joseph F. Spanier Title: Vice President & CFO BANKBOSTON, N.A., individually and as Administrative Agent By: /s/ Robert W. MacElhiney -------------------------------------- Name: Robert W. MacElhiney Title: Vice President ABN AMRO BANK N.V. By: /s/ Lisa Megeaski -------------------------------------- Name: Lisa Megeaski Title: Vice President By: /s/ Edward D. Puckhaber -------------------------------------- Name: Edward D. Puckhaber Title: Assistant Vice President FIRST CHICAGO CAPITAL CORPORATION By: /s/ Kevin J. Rooney -------------------------------------- Name: Kevin Rooney Title: Director 87 EXHIBIT A PAYMENT OF THIS BRIDGE NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE PRIOR PAYMENT IN FULL IN CASH OR CASH EQUIVALENTS OF ALL SENIOR DEBT, AS DEFINED IN THAT CERTAIN PURCHASE AGREEMENT REFERRED TO BELOW, A COPY OF WHICH WILL BE MADE AVAILABLE TO THE HOLDER HEREOF UPON WRITTEN REQUEST TO THE ADMINISTRATIVE AGENT. FORM OF BRIDGE NOTE $[___________] _____________ __, ____" FOR VALUE RECEIVED, the undersigned TRANSTECHNOLOGY CORPORATION, a Delaware corporation ("TransTechnology"), hereby promises to pay (without setoff or counterclaim) to the order of [INSERT LENDER], a [insert entity] (the "Lender"), at the Administrative Agent's Head Office (as defined in the Purchase Agreement referred to below): (a) prior to or on August __, 2004" \@ "MMMM d, yyyy" \* charformat August __, 2000 the principal amount of [INSERT AMOUNT] DOLLARS ($____), evidencing the portion of the Bridge Loan made by the Lender to TransTechnology pursuant to the Senior Subordinated Note Purchase Agreement dated as of August 31, 1999 (as amended, restated, modified, varied and in effect from time to time, the "Purchase Agreement"), by and among TransTechnology, the lending institutions party thereto (the "Lenders"), and BankBoston, N.A., as administrative agent for the Lenders (the "Administrative Agent"); (b) the principal outstanding hereunder from time to time at the times provided in the Purchase Agreement; and (c) interest from the date hereof on the principal amount from time to time outstanding to and including the maturity hereof at the rates and terms and in all cases in accordance with the terms of the Purchase Agreement. This Note evidences borrowings under and has been issued by TransTechnology in accordance with the terms of the Purchase Agreement. The Lender and any holder hereof is entitled to the benefits of the Purchase Agreement and the other Loan Documents, and may enforce the agreements of TransTechnology contained therein, and any holder hereof may exercise the respective remedies provided for thereby or otherwise available in respect thereof, all in accordance with the respective terms thereof. All capitalized terms used in this Note and not otherwise defined herein shall have the same meanings herein as in the Purchase Agreement. TransTechnology irrevocably authorizes the Lender to make or cause to be made, at the time of receipt of any payment of principal of this Note, an appropriate notation on the grid attached to this Note, or the continuation of such grid, or any other similar record, 88 -2- including computer records, reflecting the receipt of such payment. The outstanding amount of the Lender's portion of the Bridge Loan set forth on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Lender with respect to its portion of the Bridge Loan shall be PRIMA FACIE evidence of the principal amount of the Lender's portion of the Bridge Loan owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such amount on any such grid, continuation or other record shall not limit or otherwise affect the obligation of TransTechnology hereunder or under the Purchase Agreement to make payments of principal of and interest on this Note when due. TransTechnology has the right in certain circumstances and the obligation under certain other circumstances to prepay the whole or part of the principal of this Note on the terms and conditions specified in the Purchase Agreement. If any one or more of the Events of Default shall occur, the entire unpaid principal amount of this Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Purchase Agreement. No delay or omission on the part of the Lender or any holder hereof in exercising any right hereunder shall operate as a waiver of such right or of any other rights of the Lender or such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar or waiver of the same or any other right on any future occasion. TransTechnology and every endorser and guarantor of this Note or the obligation represented hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or person primarily or secondarily liable. This Note is subject to conversion into a Term Note on the terms and conditions specified in the Purchase Agreement. THIS NOTE AND THE OBLIGATIONS OF TRANSTECHNOLOGY HEREUNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). TRANSTECHNOLOGY AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON TRANSTECHNOLOGY BY MAIL AT THE ADDRESS SPECIFIED IN SS.21 OF THE PURCHASE AGREEMENT. TRANSTECHNOLOGY HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. 89 -3- TRANSTECHNOLOGY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS NOTE, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. This Note shall be deemed to take effect as a sealed instrument under the laws of the Commonwealth of Massachusetts. 90 -4- IN WITNESS WHEREOF, the undersigned has caused this Note to be signed under seal in its corporate name by its duly authorized officer as of the day and year first above written. TRANSTECHNOLOGY CORPORATION By: _____________________________________________ Name: Title: 91 -5- Amount Amount of Balance of of Bridge Loan Principal Paid Principal Notation Date or Prepaid Unpaid Made By: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 92 EXHIBIT B PAYMENT OF THIS TERM NOTE IS SUBORDINATED IN RIGHT OF PAYMENT TO THE PRIOR PAYMENT IN FULL IN CASH OR CASH EQUIVALENTS OF ALL SENIOR DEBT, AS DEFINED IN THAT CERTAIN PURCHASE AGREEMENT REFERRED TO BELOW, A COPY OF WHICH WILL BE MADE AVAILABLE TO THE HOLDER HEREOF UPON WRITTEN REQUEST TO THE ADMINISTRATIVE AGENT. FORM OF TERM NOTE $[___________] _____________ __, ____ FOR VALUE RECEIVED, the undersigned TRANSTECHNOLOGY CORPORATION, a Delaware corporation ("TransTechnology"), hereby promises to pay (without setoff or counterclaim) to the order of [INSERT LENDER], a [insert entity] (the "Lender"), at the Administrative Agent's Head Office (as defined in the Purchase Agreement referred to below): (a) prior to or on August __, 2004" \@ "MMMM d, yyyy" \* charformat August __, 2009 the principal amount of [INSERT AMOUNT] DOLLARS ($____), evidencing the portion of the Term Loan made by the Lender to TransTechnology pursuant to the Senior Subordinated Note Purchase Agreement dated as of August 31, 1999 (as amended, restated, modified, varied and in effect from time to time, the "Purchase Agreement"), by and among TransTechnology, the lending institutions party thereto (the "Lenders"), and BankBoston, N.A., as administrative agent for the Lenders (the "Administrative Agent"); (b) the principal outstanding hereunder from time to time at the times provided in the Purchase Agreement; and (c) interest from the date hereof on the principal amount from time to time outstanding to and including the maturity hereof at the rates and terms and in all cases in accordance with the terms of the Purchase Agreement. This Note evidences borrowings under and has been issued by TransTechnology in accordance with the terms of the Purchase Agreement. The Lender and any holder hereof is entitled to the benefits of the Purchase Agreement and the other Loan Documents, and may enforce the agreements of TransTechnology contained therein, and any holder hereof may exercise the respective remedies provided for thereby or otherwise available in respect thereof, all in accordance with the respective terms thereof. All capitalized terms used in this Note and not otherwise defined herein shall have the same meanings herein as in the Purchase Agreement. TransTechnology irrevocably authorizes the Lender to make or cause to be made, at the time of receipt of any payment of principal of this Note, an appropriate notation on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, reflecting the receipt of such payment. The outstanding 93 -2- amount of the Lender's portion of the Term Loan set forth on the grid attached to this Note, or the continuation of such grid, or any other similar record, including computer records, maintained by the Lender with respect to its portion of the Term Loan shall be prima facie evidence of the principal amount of the Lender's portion of the Term Loan owing and unpaid to the Lender, but the failure to record, or any error in so recording, any such amount on any such grid, continuation or other record shall not limit or otherwise affect the obligation of TransTechnology hereunder or under the Purchase Agreement to make payments of principal of and interest on this Note when due. TransTechnology has the right in certain circumstances and the obligation under certain other circumstances to prepay the whole or part of the principal of this Note on the terms and conditions specified in the Purchase Agreement. If any one or more of the Events of Default shall occur, the entire unpaid principal amount of this Note and all of the unpaid interest accrued thereon may become or be declared due and payable in the manner and with the effect provided in the Purchase Agreement. No delay or omission on the part of the Lender or any holder hereof in exercising any right hereunder shall operate as a waiver of such right or of any other rights of the Lender or such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar or waiver of the same or any other right on any future occasion. TransTechnology and every endorser and guarantor of this Note or the obligation represented hereby waives presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, and assents to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral and to the addition or release of any other party or person primarily or secondarily liable. THIS NOTE AND THE OBLIGATIONS OF TRANSTECHNOLOGY HEREUNDER SHALL FOR ALL PURPOSES BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). TRANSTECHNOLOGY AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON TRANSTECHNOLOGY BY MAIL AT THE ADDRESS SPECIFIED IN SS.21 OF THE PURCHASE AGREEMENT. TRANSTECHNOLOGY HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. TRANSTECHNOLOGY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS NOTE, ANY RIGHTS OR OBLIGATIONS 94 -3- HEREUNDER, OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. This Note shall be deemed to take effect as a sealed instrument under the laws of the Commonwealth of Massachusetts. 95 -4- IN WITNESS WHEREOF, the undersigned has caused this Note to be signed under seal in its corporate name by its duly authorized officer as of the day and year first above written. TRANSTECHNOLOGY CORPORATION By: __________________________________________ Name: Title: 96 -5- Amount Amount of Balance of of Term Loan Principal Paid Principal Notation Date or Prepaid Unpaid Made By: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 97 EXHIBIT C [FORM OF EXCHANGE NOTE] (Face of Note) ================================================================================ CUSIP #______ [Series A] [Series B] Senior Subordinated Notes due 2009 No.__ $_____ TransTechnology Corporation promises to pay to______________________________________________ or registered assigns, the principal sum of________________________________________ Dollars on ________, 2009. Interest Payment Dates: August 31, November 30, February 28 and May 31 Record Dates: August 15, November 15, February 14 and May 15 DATED: ____________, 200_ TRANSTECHNOLOGY CORPORATION BY: ------------------------------ Name: Title: (SEAL) This is one of the [Global] Notes referred to in the within-mentioned Indenture: State Street Bank and Trust Company, as Trustee By: --------------------------- Name: Title: ================================================================================ 98 -2- (Back of Note) [Series A] [Series B] Senior Subordinated Notes due 2009 [INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] [INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. TransTechnology Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at [if subject to the Fixed Rate, insert Fixed Rate][the Variable Rate, as defined in the Indenture to which this Note is subject]% per annum from __________________ until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages semi-annually on August 31, November 31, February 28 and May 31 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand to the extent lawful at a rate that is 2% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the August 15, November 15, February 14, or May 15 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. Principal, premium, if any, and interest and Liquidated Damages on the Notes will be payable at the office or agency of the Company maintained for such purpose or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium, interest and Liquidated Damages with respect to Notes the Holders of which have given wire transfer instructions to the Company prior to the Record Date will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued in denominations of $1,000 and integral multiples thereof. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 99 -3- 4. INDENTURE AND SUBORDINATION. The Company issued the Notes under an Indenture dated as of August 31, 2000 ("the Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are general unsecured obligations of the Company limited to $75.0 million in aggregate principal amount. The payment of the Notes will, to the extent set forth in the Indenture, be subordinated in right of payment to the prior payment in full in cash or cash equivalents of all Senior Debt. 5. OPTIONAL REDEMPTION. (a) The Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 10 nor more than 30 days' notice, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon and Liquidated Damages under and as defined in the Registration Right Agreement referred to below with respect thereto, to the applicable redemption date. (b) Notwithstanding the provisions of clause (a), any Notes held by a Fixed Rate Holder (as defined in the Indenture) shall not be subject to redemption at the Company's option until August 31, 2005, and from and after August 31, 2005 the amount required to be paid in redemption of any such Note shall be equal to the outstanding principal amount thereof, PLUS any accrued but unpaid interest and Liquidated Damages thereon, to the applicable redemption date, PLUS a premium equal to the product of (i) the principal amount of such Note multiplied by (ii) the percentage calculated by multiplying (A) the fixed interest rate applicable to such Note by (B) the percentage set forth in the table below opposite the period in which such redemption occurs: Period Percentage ------ ---------- From and including August 31, 2005 through 50% August 30, 2006 From and including August 31, 2006 through 33.33% August 30, 2007 From and including August 31, 2007 through 16.66% August 30, 2008 From and including August 31, 2008 through 0% August 30, 2009 6. MANDATORY REDEMPTION. Except as set forth in Paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, each Holder of Notes will have the right to require the Company to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages 100 -4- thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 15 Business Days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $5.0 million the Company will be required to make an offer to all Holders of Notes and all holders of other pari passu Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture and such other Indebtedness. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such other Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. 8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class mail at least 10 days but not more than 30 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. Notes in denominations larger than $1,000 may be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company or the Registrar is not required to transfer or exchange any Note selected for redemption. Also, the Company or the Registrar is not required to transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Notes or the Subsidiary Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes) and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding 101 -5- Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). Without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation, or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by the Company or any of its Subsidiaries for 30 days after notice to comply with Section 4.07, 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by the Company or any of its Subsidiaries for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, which default results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $5.0 million or more (other than Existing Indebtedness to the extent it is secured by or paid by the drawing against a letter of credit permitted to be issued under the Indenture); (vi) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries as set forth in the Indenture; and (viii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid in any material respect or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least a majority in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency as set forth in the Indenture, with respect to the Company, any Significant Subsidiary or any group of Subsidiaries, that taken together would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 102 -6- 13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any Guarantor, as such, shall not have any liability for any obligations of the Company or any Guarantor under the Notes, the Subsidiary Guarantees, the Indenture or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of August 31, 1999, between the Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: TransTechnology Corporation 150 Allen Road Liberty Corner, NJ 07893 Attention: Chief Financial Officer 103 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - -------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint ___________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. - -------------------------------------------------------------------------------- Date:________________ Your Signature:_________________________ (Sign exactly as your name appears on the Note) SIGNATURE GUARANTEE: - ------------------------- Participant in a Recognized Signature Guarantee Medallion Program 104 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $_____ Date:______ Your Signature:______________________________ (Sign exactly as your name appears on the Note) Tax Identification No:________________________ SIGNATURE GUARANTEE _____________________________ Participant in a Recognized Signature Guarantee Medallion Program 105 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1) The following changes of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global Note or Definitive Note for an interest in this Global Note, have been made:
Amount of Amount of Principal Amount decrease in increase in of this Signature of Principal Principal Global Note authorized officer Amount of Amount of following such of Trustee or Date of Exchange this Global Note this Global Note decrease (or increase) Custodian - ---------------- ---------------- ---------------- ---------------------- ------------------
(1) This should be included only if the Note is issued in global form. 106 EXHIBIT D - ------------------------------------------------------------------------------- TRANSTECHNOLOGY CORPORATION SERIES A AND SERIES B SENIOR SUBORDINATED NOTES DUE 2009 INDENTURE --------------------------------------- Dated as of August 31, 2000 --------------------------------------- STATE STREET BANK AND TRUST COMPANY Trustee - ------------------------------------------------------------------------------- 107 CROSS-REFERENCE TABLE*
(a) TRUST INDENTURE Act Section Indenture Section 310(a)(1)........................................................................................7.10 (a)(2)...........................................................................................7.10 (a)(3)...........................................................................................N.A. (a)(4)...........................................................................................N.A. (a)(5)...........................................................................................7.10 (i)(b)...........................................................................................7.10 (ii)(c)..........................................................................................N.A. 311(a)...........................................................................................7.11 (b)..............................................................................................7.11 (iii(c)..........................................................................................N.A. 312(a)...........................................................................................2.05 (b)..............................................................................................11.03 (iv)(c)..........................................................................................11.03 313(a)...........................................................................................7.06 (b)(2)...........................................................................................7.07 (v)(c)...........................................................................................7.06; 12.02 (vi)(d)..........................................................................................7.06 314(a)...........................................................................................4.03; 12.02 (c)(1)...........................................................................................12.04 (c)(2)...........................................................................................12.04 (c)(3)...........................................................................................N.A. (vii)(e).........................................................................................11.05 (f)..............................................................................................NA 315 (a)..........................................................................................7.01 (b)..............................................................................................7.05, 12.02 (A)(c)...........................................................................................7.01 (d)..............................................................................................7.01 (e)..............................................................................................6.11 316 (a)(last sentence)...........................................................................2.09 (a)(1)(A)........................................................................................6.05 (a)(1)(B)........................................................................................6.04 (a)(2)...........................................................................................N.A. (b)..............................................................................................6.07 (B)(c)...........................................................................................2.12 317(a)(1)........................................................................................6.08 (a)(2)...........................................................................................6.09 (b)..............................................................................................2.04 318 (a)..........................................................................................12.01 (b)..............................................................................................N.A. (c)..............................................................................................12.01 N.A. means not applicable. *This Cross-Reference Table is not part of the Indenture.
108
TABLE OF CONTENTS ----------------- PAGE ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE...............................................................................................1 Section 1.01. Definitions..............................................................1 Section 1.02. Other Definitions........................................................19 Section 1.03. Terms of Tia.............................................................19 Section 1.04. Rules of Construction....................................................20 ARTICLE 2. THE NOTES....................................................................................20 Section 2.01. Form and Dating..........................................................20 Section 2.02. Execution and Authentication.............................................22 Section 2.03. Registrar and Paying Agent...............................................22 Section 2.04. Paying Agent to Hold Money in Trust......................................23 Section 2.05. Holder Lists.............................................................23 Section 2.06. Transfer and Exchange....................................................24 Section 2.07. Replacement Notes........................................................28 Section 2.08. Outstanding Notes........................................................28 Section 2.09. Treasury Notes...........................................................29 Section 2.10. Temporary Notes..........................................................29 Section 2.11. Cancellation.............................................................29 Section 2.12. Defaulted Interest.......................................................30 SECTION 2.13 Special Transfer Provisions..............................................30 ARTICLE 3. REDEMPTION AND PREPAYMENT....................................................................34 Section 3.01. Notices to Trustee.......................................................34 Section 3.02. Selection of Notes to Be Redeemed........................................34 Section 3.03. Notice of Redemption.....................................................35 Section 3.04. Effect of Notice of Redemption...........................................36 Section 3.05. Deposit of Redemption Price..............................................36 Section 3.06. Notes Redeemed in Part...................................................36 Section 3.07. Optional Redemption......................................................36 Section 3.08. Mandatory Redemption.....................................................37 Section 3.09. Offer to Purchase by Application of Excess Proceeds......................37 ARTICLE 4. COVENANTS....................................................................................39 Section 4.01. Payment of Notes.........................................................39 Section 4.02. Maintenance of Office or Agency..........................................40 Section 4.03. Reports..................................................................40 Section 4.04. Compliance Certificate...................................................41 Section 4.05. Taxes....................................................................42 Section 4.06. Stay, Extension and Usury Laws...........................................42
109 ii Section 4.07. Restricted Payments......................................................43 Section 4.08. Dividend and Other Payment Restrictions Affecting Subsidiaries...........45 Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock...............46 Section 4.10. Asset Sales.............................................................49 Section 4.11. Transactions with Affiliates.............................................50 Section 4.12. Liens....................................................................51 Section 4.13. No Senior Subordinated Debt..............................................51 Section 4.14. Corporate Existence......................................................51 Section 4.15. Offer to Repurchase Upon Change of Control...............................52 Section 4.16. Payments for Consent.....................................................53 Section 4.17. Additional Subsidiary Guarantees.........................................53 ARTICLE 5. SUCCESSORS...................................................................................53 Section 5.01. Merger, Consolidation, or Sale of Assets.................................53 Section 5.02. Successor Corporation Substituted........................................54 ARTICLE 6. DEFAULTS AND REMEDIES........................................................................54 Section 6.01. Events of Default........................................................54 Section 6.02. Acceleration.............................................................56 Section 6.03. Other Remedies...........................................................57 Section 6.04. Waiver of Past Defaults..................................................57 Section 6.05. Control by Majority......................................................57 Section 6.06. Limitation on Suits......................................................58 Section 6.07. Rights of Holders of Notes to Receive Payment............................58 Section 6.08. Collection Suit by Trustee...............................................58 Section 6.09. Trustee May File Proofs of Claim.........................................59 Section 6.10. Priorities...............................................................59 Section 6.11. Undertaking for Costs....................................................60 ARTICLE 7. TRUSTEE......................................................................................60 Section 7.01. Duties of Trustee........................................................60 Section 7.02. Rights of Trustee........................................................61 Section 7.03. Individual Rights of Trustee.............................................62 Section 7.04. Trustee's Disclaimer.....................................................62 Section 7.05. Notice of Defaults.......................................................62 Section 7.06. Reports by Trustee to Holders of the Notes...............................63 Section 7.07. Compensation and Indemnity...............................................63 Section 7.08. Replacement of Trustee...................................................64 Section 7.09. Successor Trustee by Merger, etc.........................................65 Section 7.10. Eligibility; Disqualification............................................65 Section 7.11 Preferential Collection of Claims Against Company........................66
110 iii ARTICLE 8. [intentionally omitted].....................................................................66 ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.............................................................66 Section 9.01. Without Consent of Holders of Notes......................................66 Section 9.02. With Consent of Holders of Notes.........................................67 Section 9.03. Compliance with Trust Indenture Act......................................68 Section 9.04. Revocation and Effect of Consents........................................68 Section 9.05. Notation on or Exchange of Notes.........................................69 Section 9.06. Trustee to Sign Amendments, etc..........................................69 ARTICLE 10. SUBORDINATION...............................................................................69 Section 10.01. Agreement to Subordinate.................................................69 Section 10.02. Certain Definitions......................................................70 Section 10.03. Liquidation; Dissolution; Bankruptcy.....................................70 Section 10.04. Default on Designated Senior Debt........................................71 Section 10.05. Acceleration of Securities...............................................72 Section 10.06. When Distribution Must Be Paid over......................................72 Section 10.07. Notice by Company........................................................73 Section 10.08. Subrogation..............................................................73 Section 10.09. Relative Rights..........................................................73 Section 10.10. Subordination May Not Be Impaired by Company.............................74 Section 10.11. Distribution or Notice to Representative.................................74 Section 10.12. Rights of Trustee and Paying Agent.......................................75 Section 10.13. Authorization to Effect Subordination....................................75 Section 10.14. Amendments...............................................................75 ARTICLE 11. SUBSIDIARY GUARANTEES.......................................................................76 Section 11.01. Guarantee................................................................76 Section 11.02. Subordination of Subsidiary Guarantee....................................77 Section 11.03. Limitation on Guarantor Liability........................................77 Section 11.04. Execution and Delivery of Subsidiary Guarantee...........................78 Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.......................78 Section 11.06. Releases Following Sale of Assets or capital stock.......................79 ARTICLE 12. MISCELLANEOUS...............................................................................79 Section 12.01. Trust Indenture Act Controls.............................................79 Section 12.02. Notices..................................................................79 Section 12.03. Communication by Holders of Notes with Other Holders of Notes............81 Section 12.04. Certificate and Opinion as to Conditions Precedent.......................81 Section 12.05. Statements Required in Certificate or Opinion............................81 Section 12.06. Rules by Trustee and Agents..............................................82 Section. 12.07. No Personal Liability of Directors, Officers, Employees and Stockholders.82
111 iv Section 12.08. Governing Law............................................................82 Section 12.09. No Adverse Interpretation of Other Agreements............................82 Section 12.10. Successors...............................................................82 Section 12.11. Severability.............................................................83 Section 12.12. Counterpart Originals....................................................83 Section 12.13. Table of Contents, Headings, etc.........................................83
112 v EXHIBITS Exhibit A-1 FORM OF NOTE Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE Exhibit B FORM OF CERTIFICATE OF TRANSFER Exhibit C FORM OF CERTIFICATE OF EXCHANGE Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR Exhibit E FORM OF SUBORDINATED SUBSIDIARY GUARANTEE Exhibit F FORM OF SUPPLEMENTAL INDENTURE 113 INDENTURE dated as of August 31, 2000 between TransTechnology Corporation, a Delaware corporation (the "Company"), the Guarantors named herein, and State Street Bank and Trust Company, a Massachusetts trust company, as trustee (the "Trustee"). The Company and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Company's Series A Senior Subordinated Notes due 2009 (the "Series A Notes") and the Company's Series B Senior Subordinated Notes due 2009 (the "Series B Notes"): ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. DEFINITIONS. "144A Global Note" means a global note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of, and registered in the name of, the Depositary or its nominee that will be issued in a denomination equal to the outstanding principal amount of the Notes sold in reliance on Rule 144A. "Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person. "Administrative Agent" means BankBoston, N.A., in its capacity as Administrative Agent under the Note Purchase Agreement, and any successor Administrative Agent under the Note Purchase Agreement. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person but in any event excluding the agent and lenders under the Senior Credit Facility. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. 114 2 "Agent" means any Registrar, Paying Agent or co-registrar. "Applicable Procedures" means, with respect to any transfer or exchange of or for beneficial interests in any Global Note, the rules and procedures of the Depositary, Euroclear and Cedel that apply to such transfer or exchange. "Asset Sale" means (i) the sale, lease, conveyance or other disposition of any assets or rights (including, without limitation, by way of a sale and leaseback) other than sales of inventory in the ordinary course of business consistent with past practices (provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole will be governed by Sections 4.15 or 5.01 and not by Section 4.10 hereof) and (ii) the issue or sale by the Company or any of its Restricted Subsidiaries of Equity Interests of any of the Company's Restricted Subsidiaries, in the case of either clause (i) or (ii), whether in a single transaction or a series of related transactions (a) that have a fair market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the foregoing, the following items shall not be deemed to be Asset Sales: (i) a transfer of assets by the Company to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to another Restricted Subsidiary, (ii) an issuance of Equity Interests by a Restricted Subsidiary to the Company or to another Restricted Subsidiary, and (iii) a Restricted Payment that is permitted by Section 4.07 hereof. "Bankruptcy Law" means Title 11, U.S. Code or any similar federal or state law for the relief of debtors. "Board of Directors" means the Board of Directors of the Company, or any authorized committee of the Board of Directors. "Broker-Dealer" has the meaning set forth in the Registration Rights Agreement. "Business Day" means any day other than a Legal Holiday. "Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or 115 3 participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than six months from the date of acquisition, (iii) certificates of deposit and eurodollar time deposits with maturities of six months or less from the date of acquisition, bankers' acceptances with maturities not exceeding six months and overnight bank deposits, in each case with any lender party to the Senior Credit Facility or with any domestic commercial bank having capital and surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above, (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each case maturing within six months after the date of acquisition and (vi) money market funds at least 95% of the assets of which constitute Cash Equivalents of the kinds described in clauses (i) - (v) of this definition. "Cedel" means Cedel Bank, SA. "Change of Control" means the occurrence of any of the following: (i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its Restricted Subsidiaries taken as a whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act), (ii) the adoption of a plan relating to the liquidation or dissolution of the Company; (iii) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above) becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 35% of the Voting Stock of the Company (measured by voting power rather than number of shares); or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Company" means TransTechnology Corporation, a Delaware corporation, and any and all successors thereto. 116 4 "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Subsidiaries for such period, to the extent that such provision for taxes was included in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Income, minus (v) non-cash items increasing such Consolidated Net Income for such period, in each case, on a consolidated basis and determined in accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on the income or profits of, and the depreciation and amortization and other non-cash expenses of, a Restricted Subsidiary of the referent Person shall be added to Consolidated Net Income to compute Consolidated Cash Flow only to the extent that a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Restricted Subsidiary without prior governmental approval (that has not been obtained), and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof that is a 117 5 Guarantor, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) and without direct or indirect restriction pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (iv) the cumulative effect of a change in accounting principles shall be excluded, and (v) the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not distributed to the Company or one of its Restricted Subsidiaries. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Restricted Subsidiaries as of such date plus (ii) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred equity (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred equity, less (a) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) effected subsequent to the date of this Indenture in the book value of any asset owned by such Person or a consolidated Restricted Subsidiary of such Person, (y) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Restricted Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the date of this Indenture, or (ii) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board at the time of such nomination or election. "Conversion Date" means August 31, 2000. "Corporate Trust Office of the Trustee" shall be at the address of the Trustee specified in Section 12.02 hereof or such other address as to which the Trustee may give notice to the Company. 118 6 "Credit Facilities" means, with respect to the Company and its Restricted Subsidiaries, one or more debt facilities (including, without limitation, the Senior Credit Facility) or commercial paper facilities with banks, insurance companies, commercial finance companies or other institutional lenders providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit or Hedging Obligations, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time. "Custodian" means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Definitive Note" means a certificated Note registered in the name of the Holder thereof and issued in accordance with Section 2.06 hereof, in the form of Exhibit A-1 hereto except that such Note shall not bear the Global Note Legend and shall not have the "Schedule of Exchanges of Interests in the Global Note" attached thereto. "Depositary" means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as depositary hereunder and having become such pursuant to the applicable provision of this Indenture. "Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, at the option of the holder thereof), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the Holder thereof, in whole or in part, on or prior to the date that is 91 days after the date on which the Notes mature; provided, however, that any Capital Stock that would constitute Disqualified Stock solely because the holders thereof have the right to require the Company to repurchase such Capital Stock upon the occurrence of a Change of Control or an Asset Sale shall not constitute Disqualified Stock if the terms of such Capital Stock provide that the Company may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Section 4.07 hereof. "Domestic Restricted Subsidiary" means, with respect to the Company, any Restricted Subsidiary of the Company that was formed under the laws of the United States of America or any state, possession or commonwealth thereof or the District 119 7 of Columbia, or that guarantees or otherwise provides credit support for any Indebtedness of the Company. "Domestic Subsidiary" means each current and any future Subsidiary of the Company that is organized under the laws of the United States or any state, possession or commonwealth thereof or the District of Columbia. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear system. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Notes" means the Notes issued in the Exchange Offer pursuant to Section 2.06(f) hereof. "Exchange Offer" has the meaning set forth in the Registration Rights Agreement. "Existing Indebtedness" means Indebtedness of the Company and its Restricted Subsidiaries (other than Indebtedness under the Senior Credit Facility) in existence on the date of this Indenture, until such Indebtedness is repaid. "Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest of such Person and its Restricted Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all dividend payments, whether or not in cash, on any series of preferred stock of such Person or any of its Restricted Subsidiaries, other than dividend payments on Equity Interests payable solely in Equity Interests of the Company (other than Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined 120 8 federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person for such period to the Fixed Charges of such Person and its Restricted Subsidiaries for such period. In the event that the referent Person or any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems or prepays any Indebtedness (other than revolving credit borrowings) or issues or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee, redemption or prepayment of Indebtedness, or such issuance or redemption of preferred stock, as if the same had occurred at the beginning of the applicable four-quarter reference period. In addition, for purposes of making the computation referred to above, (i) acquisitions that have been made by the Company or any of its Restricted Subsidiaries, including through mergers or consolidations and including any related financing transactions, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date shall be deemed to have occurred on the first day of the four-quarter reference period and Consolidated Cash Flow for such reference period shall be calculated without giving effect to clause (iii) of the proviso set forth in the definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the referent Person or any of its Restricted Subsidiaries following the Calculation Date. "Fixed Rate" means, with respect to any Note, the Fixed Rate payable thereon pursuant to and as defined in the Note Purchase Agreement. "Fixed Rate Holder" means any Holder of a Note other than (i) an original holder of a Bridge Note issued pursuant to the Note Purchase Agreement, (ii) an Affiliate of such an original holder, (iii) in the case of any such original holder or Affiliate which is an investment fund, any other such fund that is managed or advised by the same advisor of such original holder or Affiliate, or by an Affiliate of such investment advisor, or (iv) any transferee of a Note from any Person described in the foregoing clauses (i) - (iii) who shall have taken such Note as a "Variable Rate Holder" under and as defined in the Note Purchase Agreement. 121 9 "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of this Indenture. "Global Notes" means, individually and collectively, each of the Restricted Global Notes and the Unrestricted Global Notes, in the form of Exhibit A hereto. "Global Note Legend" means the legend set forth in Section 2.06(g)(ii), which is required to be placed on all Global Notes issued under this Indenture. "Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, by way of a pledge of assets or through letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness. "Guarantors" means (i) each current and future Domestic Restricted Subsidiary of the Company, and (ii) any other Subsidiary of the Company that executes a Guarantee in accordance with the provisions of this Indenture, and their respective successors and assigns. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) interest rate swap agreements, interest rate cap agreements and interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency changes. "Holder" means a Person in whose name a Note is registered. "Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all Indebtedness of others secured by a Lien on any asset of such Person (whether or not such Indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person 122 10 of any indebtedness of any other Person. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof, in the case of any Indebtedness issued with original issue discount, and (ii) the principal amount thereof in the case of any other Indebtedness. "Indenture" means this Indenture, as amended or supplemented from time to time. "Institutional Accredited Investor" means an institution that is an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including Guarantees of Indebtedness or other obligations), advances or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities, together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary of the Company, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Restricted Subsidiary not sold or disposed of in an amount determined as provided in Section 4.07 hereof. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions in the City of New York are authorized by law, regulation or executive order to remain closed. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue on such payment for the intervening period. "Letter of Transmittal" means the letter of transmittal to be prepared by the Company and sent to all Holders of the Notes for use by such Holders in connection with the Exchange Offer. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction). 123 11 "Liquidated Damages" means, at any time, all liquidated damages then owing pursuant to Section 5 of the Registration Rights Agreement. "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss). "Net Proceeds" means the aggregate cash proceeds received directly or indirectly by the Company or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness (other than Indebtedness under the Senior Credit Facility) secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP. "Non-Recourse Debt" means Indebtedness: (i) as to which neither the Company nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise) or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than the Notes being offered hereby) of the Company or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of the Company or any of its Restricted Subsidiaries. "Non-U.S. Person" means a Person who is not a U.S. Person. 124 12 "Notes" means the Series A Notes and the Series B Notes. "Note Purchase Agreement" means that certain Senior Subordinated Note Purchase Agreement, dated as of August 31, 1999, by and among the Companies, BankBoston N.A., as administrative agent and purchaser and the other purchaser named therein, providing for the purchase and sale of up to $75.0 million in aggregate principal amount of Senior Subordinated Notes. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. "Officer" means, with respect to any Person, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the Secretary or any Vice-President of such Person. "Officers' Certificate" means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company, that meets the requirements of Section 12.05 hereof. "Opinion of Counsel" means an opinion from legal counsel who is reasonably acceptable to the Trustee, that meets the requirements of Section 12.05 hereof. The counsel may be an employee of or counsel to the Company, any Subsidiary of the Company or the Trustee. "Participant" means, with respect to the Depositary, Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear or Cedel, respectively (and, with respect to The Depository Trust Company, shall include Euroclear and Cedel). "Permitted Investments" means (a) any Investment in the Company or in a Restricted Subsidiary of the Company that is a Guarantor; (b) any Investment in Cash Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (i) such Person becomes a Restricted Subsidiary of the Company and a Guarantor or (ii) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company that is a Guarantor; (d) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with Section 4.10 hereof; (e) any acquisition of assets solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) of the Company; (f) Investments existing on the date of the Indenture; (g) 125 13 receivables owing to the Company or any Wholly Owned Restricted Subsidiary of the Company if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided that such trade terms may include concessionary terms as the Company or such Restricted Subsidiary deems reasonable under the circumstances; (h) loans or advances to employees permitted by Section 4.11 hereof; (i) stock obligations or securities received in settlement of debts created in the ordinary course of business and owning to the Company or any of its Restricted Subsidiaries or in satisfaction of judgments; (j) any Investment by the Company or any Restricted Subsidiary of the Company consisting of intercompany loans to a Restricted Subsidiary of the Company that is not a Guarantor; (k) Hedging Obligations incurred to protect the Company and/or its Subsidiaries against fluctuations in interest rates or currency exchange rates and not for purposes of speculation; and (l) other Investments in any Person having an aggregate fair market value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (l) that are at the time outstanding, not to exceed $5.0 million. "Permitted Liens" means (i) Liens on assets of the Company, any of its Restricted Subsidiaries or any of the Guarantors securing Senior Debt that was permitted by the terms of this Indenture to be incurred; (ii) Liens in favor of the Company; (iii) Liens on property of a Person existing at the time such Person is merged into or consolidated with the Company or any Restricted Subsidiary of the Company; provided that such Liens were in existence prior to the contemplation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with the Company; (iv) Liens on property or assets existing at the time of acquisition thereof or the acquisition of a Person owning such property or assets by the Company or any Restricted Subsidiary of the Company, provided that such Liens were in existence prior to the contemplation of such acquisition; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (vi) Liens to secure Indebtedness (including Capital Lease Obligations) permitted by clause (iv) of Section 4.09 hereof covering only the assets acquired or financed with such Indebtedness; (vii) Liens existing on the date of this Indenture; (viii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded, provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (ix) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary of the Company with respect to obligations that do not exceed $5.0 million at any one time outstanding and that (a) are not incurred in connection with the borrowing of money or the obtaining of advances or credit (other than trade credit in the ordinary course of business) and (b) do not in the aggregate materially detract from the value of the property or 126 14 materially impair the use thereof in the operation of business by the Company or such Restricted Subsidiary. "Permitted Refinancing Indebtedness" means any Indebtedness of the Company or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of the Company or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus accrued interest on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness is subordinated in right of payment to the Notes on terms at least as favorable to the Holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by the Company or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or agency or political subdivision thereof (including any subdivision or ongoing business of any such entity or substantially all of the assets of any such entity, subdivision or business). "Private Placement Legend" means the legend set forth in Section 2.06(g)(i) to be placed on all Notes issued under this Indenture except where otherwise permitted by the provisions of this Indenture. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. "Registration Rights Agreement" means the Registration Rights Agreement with respect to the Notes, dated as of August 31, 1999, by and among the Company and the other parties named on the signature pages thereof, as such agreement may be amended, modified or supplemented from time to time. "Regulation S" means Regulation S promulgated under the Securities Act. 127 15 "Regulation S Global Note" means a Regulation S Temporary Global Note or Regulation S Permanent Global Note, as appropriate. "Regulation S Permanent Global Note" means a permanent global Note in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Note upon expiration of the Restricted Period. "Regulation S Temporary Global Note" means a temporary global Note in the form of Exhibit A-2 hereto bearing the Global Note Legend and the Private Placement Legend and deposited with or on behalf of and registered in the name of the Depositary or its nominee, issued in a denomination equal to the outstanding principal amount of the Notes initially sold in reliance on Rule 903 of Regulation S. "Resale Restriction Termination Date" means, as to any Note, the date which is two years after the later of the date of issuance thereof and the last date on which the Company or any of its Affiliates held any beneficial interest in such Note or a predecessor to such Note. "Responsible Officer," when used with respect to the Trustee, means any officer within the Corporate Trust Administration of the Trustee (or any successor group of the Trustee) or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Restricted Definitive Note" means a Definitive Note bearing the Private Placement Legend. "Restricted Global Note" means a Global Note bearing the Private Placement Legend. "Restricted Investment" means any Investment other than a Permitted Investment. "Restricted Period" means the 40-day restricted period as defined in Regulation S. "Restricted Subsidiary" means, with respect to any person, each Subsidiary of such Person that is not an Unrestricted Subsidiary. "Rule 144" means Rule 144 promulgated under the Securities Act. 128 16 "Rule 144A" means Rule 144A promulgated under the Securities Act. "Rule 903" means Rule 903 promulgated under the Securities Act. "Rule 904" means Rule 904 promulgated the Securities Act. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Senior Credit Facility" means that certain Second Amended and Restated Credit Agreement, dated as of July 30, 1995, amended and restated as of July 24, 1998, and further amended and restated as of August 31, 1999, by and among the Company, certain of its Subsidiaries, the financial institutions named therein as Lenders, BHF-BANK Aktiengesellschaft, as DM Fronting Bank, ABN AMRO Bank N.V., as Syndication Agent, The First National Bank of Chicago, as Documentation Agent, and BankBoston, N.A., as Sterling Fronting Bank, Issuing Bank, and Administrative Agent, providing for up to $250.0 million of revolving credit and term loan borrowings, and including any related notes, Guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, replaced or refinanced from time to time. "Senior Subordinated Notes" means the Bridge Notes issued pursuant to the Note Purchase Agreement and the Term Notes. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of this Indenture. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subordinated Guaranty" means the Subordinated Guaranty by each Guarantor of the Company's payment obligations under the Senior Subordinated Notes, executed pursuant to the provisions of the Note Purchase Agreement. "Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any 129 17 contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof). "Subsidiary Guarantee" means a Guarantee of the Notes by any Guarantor. "Term Notes" means the Term Notes issued pursuant to the Note Purchase Agreement. "TIA" means the Trust Indenture Act of 1939 (15 U.S.C.ss.ss. 77aaa-77bbbb) as in effect on the date on which this Indenture is qualified under the TIA. "Trustee" means the party named as such above until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder. "Unrestricted Global Note" means a permanent global Note in the form of Exhibit A-1 attached hereto that bears the Global Note Legend and that has the "Schedule of Exchanges of Interests in the Global Note" attached thereto, and that is deposited with or on behalf of and registered in the name of the Depositary, representing a series of Notes that do not bear the Private Placement Legend. "Unrestricted Definitive Note" means one or more Definitive Notes that do not bear and are not required to bear the Private Placement Legend. "Unrestricted Subsidiary" means any Subsidiary that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (i) has no Indebtedness other than Non-Recourse Debt; (ii) is not party to any agreement, contract, arrangement or understanding with the Company or any Restricted Subsidiary of the Company unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to the Company or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Company; (iii) is a Person with respect to which neither the Company nor any of its Restricted Subsidiaries has any direct or indirect obligation (A) to subscribe for additional Equity Interests or (B) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (iv) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of the Company or any of its Restricted Subsidiaries; and (v) has at least one director on its board of directors that is not a director or executive officer of the Company or any of its Restricted Subsidiaries and has at least one executive 130 18 officer that is not a director or executive officer of the Company or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation compiled with the foregoing conditions and was permitted by Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Company as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under Section 4.09 hereof the Company shall be in default of such covenant). The Board of Directors of the Company may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under Section 4.09 hereof calculated on a pro forma basis as if such designation had occurred at the beginning of the four-quarter reference period, and (ii) no Default or Event of Default would be in existence following such designation. "U.S. Person" means a U.S. person as defined in Rule 902(o) under the Securities Act. "Variable Rate" means, as to any Notes other than a Note bearing interest at a Fixed Rate at any time, the variable rate of interest then applicable to such Note under the terms of the Note Purchase Agreement, as shall be certified by the Administrative Agent to the Trustee or any Holder upon three (3) Business Days' prior written request. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness. "Wholly Owned" means, when used with respect to any Subsidiary or Restricted Subsidiary of a Person, a Subsidiary (or Restricted Subsidiary, as 131 19 appropriate) of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries (or Wholly Owned Restricted Subsidiaries, as appropriate) of such Person and one or more Wholly Owned Subsidiaries (or Wholly Owned Restricted Subsidiaries, as appropriate) of such Person. SECTION 1.02. OTHER DEFINITIONS.
Defined in Term Section "Affiliate Transaction"......................................................4.11 "Asset Sale Offer"...........................................................3.09 "Authentication Order".......................................................2.02 "Change of Control Offer"....................................................4.15 "Change of Control Payment"..................................................4.15 "Change of Control Payment Date" ............................................4.15 "Commission".................................................................4.03 "Designated Senior Debt".....................................................10.02 "Event of Default"...........................................................6.01 "Excess Proceeds"............................................................4.10 "incur"......................................................................4.09 "Offer Amount"...............................................................3.09 "Offer Period"...............................................................3.09 "Paying Agent"...............................................................2.03 "Payment Blockage Notice"....................................................10.04 "Permitted Debt".............................................................4.09 "Permitted Junior Securities"................................................10.02 "Purchase Date"..............................................................3.09 "Registrar"..................................................................2.03 "Representative".............................................................10.02 "Restricted Payments"........................................................4.07 "Senior Debt"................................................................10.02 "Payment Blockage Notice"....................................................10.04
SECTION 1.03. TERMS OF TIA. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes; 132 20 "indenture security holder" means a Holder of a Note; "indenture to be qualified" means this Indenture; "indenture trustee" or "institutional trustee" means the Trustee; and "obligor" on the Notes and the Subsidiary Guarantees means the Company and the Guarantors, respectively, and any successor obligor upon the Notes and the Subsidiary Guarantees, respectively. All other terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule under the TIA have the meanings so assigned to them. SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) words in the singular include the plural, and in the plural include the singular; (5) provisions apply to successive events and transactions; and (6) references to sections of or rules under the Securities Act shall be deemed to include substitute, replacement of successor sections or rules adopted by the SEC from time to time. ARTICLE 2. THE NOTES SECTION 2.01. FORM AND DATING. (a) General. The Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage. Each Note shall be dated the date of its authentication. The Notes shall be in denominations of $1,000 and integral multiples thereof. 133 21 The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Company, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling. (b) Global Notes. Notes issued in global form shall be substantially in the form of Exhibits A-1 or A-2 attached hereto (including the Global Note Legend thereon and the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Notes issued in definitive form shall be substantially in the form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon and without the "Schedule of Exchanges of Interests in the Global Note" attached thereto). Each Global Note shall represent such of the outstanding Notes as shall be specified therein and each shall provide that it shall represent the aggregate principal amount of outstanding Notes from time to time endorsed thereon and that the aggregate principal amount of outstanding Notes represented thereby may from time to time be reduced or increased, as appropriate, to reflect exchanges and redemptions. Any endorsement of a Global Note to reflect the amount of any increase or decrease in the aggregate principal amount of outstanding Notes represented thereby shall be made by the Trustee or by the Custodian, at the direction of the Trustee, in accordance with instructions given by or on behalf of the Holder thereof as required by Section 2.06 hereof. (c) Temporary Global Notes. Notes offered and sold in reliance on Regulation S shall be issued initially in the form of the Regulation S Temporary Global Note, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Trustee, at its Corporate Trust Office, as custodian for the Depositary, and registered in the name of the Depositary or the nominee of the Depositary for the accounts of designated agents holding on behalf of Euroclear or Cedel, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The Restricted Period shall be terminated upon the receipt by the Trustee of (i) a written certificate from the Depositary, together with copies of certificates from Euroclear and Cedel certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Note (except to the extent of any beneficial owners thereof who acquired an interest therein during the Restricted Period pursuant to another exemption from registration under the Securities Act and who will take delivery of a beneficial ownership interest in a 144A Global Note bearing a Private Placement Legend, all as contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company. Following the termination of the Restricted Period, beneficial interests in the Regulation S Temporary Global Note shall be exchanged for beneficial interests in Regulation S 134 22 Permanent Global Notes pursuant to the Applicable Procedures. Simultaneously with the authentication of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate principal amount of the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee, as the case may be, in connection with transfers of interest as hereinafter provided. (d) Euroclear and Cedel Procedures Applicable. The provisions of the "Operating Procedures of the Euroclear System" and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank" and "Customer Handbook" of Cedel shall be applicable to transfers of beneficial interests in the Regulation S Temporary Global Note and the Regulation S Permanent Global Notes that are held by Participants through Euroclear or Cedel. SECTION 2.02. EXECUTION AND AUTHENTICATION. An Officer shall sign the Notes for the Company by manual or facsimile signature. The Company's seal shall be reproduced on the Notes and may be in facsimile form. If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid. A Note shall not be valid until authenticated by the manual signature of the Trustee. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall, upon a written order of the Company signed by an Officer (an "Authentication Order"), authenticate Notes for original issue up to the aggregate principal amount stated in paragraph 4 of the Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. An authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Company. SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange ("Registrar") and an office or 135 23 agency where Notes may be presented for payment ("Paying Agent"). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may appoint one or more co-registrars and one or more additional paying agents. The term "Registrar" includes any co-registrar and the term "Paying Agent" includes any additional paying agent. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may act as Paying Agent or Registrar. The Company initially appoints The Depository Trust Company ("DTC") to act as Depositary with respect to the Global Notes. The Company initially appoints the Trustee to act as the Registrar and Paying Agent and to act as Custodian with respect to the Global Notes. The Company shall, prior to the Record Date, notify the Paying Agent of any wire transfer instructions for payments that it receives from Holders. SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. The Company shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium or Liquidated Damages, if any, or interest on the Notes, and will notify the Trustee of any default by the Company in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have no further liability for the money. If the Company or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy or reorganization proceedings relating to the Company, the Trustee shall serve as Paying Agent for the Notes. SECTION 2.05. HOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is not the Registrar, the Company shall furnish to the Trustee at least seven Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably 136 24 require of the names and addresses of the Holders of Notes and the Company shall otherwise comply with TIA Section 312(a). SECTION 2.06. TRANSFER AND EXCHANGE. (a) The Global Notes. The Notes initially shall (i) be issued in the form of Global Notes, (ii) be registered in the name of the Depositary or the nominee of such Depositary, (iii) be delivered to the Trustee as custodian for such Depositary and (iv) bear legends as set forth in subparagraph (g)(ii) below. Participants in, the Depositary shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, or the Trustee as its Custodian, or under the Global Notes, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of each Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Participants, the operation of customary practices governing the exercise of the rights of a Holder of any Note. (b) Transfer of Global Notes. Transfers of Global Notes shall be limited to transfers in whole, but not in part, to the Depositary, its successors, or their respective nominees. Interests of beneficial owners in the Global Notes may be transferred or exchanged for Definitive Notes in accordance with the rules and procedures of the Depositary and this Indenture. In addition, Definitive Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Notes if (i) the Depositary notifies the Company that it is unwilling or unable to continue as Depositary for any Global Note, or that it will cease to be a "Clearing Agency" under the Exchange Act, and in either case a successor Depositary is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing and the Registrar has received a written request from the Depositary to issue Definitive Notes. (c) Issuance of Definitive Notes. In connection with any transfer or exchange of a portion of the beneficial interest in any Global Note to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Definitive Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Definitive Note of like tenor and principal amount of authorized denominations. (d) Surrender of Global Notes. In connection with the transfer of Global Notes as an entirety to beneficial owners pursuant to paragraph (b), the Global 137 25 Notes shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depositary in exchange for its beneficial interest in the Global Notes, an equal aggregate principal amount at maturity of Definitive Notes of like tenor of authorized denominations. (e) Private Placement Legend. Any Definitive Note delivered in exchange for an interest in a Global Note pursuant to subparagraph (b), (c) or (d) of this Section 2.06 shall, except as otherwise provided by Section 2.13 hereof, bear the Private Placement Legend. (f) Exchange Offer. Upon the occurrence of the Exchange Offer in accordance with the Registration Rights Agreement, the Company shall issue and, upon receipt of an Authentication Order in accordance with Section 2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes in an aggregate principal amount equal to the principal amount of the beneficial interests in the Restricted Global Notes tendered for acceptance by Persons that certify in the applicable Letters of Transmittal that (x) they are not Broker-Dealers, (y) they are not participating in a distribution of the Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an aggregate principal amount equal to the principal amount of the Restricted Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with the issuance of such Notes, the Trustee shall cause the aggregate principal amount of the applicable Restricted Global Notes to be reduced accordingly, and the Company shall execute and the Trustee shall authenticate and deliver to the Persons designated by the Holders of Definitive Notes so accepted Definitive Notes in the appropriate principal amount. (g) Legends. The following legends shall appear on the face of all Global Notes and Definitive Notes issued under this Indenture unless specifically stated otherwise in the applicable provisions of this Indenture: (i) Private Placement Legend. (A) Except as permitted by each Global Note and each Definitive Note (and all Notes issued in exchange therefor or substitution thereof) shall bear the legend in substantially the following form: "THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE 138 26 SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS." (B) Notwithstanding the foregoing, any Global Note or Definitive Note issued pursuant to Section 2.06(f) or in accordance with any of Section 2.13(d)(i) - (iii) (and all Notes issued in exchange therefor or substitution thereof) shall not bear the Private Placement Legend. (ii) Global Note Legend. Each Global Note shall bear a legend in substantially the following form: "THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY." (iii) Regulation S Temporary Global Note Legend. The Regulation S Temporary Global Note shall bear a legend in substantially the following form: "THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED 139 27 NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN)." (h) Cancellation and/or Adjustment of Global Notes. At such time as all beneficial interests in a particular Global Note have been exchanged for Definitive Notes or a particular Global Note has been redeemed, repurchased or cancelled in whole and not in part, each such Global Note shall be returned to or retained and cancelled by the Trustee in accordance with Section 2.11 hereof. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note or for Definitive Notes, the principal amount of Notes represented by such Global Note shall be reduced accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such reduction; and if the beneficial interest is being exchanged for or transferred to a Person who will take delivery thereof in the form of a beneficial interest in another Global Note, such other Global Note shall be increased accordingly and an endorsement shall be made on such Global Note by the Trustee or by the Depositary at the direction of the Trustee to reflect such increase. (i) General Provisions Relating to Transfers and Exchanges. (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon the Company's order or at the Registrar's request. (ii) No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof). (iii) The Registrar shall not be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part. (iv) All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Company, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange. 140 28 (v) The Registrar shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (c) to register the transfer of or to exchange a Note between a record date and the next succeeding Interest Payment Date. (vi) Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Company may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Notes and for all other purposes, and none of the Trustee, any Agent or the Company shall be affected by notice to the contrary. (vii) The Trustee shall authenticate Global Notes and Definitive Notes in accordance with the provisions of Section 2.02 hereof. (viii) All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile. SECTION 2.07. REPLACEMENT NOTES If any mutilated Note is surrendered to the Trustee or the Company and the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Note, the Company shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Company to protect the Company, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced. The Company may charge for its expenses in replacing a Note. Every replacement Note is an additional obligation of the Company and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder. SECTION 2.08. OUTSTANDING NOTES. The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance 141 29 with the provisions hereof, and those described in this Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Company or an Affiliate of the Company holds the Note; however, Notes held by the Company or a Subsidiary of the Company shall not be deemed to be outstanding for purposes of Section 3.07(b) hereof. If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser. If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue. If the Paying Agent (other than the Company, a Subsidiary of the Company or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest. SECTION 2.09. TREASURY NOTES. In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Company, or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that the Trustee knows are so owned shall be so disregarded. SECTION 2.10. TEMPORARY NOTES Until certificates representing Notes are ready for delivery, the Company may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes. Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Company considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes. Holders of temporary Notes shall be entitled to all of the benefits of this Indenture. SECTION 2.11. CANCELLATION. The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes 142 30 surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes (subject to the record retention requirement of the Exchange Act). Certification of the destruction of all cancelled Notes shall be delivered to the Company. The Company may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation. SECTION 2.12. DEFAULTED INTEREST. If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment. The Company shall fix or cause to be fixed each such special record date and payment date, provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest. At least 15 days before the special record date, the Company (or, upon the written request of the Company, the Trustee in the name and at the expense of the Company) shall mail or cause to be mailed to Holders a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.13. SPECIAL TRANSFER PROVISIONS. (a) Transfers to Non-QIB Institutional Accredited Investors. The following additional provisions shall apply with respect to the registration of any proposed transfer of a Note to any Institutional Accredited Investor which is not a QIB: (i) the Registrar shall register the transfer of any Note, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the Resale Restriction Termination Date or (y) the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit C hereto and any legal opinions and certifications required thereby; (ii) if the proposed transferor is a Participant seeking to transfer an interest in a Global Note, upon receipt by the Registrar of (x) written instructions given in accordance with the Depositary's and the Registrar's procedures and (y) the appropriate certificate, if any, required by clause (y) of paragraph (i) above, together with any required legal opinions and certifications, the Registrar shall register the transfer and reflect on its books and records the date and a decrease in the principal amount of the Global Note from which such interests are to be transferred in an amount equal to 143 31 the principal amount of the Notes to be transferred and the Company shall execute and upon the order of the Company accompanied by an Officers' Certificate, the Trustee shall authenticate Definitive Notes in a principal amount equal to the principal amount of the Global Notes to be transferred. (b) Transfers to Non-U.S. Persons. The following additional provisions shall apply with respect to the registration of any proposed transfer of an Initial Note to any Non-U.S. Person: (i) the Registrar shall register the transfer of any Initial Note, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the Resale Restriction Termination Date or (y) the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto; (ii) if the proposed transferee is a Participant and the Notes to be transferred consist of Definitive Notes which after transfer are to be evidenced by an interest in the Regulation S Global Note upon receipt by the Registrar of (x) written instructions given in accordance with the Depositary's and the Registrar's procedures and (y) the appropriate certificate, if any, required by clause (y) of paragraph (i) above, together with any required legal opinions and certifications, the Registrar shall register the transfer and reflect on its books and records the date and an increase in the principal amount of the Regulation S Global Note in an amount equal to the principal amount of Definitive Notes to be transferred, and the Trustee shall cancel the Definitive Notes so transferred; (iii) if the proposed transferor is a Participant seeking to transfer an interest in a Global Note, upon receipt by the Registrar of (x) written instructions given in accordance with the Depositary's and the Registrar's procedures and (y) the appropriate certificate, if any, required by clause (y) of paragraph (i) above, together with any required legal opinions and certifications, the Registrar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the Global Note from which such interests are to be transferred in an amount equal to the principal amount of the Notes to be transferred and (B) an increase in the principal amount of the Regulation S Global Note in an amount equal to the principal amount of the Global Note to be transferred; and (iv) until the first day after the end of the Restricted Period, an owner of a beneficial interest in the Regulation S Temporary Global Note may not transfer such interest to a transferee that is a U.S. person or for the account or benefit of a U.S. person within the meaning of Rule 902(o) of the Securities Act. During the Restricted Period, all beneficial interests in the Regulation S Temporary Global Note shall be transferred only through Cedel 144 32 or Euroclear, either directly if the transferor and transferee are participants in such systems, or indirectly through organizations that are participants, in accordance with (x) the written instructions given in accordance with the Depositary's, Euroclear or Cedel's and the Registrar's procedures and (y) if the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto; and (v) upon the expiration of the Restricted Period, beneficial ownership interests in the Regulation S Temporary Global Note may be exchanged for interests in the Regulation S Permanent Global Note upon certification to the Registrar that such interest are owned either by Non-U.S. Persons or U.S. Persons who purchased such interests pursuant to an exemption from, or transfer not subject to, the registration requirements of the Securities Act. Upon the expiration of the Restricted Period, the Company shall prepare and execute the Regulation S Permanent Global Note in accordance with the terms of this Indenture and deliver it to the Trustee for authentication. The Trustee shall retain the Regulation S Permanent Global Note as custodian for the Depositary. Any transfers of beneficial ownership interests in the Regulation S Temporary Global Note made in reliance on Regulation S shall thenceforth be recorded by the Trustee by making an appropriate increase in the principal amount of the Regulation S Permanent Global Note and a corresponding decrease in the principal amount of the Regulation S Temporary Global Note. At such time as the principal amount of the Regulation S Temporary Global Note has been reduced to zero, the Trustee shall cancel the Regulation S Temporary Global Note and deliver it to the Company. (c) Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Note to a QIB (excluding Non-U.S. Persons): (i) the Registrar shall register the transfer of any Note, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the Resale Restriction Termination Date or (y) such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed a certification stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is 145 33 being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; (ii) if the proposed transferee is a Participant and the Notes to be transferred consist of Definitive Notes which after transfer are to be evidenced by an interest in the 144A Global Note, upon receipt by the Registrar of written instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall register the transfer and reflect on its book and records the date and an increase in the principal amount of the 144A Global Note in an amount equal to the principal amount of Definitive Notes to be transferred, and the Trustee shall cancel the Definitive Note so transferred; and (iii) if the proposed transferor is a Participant seeking to transfer an interest in a Global Note, upon receipt by the Registrar of written instructions given in accordance with the Depositary's and the Registrar's procedures, the Registrar shall register the transfer and reflect on its books and records the date and (A) a decrease in the principal amount of the Global Note from which interests are to be transferred in an amount equal to the principal amount of the Notes to be transferred and (B) an increase in the principal amount of the 144A Global Note in an amount equal to the principal amount of the Global Note to be transferred. (d) Private Placement Legend. Upon the registration of transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the registration of transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) the circumstances contemplated by paragraph (a)(i)(x) of this Section 2.13 exist, (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (iii) such Note has been sold pursuant to an effective registration statement under the Securities Act. (e) Other Transfers. If a Holder proposes to transfer a Definitive Restricted Note or any interest in a Global Restricted Note pursuant to any exemption from the registration requirements of the Securities Act other than as provided for by Section 2.13(a), (b) and (c) hereof, the Registrar shall only register such transfer or exchange if such transferor delivers an Opinion of Counsel satisfactory to the Company and the Registrar that such transfer is in compliance 146 34 with the Securities Act and the terms of this Indenture; provided, however, that the Company may, based upon the opinion of its counsel, instruct the Registrar by order accompanied by an Officers' Certificate not to register such transfer in any case where the proposed transferee is not a QIB, Non-U.S. Person or Institutional Accredited Investor. (f) General. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.06 hereof or this Section 2.13. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable prior written notice to the Registrar. ARTICLE 3. REDEMPTION AND PREPAYMENT SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem Notes pursuant to the optional redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers' Certificate setting forth (i) the clause of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be redeemed and (iv) the redemption price. SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased among the Holders of the Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate. In the event of partial redemption by lot, the particular Notes to be redeemed shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes and portions of Notes selected 147 35 shall be in amounts of $1,000 or whole multiples of $1,000; except that if all of the Notes of a Holder are to be redeemed, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.03. NOTICE OF REDEMPTION Subject to the provisions of Section 3.09 hereof, at least 30 days but not more than 60 days before a redemption date, the Company shall mail or cause to be mailed, by first class mail, a notice of redemption to each Holder whose Notes are to be redeemed at its registered address. The notice shall identify the Notes to be redeemed and shall state: (a) the redemption date; (b) the redemption price; (c) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note; (d) the name and address of the Paying Agent; (e) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price; (f) that, unless the Company defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date; (g) the paragraph of the Notes and/or section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and (h) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at its expense; provided, however, that the Company shall have delivered to the Trustee, at least 45 days prior to the redemption date, an Officers' Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph. 148 36 SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price. A notice of redemption may not be conditional. SECTION 3.05. DEPOSIT OF REDEMPTION PRICE One Business Day prior to the redemption date, the Company shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption price of and accrued interest on all Notes to be redeemed on that date. The Trustee or the Paying Agent shall promptly return to the Company any money deposited with the Trustee or the Paying Agent by the Company in excess of the amounts necessary to pay the redemption price of, and accrued interest on, all Notes to be redeemed. If the Company complies with the provisions of the preceding paragraph, on and after the redemption date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption. If a Note is redeemed on or after an interest record date but on or prior to the related interest payment date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption shall not be so paid upon surrender for redemption because of the failure of the Company to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof. SECTION 3.06. NOTES REDEEMED IN PART. Upon surrender of a Note that is redeemed in part, the Company shall issue and, upon the Company's written request, the Trustee shall authenticate for the Holder at the expense of the Company a new Note equal in principal amount to the unredeemed portion of the Note surrendered. SECTION 3.07. OPTIONAL REDEMPTION. (a) The Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 10 nor more than 30 days' notice, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, to the applicable redemption date. 149 37 (b) Notwithstanding the provisions of clause (a) of this Section 3.07, any Notes held by a Fixed Rate Holder shall not be subject to redemption at the Company's option until the fifth anniversary of the Conversion Date, and from and after the fifth anniversary of the Conversion Date the amount required to be paid in redemption of any such Note shall be equal to the outstanding principal amount thereof, PLUS any accrued but unpaid interest and Liquidated Damages thereon, to the applicable redemption date, PLUS a premium equal to the product of (a) the principal amount of such Note multiplied by (b) the percentage calculated by multiplying (i) the Fixed Rate applicable to such Note by (ii) the percentage set forth in the table below opposite the period in which such redemption occurs:
Period Percentage ------ ---------- From and including August 31, 2005 through August 30, 2006 50% From and including August 31, 2006 through August 30, 2007 33.33% From and including August 31, 2007 through August 30, 2008 16.66% From and including August 31, 2008 through August 30, 2009 0%
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Section 3.01 through 3.06 hereof. SECTION 3.08. MANDATORY REDEMPTION. Except as set forth in Sections 4.10 and 4.15 hereof, the Company shall not be required to make mandatory redemption payments with respect to the Notes. SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS. In the event that, pursuant to Section 4.10 hereof, the Company shall be required to commence an offer to all Holders to purchase Notes (an "Asset Sale Offer"), it shall follow the procedures specified below. The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the "Offer Period"). No later than five Business Days after the termination of the Offer Period (the "Purchase Date"), the Company shall 150 38 purchase the principal amount of Notes required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer Amount has been tendered, all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so purchased shall be made in the same manner as interest payments are made. If the Purchase Date is on or after an interest record date and on or before the related interest payment date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer. Upon the commencement of an Asset Sale Offer, the Company shall send, by first class mail, a notice to the Trustee and each of the Holders. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall state: (a) that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open; (b) the Offer Amount, the purchase price and the Purchase Date; (c) that any Note not tendered or accepted for payment shall continue to accrete or accrue interest; (d) that, unless the Company defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or accrue interest after the Purchase Date; (e) that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may only elect to have all of such Note purchased and may not elect to have only a portion of such Note purchased; (f) that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, or transfer by book-entry transfer, to the Company, a depositary, if appointed by the Company, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date; (g) that Holders shall be entitled to withdraw their election if the Company, the depositary or the Paying Agent, as the case may be, receives, not 151 39 later than the expiration of the Offer Period, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; (h) that, if the aggregate principal amount of Notes surrendered by Holders exceeds the Offer Amount, the Company shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased); and (i) that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer). On or before the Purchase Date, the Company shall, to the extent lawful, accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered, and shall deliver to the Trustee an Officers' Certificate stating that such Notes or portions thereof were accepted for payment by the Company in accordance with the terms of this Section 3.09. The Company, the Depositary or the Paying Agent, as the case may be, shall promptly (but in any case not later than five days after the Purchase Date) mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes tendered by such Holder and accepted by the Company for purchase, and the Company shall promptly issue a new Note, and the Trustee, upon written request from the Company shall authenticate and mail or deliver such new Note to such Holder, in a principal amount equal to any unpurchased portion of the Note surrendered. Any Note not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company shall publicly announce the results of the Asset Sale Offer on the Purchase Date. Other than as specifically provided in this Section 3.09, any purchase pursuant to this Section 3.09 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof. ARTICLE 4. COVENANTS SECTION 4.01. PAYMENT OF NOTES. The Company shall pay or cause to be paid the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes. Principal, premium, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than the Company or a Subsidiary thereof, holds as of 152 40 10:00 a.m. Eastern Time on the due date money deposited by the Company in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due. The Company shall pay all Liquidated Damages, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to 2% per annum in excess of the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace period) at the same rate to the extent lawful. SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee. The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York for such purposes. The Company shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Company in accordance with Section 2.03. SECTION 4.03. REPORTS. (a) Whether or not required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), so long as any Notes are outstanding, the Company shall furnish to the Holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with 153 41 the Commission on Forms 10-Q and 10-K if the Company were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants and (ii) all current reports that would be required to be filed with the Commission on Form 8-K if the Company were required to file such reports, in each case within the time periods specified in the Commission's rules and regulations. In addition, following the consummation of the exchange offer contemplated by the Registration Rights Agreement, whether or not required by the rules and regulations of the Commission, the Company shall file a copy of all such information and reports with the Commission for public availability within the time periods specified in the Commission's rules and regulations (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. (b) In addition, for so long as any Notes remain outstanding, the Company and the Guarantors shall furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. Any materials required to be furnished to Holders of Notes by this Section 4.03 shall discuss, in reasonable detail, either on the face of the financial statements included therein or in the footnotes thereto and in any Management's Discussion and Analysis of Financial Condition and Results of Operations, the financial condition and results of operations of the Company and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries of the Company. SECTION 4.04. COMPLIANCE CERTIFICATE. (a) The Company and each Guarantor (to the extent that such Guarantor is so required under the TIA) shall deliver to the Trustee, within 90 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Company has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action the Company is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if 154 42 any, on the Notes is prohibited or if such event has occurred, a description of the event and what action the Company is taking or proposes to take with respect thereto. (b) So long as not contrary to the then current recommendations of the American Institute of Certified Public Accountants, the year-end financial statements delivered pursuant to Section 4.03(a) above shall be accompanied by a written statement of the Company's independent public accountants (who shall be a firm of established national reputation) that in making the examination necessary for certification of such financial statements, nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article 4 or Article 5 hereof or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of any Default or Event of Default, an Officers' Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto. SECTION 4.05. TAXES. The Company shall pay, and shall cause each of its Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and governmental levies except such as are contested in good faith and by appropriate proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes. SECTION 4.06. STAY, EXTENSION AND USURY LAWS. The Company and each of the Guarantors covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Company and each of the Guarantors (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted. 155 43 SECTION 4.07. RESTRICTED PAYMENTS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Company's or any of its Restricted Subsidiaries' Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving the Company or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Company's or any of its Restricted Subsidiaries' Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, in connection with any merger or consolidation involving the Company) any Equity Interests of the Company or any direct or indirect parent of the Company; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness that is subordinated to the Notes, except a payment of interest or principal at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment: (a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; and (b) the Company would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof; and (c) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Company and its Restricted Subsidiaries after the date of this Indenture (excluding Restricted Payments permitted by clauses (ii), (iii), (iv), (v) and (vi) of the next succeeding paragraph), is less than the sum, without duplication, of (i) 50% of the Consolidated Net Income of the Company for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of this Indenture to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds received by the Company since the date of this Indenture as a contribution to its common equity capital or from the issue or sale of Equity Interests of the Company (other than Disqualified Stock) or from the issue or 156 44 sale of Disqualified Stock or debt securities of the Company that have been converted into such Equity Interests (other than Equity Interests (or Disqualified Stock or convertible debt securities) sold to a Subsidiary of the Company), plus (iii) to the extent that any Restricted Investment that was made after the date of this Indenture is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash return of capital with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment. The foregoing provisions shall not prohibit (i) the payment of any dividend within 60 days after the date of declaration thereof, if at said date of declaration such payment would have complied with the provisions of this Indenture; (ii) the redemption, repurchase, retirement, defeasance or other acquisition of any Indebtedness that is subordinated to the Notes or Equity Interests of the Company in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Company) of, other Equity Interests of the Company (other than any Disqualified Stock); provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement, defeasance or other acquisition shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of Indebtedness that is subordinated to the Notes with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the payment of any dividend (in cash or otherwise) by a Subsidiary of the Company to the holders of its common Equity Interests on a pro rata basis; (v) the repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Company or any Restricted Subsidiary of the Company; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests of the Company or any Subsidiary shall not exceed $2.0 million in any twelve-month period and no Default or Event of Default shall have occurred and be continuing immediately after such transaction; or (vi) so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the Company may declare and pay dividends in cash on or in respect of any of its Equity Interests in an aggregate amount not to exceed $2.0 million paid in any period of twelve (12) consecutive months. The Board of Directors of the Company may designate any Restricted Subsidiary (other than TransTechnology Engineered Components, LLC, a Delaware limited liability company, or TransTechnology Canada Corporation, an Ontario corporation) to be an Unrestricted Subsidiary if such designation would not cause a Default. For purposes of making such determination, all outstanding investments by the Company and its Restricted Subsidiaries (except to the extent repaid in cash) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under clause (c) of this Section 4.07. All such outstanding investments will be deemed to constitute investments in an amount equal to the greatest of (x) 157 45 the net book value of such investments at the time of such designation, (y) the fair market value of such investments at the time of such designation and (z) the original fair market value of such investments at the time they were made. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by the Company or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any non-cash Restricted Payment shall be determined by the Board of Directors whose resolution with respect thereto shall be delivered to the Trustee, such determination to be based upon an opinion or appraisal issued by an accounting, appraisal or investment banking firm of national standing if such fair market value exceeds $5.0 million. Not later than the date of making any Restricted Payment, the Company shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by this Section 4.07 were computed, together with a copy of any opinion or appraisal required by this Indenture. SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or advances to the Company or any of its Restricted Subsidiaries or (iii) transfer any of its properties or assets to the Company or any of its Restricted Subsidiaries. However, the foregoing restrictions will not apply to encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the date of this Indenture, (b) the Senior Credit Facility as in effect as of the date of this Indenture, and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacement or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in the Senior Credit Facility as in effect on the date of this Indenture as determined in good faith by the Company's Board of Directors, (c) the Note Purchase Agreement, the Notes and the Subsidiary 158 46 Guarantees, (d) applicable law, (e) any instrument governing Indebtedness or Capital Stock of a Person acquired by the Company or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Indenture to be incurred, (f) customary non-assignment provisions in leases and other contracts, (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (h) any agreement for the sale of a Restricted Subsidiary or a substantial portion of a Restricted Subsidiary's assets that restricts distributions by that Restricted Subsidiary pending its sale, (i) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive, taken as a whole, than those contained in the agreements governing the Indebtedness being refinanced as determined in good faith by the Company's Board of Directors, (j) Liens securing Indebtedness otherwise permitted to be incurred pursuant to the provisions of Section 4.12 that limit the right of the debtor to dispose of the assets securing such Indebtedness, (k) provisions with respect to the disposition or distribution of assets or property in joint venture agreements and other similar agreements entered into in the ordinary course of business and (l) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business. SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur") any Indebtedness (including Acquired Debt) and that the Company shall not issue any Disqualified Stock and shall not permit any of its Subsidiaries to issue any shares of preferred stock (other than to a Company or the Restricted Subsidiaries of the Company); provided, however, that the Company and its Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and the Company's Restricted Subsidiaries may incur Indebtedness (including Acquired Debt) and issue any shares of preferred stock (to the extent otherwise permitted by this Indenture) if the Fixed Charge Coverage Ratio for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock is issued would have been at least 2.0 to 1, determined on a pro forma basis (including a pro 159 47 forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock had been issued, as the case may be, at the beginning of such four-quarter period. The provisions of the first paragraph of this Section 4.09 will not apply to the incurrence of any of the following items of Indebtedness (collectively, "Permitted Debt"): (i) the incurrence by the Company and the Guarantors of Indebtedness and letters of credit (with letters of credit being deemed to have a principal amount equal to the stated amount thereof) and other obligations under Credit Facilities in an aggregate principal amount that does not exceed at any one time $25.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied to repay Indebtedness under a Credit Facility pursuant to Section 4.10 hereof (other than temporary paydowns pending final application of such Net Proceeds); (ii) the incurrence by the Company and the Guarantors of the Existing Indebtedness and letters of credit (including reimbursement obligations with respect thereto) supporting Existing Indebtedness whether such letters of credit are incurred under the Senior Credit Facility or otherwise; (iii) the incurrence by the Company of Indebtedness represented by the Notes; (iv) the incurrence by the Company or any of the Guarantors of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case incurred for the purpose of financing all or any part of the purchase price or cost of construction or improvement of property, plant or equipment used in the business of the Company or such Subsidiary, in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness incurred pursuant to this clause (iv), not to exceed $8.0 million at any time outstanding; (v) the incurrence by the Company or any of the Guarantors of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to refund, refinance or replace Indebtedness (other than intercompany Indebtedness) that is permitted by this Indenture to be incurred under the first paragraph hereof or clauses (ii) or (iii) of this paragraph; (vi) the incurrence by the Company or any of the Guarantors of intercompany Indebtedness between or among the Company and any 160 48 Guarantor; provided, however, that (i) if the Company is the obligor on such Indebtedness, such Indebtedness is expressly subordinated to the prior payment in full in cash of all Obligations with respect to the Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Company or a Subsidiary thereof and (B) any sale or other transfer of any such Indebtedness to a Person that is not either the Company or a Guarantor thereof shall be deemed, in each case, to constitute an incurrence of such Indebtedness by the Company or such Guarantor, as the case may be, that was not permitted by this clause (vi); (vii) the incurrence by the Company or any of the Guarantors of Hedging Obligations that are incurred for the purpose of fixing or hedging interest rate risk with respect to any floating rate Indebtedness that is permitted by the terms of this Indenture to be outstanding; (viii) the guarantee by the Company or any of its Subsidiaries or any of the Guarantors of Indebtedness of the Company or another Guarantor that was permitted to be incurred by another provision of this Section 4.09; (ix) the incurrence by the Company's Unrestricted Subsidiaries of Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary of the Company that was not permitted by this clause (ix), and the issuance of preferred stock by Unrestricted Subsidiaries; (x) the incurrence by the Company or any of its Restricted Subsidiaries of additional Indebtedness in an aggregate principal amount (including all Permitted Refinancing Indebtedness incurred to refund, refinance or replace any Indebtedness pursuant to this clause (x) not to exceed $5.0 million at any time outstanding); or (xi) the incurrence by the Restricted Subsidiaries that are not Guarantors of International Facility Loans under (and as defined in) the Senior Credit Facility; provided that the aggregate principal amount of all Indebtedness outstanding under such International Facility Loans after giving effect to such incurrence does not exceed an amount equal to $35.0 million. For purposes of determining compliance with this Section 4.09, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Debt described in clauses (i) through (x) above or is entitled to be incurred pursuant to the first paragraph of this Section 4.09, the Company shall, in its sole discretion, classify such item of Indebtedness in any manner that complies 161 49 with this Section 4.09. Accrual of interest, accretion or amortization of original issue discount, the payment of interest on any Indebtedness in the form of additional Indebtedness with the same terms, and the payment of dividends on Disqualified Stock in the form of additional shares of the same class of Disqualified Stock will not be deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock for purposes of this Section 4.09; provided, in each such case, that the amount thereof is included in Fixed Charges of the Company as accrued (to the extent not already included in Fixed Charges). SECTION 4.10. ASSET SALES The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 75% of the consideration therefor received by the Company or such Restricted Subsidiary is in the form of cash or Cash Equivalents; provided that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or the Subsidiary Guarantees) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases the Company or such Restricted Subsidiary from further liability and (y) in the case of any Asset Sale constituting the transfer (by merger or otherwise) of all of the Capital Stock of a Restricted Subsidiary, any liabilities (as shown on such Restricted Subsidiary's most recent balance sheet) of such Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or the Subsidiary Guarantees) that will remain outstanding after such transfer and will not be a liability of the Company or any other Restricted Subsidiary of the Company following such transfer and (z) any securities, notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are contemporaneously (subject to ordinary settlement periods) converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision. Within 180 days after the receipt of any Net Proceeds from an Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to repay Senior Debt, (b) to the acquisition of a majority of the assets of, or a majority of the Voting Stock of, another business, (c) the making of a capital expenditure, or (d) the acquisition of other long-term assets, in each case, in, or used or useful in, the same or a similar line of business as the Company or one of its Subsidiaries was engaged in on the date of this Indenture or any reasonable extension or expansion thereof. Pending 162 50 the final application of any such Net Proceeds, the Company may temporarily reduce revolving credit borrowings or otherwise invest such Net Proceeds in any manner that is not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as provided in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will be required to make an offer to all Holders of Notes and all holders of other pari passu Indebtedness containing provisions similar to those set forth in this Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in this Indenture and such other Indebtedness. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by this Indenture. If the aggregate principal amount of Notes and such other Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. SECTION 4.11. TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to the Company or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Company or such Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $1.0 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5.0 million, an opinion as to the fairness to the Holders of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing. Notwithstanding the foregoing, the following 163 51 items shall not be deemed to be Affiliate Transactions: (i) any employment agreement entered into by the Company or any of its Restricted Subsidiaries, or loans or advances to any employees of the Company or any of its Restricted Subsidiaries, in each case in the ordinary course of business and consistent with reasonable commercial practices, (ii) transactions between or among the Company and/or its Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not otherwise Affiliates of the Company, (iv) Restricted Payments that are permitted by Section 4.07 hereof, and (v) Affiliate Transactions existing on the date of this Indenture and permitted under the terms of the Credit Facilities. SECTION 4.12. LIENS. The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly create, incur, assume or suffer to exist any Lien on any asset now owned or hereafter acquired, or any income or profits therefrom or assign or convey any right to receive income therefrom, securing Indebtedness or trade payables, except Permitted Liens. SECTION 4.13. NO SENIOR SUBORDINATED DEBT. Notwithstanding the provisions of Section 4.09 hereof, (i) the Company shall not incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes, and (ii) no Guarantor shall incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to Senior Debt of such Guarantor and senior in any respect in right of payment to the Subsidiary Guarantees. SECTION 4.14. CORPORATE EXISTENCE. Subject to Article 5 hereof, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or other existence of each of its Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Company or any such Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Company and its Subsidiaries; provided, however, that the Company shall not be required to preserve any such right, license or franchise, or the corporate, partnership or other existence of any of its Subsidiaries, if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the Holders of the Notes. 164 52 SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL. (a) Upon the occurrence of a Change of Control, each Holder of Notes will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within fifteen Business Days following any Change of Control, the Company shall mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by this Indenture and described in such notice. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. (b) On the Change of Control Payment Date, the Company shall, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being repurchased by the Company. The Paying Agent shall promptly mail to each Holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee shall promptly authenticate and mail (or cause to be transferred by book entry) to each Holder a new Note equal in principal amount to any unrepurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. Prior to complying with the provisions of this Section 4.15, but in any event within 90 days following a Change of Control, the Company shall either repay all outstanding Senior Debt or obtain the requisite consents, if any, under all agreements governing outstanding Senior Debt to permit the repurchase of Notes required by this Section 4.15. The Company shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (c) Notwithstanding anything to the contrary in this Section 4.15, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 165 53 4.15 and Section 3.09 hereof and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. SECTION 4.16. PAYMENTS FOR CONSENT. Neither the Company nor any of its Subsidiaries shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder of any Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid or is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement. SECTION 4.17. ADDITIONAL SUBSIDIARY GUARANTEES If the Company or any of its Restricted Subsidiaries shall acquire or create another Subsidiary after the date of this Indenture, then such newly acquired or created Subsidiary shall become a Guarantor and execute a Supplemental Indenture and deliver an Opinion of Counsel, in accordance with the terms of this Indenture; provided, that all Subsidiaries that have properly been designated as Unrestricted Subsidiaries in accordance with this Indenture (i) shall not be subject to the requirements of this Section 4.17 and (ii) shall be released from all Obligations under any Subsidiary Guarantee, in each case for so long as they continue to constitute Unrestricted Subsidiaries. ARTICLE 5. SUCCESSORS SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS. The Company shall not consolidate or merge with or into (whether or not the Company is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, to another corporation, Person or entity unless (i) the Company is the surviving corporation or the entity or the Person formed by or surviving any such consolidation or merger (if other than the Company) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) except in the case of a merger or consolidation of the Company with or into a Wholly Owned Restricted Subsidiary of the Company, the entity or Person formed by or surviving any such consolidation or merger (if other than the Company) or the entity or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of the Company under the Registration 166 54 Rights Agreement, the Notes and the Indenture pursuant to a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger or consolidation of the Company with or into a Wholly Owned Restricted Subsidiary of the Company, the Company or the entity or Person formed by or surviving any such consolidation or merger (if other than the Company), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made (A) shall have Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) shall, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof. SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED. Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Company in accordance with Section 5.01 hereof, the successor corporation formed by such consolidation or into or with which the Company is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the "Company" shall refer instead to the successor corporation and not to the Company), and may exercise every right and power of the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein; provided, however, that the predecessor Company shall not be relieved from the obligation to pay the principal of and interest on the Notes except in the case of a sale of all of the Company's assets that meets the requirements of Section 5.01 hereof. ARTICLE 6. DEFAULTS AND REMEDIES SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if: (a) the Company defaults for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by the subordination provisions of this Indenture); 167 55 (b) the Company defaults in the payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of this Indenture); (c) failure by the Company or any of its Subsidiaries for 30 days after notice to comply with any of the provisions of Sections 4.07, 4.09, 4.10, 4.15 or 5.01 hereof; (d) the Company or any of its Subsidiaries fails to comply with any other covenant, representation, warranty or other agreement in this Indenture or the Notes for 60 days after notice; (e) a default occurs under any mortgage, indenture or instrument under which there may be issued or by which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created after the date of this Indenture, which default results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $5.0 million or more; (f) a final judgment or final judgments for the payment of money are entered by a court or courts of competent jurisdiction against the Company or any of its Restricted Subsidiaries and such judgment or judgments remain undischarged for a period (during which execution shall not be effectively stayed) of 60 days, provided that the aggregate of all such undischarged judgments exceeds $5.0 million; (g) the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary pursuant to or within the meaning of Bankruptcy Law: (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors, or (v) generally is not paying its debts as they become due; or 168 56 (h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary in an involuntary case; (ii) appoints a custodian of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary or for all or substantially all of the property of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; or (iii) orders the liquidation of the Company or any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary; and the order or decree remains unstayed and in effect for 60 consecutive days; or (i) except as permitted by this Indenture, any Subsidiary Guarantee is held in any judicial proceeding to be unenforceable or invalid in any material respect or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee. SECTION 6.02. ACCELERATION. If any Event of Default (other than an Event of Default specified in clause (g) or (h) of Section 6.01 hereof with respect to the Company, any Significant Subsidiary or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary) occurs and is continuing, the Trustee or the Holders of at least a majority in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01 hereof occurs with respect to the Company, any of its Significant Subsidiaries or any group of Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary, all outstanding Notes shall be due and payable without further action or notice. Holders of the Notes may not enforce this Indenture or the Notes except as provided in this Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default 169 57 relating to the payment of principal or interest) if it determines that withholding notice is in their interest. SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may, subject to Article 10, pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. All remedies are cumulative to the extent permitted by law. SECTION 6.04. WAIVER OF PAST DEFAULTS. Holders of not less than a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences hereunder, except a continuing Default or Event of Default in the payment of the principal of, premium and Liquidated Damages, if any, or interest on the Notes (including any waiver obtained in connection with a purchase of, tender offer or exchange offer for Notes)(provided, however, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration). Upon such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.05. CONTROL BY MAJORITY. Holders of a majority in principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on it. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines may be unduly prejudicial to the rights of other Holders of Notes or that may involve the Trustee in personal liability. 170 58 SECTION 6.06. LIMITATION ON SUITS. A Holder of a Note may pursue a remedy with respect to this Indenture or the Notes only if: (a) the Holder of a Note gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least a majority in principal amount of the then outstanding Notes make a written request to the Trustee to pursue the remedy; (c) such Holder of a Note or Holders of Notes offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within 60 days after receipt of the request and the offer and, if requested, the provision of indemnity; and (e) during such 60-day period the Holders of a majority in principal amount of the then outstanding Notes do not give the Trustee a direction inconsistent with the request. A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note. SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture and subject to Article 10 and Section 11.02, the right of any Holder of a Note to receive payment of principal, premium and Liquidated Damages, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an offer to purchase), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default specified in Section 6.01(a) or (b) occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Company for the whole amount of principal of, premium and Liquidated Damages, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, 171 59 including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Company (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to this Article, it shall, subject to Article 10, pay out the money in the following order: First: to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expense and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection; Second: to Holders of Notes for amounts due and unpaid on the Notes for principal, premium and Liquidated Damages, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium and Liquidated Damages, if any and interest, respectively; and 172 60 Third: to the Company or to such party as a court of competent jurisdiction shall direct. The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.10. SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes. ARTICLE 7. TRUSTEE SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. (b) Except during the continuance of an Event of Default: (i) the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. 173 61 (c) The Trustee may not be relieved from liabilities for its own bad faith, negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) this paragraph does not limit the effect of paragraph (b) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof. (d) Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), and (c) of this Section. (e) No provision of this Indenture shall require the Trustee to expend or risk its own funds or incur any liability. The Trustee shall be under no obligation to exercise any of its rights and powers under this Indenture at the request of any Holders, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. (f) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. SECTION 7.02. RIGHTS OF TRUSTEE. (a) The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. 174 62 (c) The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture. (e) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Company shall be sufficient if signed by an Officer of the Company. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities that might be incurred by it in compliance with such request or direction. SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or any Affiliate of the Company with the same rights it would have if it were not Trustee. However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign. Any Agent may do the same with like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof. SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Company's use of the proceeds from the Notes or any money paid to the Company or upon the Company's direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication. SECTION 7.05. NOTICE OF DEFAULTS. If a Default or Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default or 175 63 Event of Default within 90 days after it occurs. Except in the case of a Default or Event of Default, in good faith, relating to the payment of principal or interest on any Note, the Trustee may withhold the notice if it determines that withholding the notice is in the interests of the Holders of the Notes. SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES. Within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with TIA Section 313(a) (but if no event described in TIA Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted). The Trustee also shall comply with TIA Section 313(b)(2). The Trustee shall also transmit by mail all reports as required by TIA Section 313(c). A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Company and filed with the SEC and each stock exchange on which the Notes are listed in accordance with TIA Section 313(d). The Company shall promptly notify the Trustee when the Notes are listed on any stock exchange. SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time reasonable compensation for its acceptance of this Indenture and services hereunder. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee against any and all losses, liabilities or expenses incurred by it arising out of or in connection with the acceptance or administration of its duties under this Indenture, including the costs and expenses of enforcing this Indenture against the Company (including this Section 7.07) and defending itself against any claim (whether asserted by the Company or any Holder or any other person) or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, liability or expense may be attributable to its gross negligence, willful misconduct or bad faith. The Trustee shall notify the Company promptly of any claim for which it may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not pay for any settlement made without its consent, which consent shall not be unreasonably withheld. 176 64 The obligations of the Company under this Section 7.07 shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes. Such Lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law. The Trustee shall comply with the provisions of TIA Section 313(b)(2) to the extent applicable. SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee's acceptance of appointment as provided in this Section. The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Company. The Holders of Notes of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Company in writing. The Company may remove the Trustee if: (a) the Trustee fails to comply with Section 7.10 hereof; (b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law; (c) a custodian or public officer takes charge of the Trustee or its property; or (d) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. 177 65 If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, or the Holders of Notes of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee, after written request by any Holder of a Note who has been a Holder of a Note for at least six months, fails to comply with Section 7.10, such Holder of a Note may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders of the Notes. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee. SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee. SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. This Indenture shall always have a Trustee who satisfies the requirements of TIA Section 310(a)(1), (2) and (5). The Trustee is subject to TIA Section 310(b). 178 66 SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee is subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. ARTICLE 8. [INTENTIONALLY OMITTED] ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES. Notwithstanding Section 9.02 of this Indenture, the Company and the Trustee may (subject to Section 10.14) amend or supplement this Indenture or the Notes without the consent of any Holder of a Note: (a) to cure any ambiguity, defect or inconsistency; (b) to provide for uncertificated Notes in addition to or in place of certificated Notes; (c) to provide for the assumption of the Company's (and Guarantors') obligations to the Holders of the Notes in the case of a merger or consolidation or sale of all or substantially all of the Company's (and Guarantors') assets pursuant to Article 5 or Article 11 hereof; (d) to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights hereunder of any Holder of the Note; and (e) to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company and the Guarantors in the execution of any amended or supplemental Indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to 179 67 enter into such amended or supplemental Indenture that affects its own rights, duties or immunities under this Indenture or otherwise. SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES. Except as provided below in this Section 9.02 and in Section 10.14, the Company and the Trustee may amend or supplement this Indenture (including Section 3.09, 4.10 and 4.15 hereof), or the Notes and any Subsidiary Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding voting as a single class (including, without limitation, consents obtained in connection with a purchase of, tender offer or exchange offer for, Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a purchase of, tender offer or exchange offer for, Notes). Section 2.08 hereof shall determine which Notes are considered to be "outstanding" for purposes of this Section 9.02. Upon the request of the Company accompanied by a resolution of its Board of Directors authorizing the execution of any such amended or supplemental Indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Company in the execution of such amended or supplemental Indenture unless such amended or supplemental Indenture directly affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture. It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section becomes effective, the Company shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding voting as a single class may waive compliance in a particular instance by the Company with any provision of this Indenture or the Notes. However, without the consent of each Holder 180 68 affected, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder): (a) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver; (b) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.15 hereof; (c) reduce the rate of or change the time for payment of interest on any Note; (d) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration); (e) make any Note payable in money other than that stated in the Notes; (f) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes; or (g) waive a redemption payment with respect to any Note (other than a payment required by Sections 3.09, 4.10 and 4.15 hereof or make any change in Section 6.04 or 6.07 hereof or in the foregoing amendment and waiver provisions. In addition, any amendment to the provisions of Article 10 of this Indenture (which relate to subordination) will require the consent of the Holders of at least 75% in aggregate principal amount of the Notes then outstanding if such amendment would adversely affect the rights of Holders of Notes. SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment or supplement to this Indenture or the Notes shall be set forth in a amended or supplemental Indenture that complies with the TIA as then in effect. SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS. Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may 181 69 revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder. SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES. The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Company in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver. SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall sign any amended or supplemental Indenture authorized pursuant to this Article Nine if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. The Company may not sign an amendment or supplemental Indenture until the Board of Directors approves it. In executing any amended or supplemental indenture, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 12.04 hereof, an Officer's Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture. ARTICLE 10. SUBORDINATION SECTION 10.01. AGREEMENT TO SUBORDINATE. The Company agrees, and each Holder by accepting a Note agrees, that the Indebtedness, interest and other Obligations of any kind evidenced by the Notes and this Indenture is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full in cash of all Senior Debt (whether outstanding on the date hereof or hereafter created, incurred, assumed or guaranteed), and that the subordination is for the benefit of the holders of Senior Debt. 182 70 SECTION 10.02. CERTAIN DEFINITIONS. "Designated Senior Debt" means (i) any Indebtedness outstanding under the Senior Credit Facility and (ii) any other Senior Debt permitted under this Indenture the principal amount of which is $25.0 million or more and that has been designated by the Company as "Designated Senior Debt"; provided, however, that so long as the Senior Credit Facility remains in effect, lenders holding a majority in aggregate amount of the loan commitments thereunder shall have consented, in writing, to such designation of additional Indebtedness as Designated Senior Debt. "Permitted Junior Securities" means Equity Interests in the Company or any Guarantor or debt securities that are unsecured and subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to at least the same extent as, or to a greater extent than, the Notes are subordinated to Senior Debt pursuant to this Indenture (without limiting the forgoing, such Permitted Junior Securities shall have no required principal payments or equity redemption requirements until after the final maturity of all Senior Debt). "Representative" means the indenture trustee or other trustee, agent or representative for any Senior Debt. "Senior Debt" means (i) all principal, premium, interest, fees, expenses and other obligations or liabilities of any kind together with available undrawn amounts under letters of credit issued or guaranteed under the Senior Credit Facility (including, without limitation, post-petition interest whether or not allowed as a claim in any bankruptcy, reorganization, insolvency, receivership or similar proceeding) with respect to Indebtedness outstanding under Credit Facilities and all Hedging Obligations with respect thereto, (ii) any other Indebtedness permitted to be incurred by the Company under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes and (iii) all Obligations with respect to the foregoing. Senior Debt will not include (w) any liability for federal, state, local or other taxes owed or owing by the Company, (x) any Indebtedness of the Company to any of its Subsidiaries or other Affiliates, excluding any Indebtedness owed to any Affiliate that was incurred prior to such Person becoming an Affiliate in connection with the acquisition by the Company or any Subsidiary of a business or Person from such Affiliate, (y) any trade payables or (z) any Indebtedness that is incurred in violation of this Indenture. SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY. Upon any distribution to creditors of the Company or any Guarantor whether in cash, properties, securities or otherwise, in a liquidation or dissolution of the Company or any Guarantor or in a bankruptcy, reorganization, insolvency, 183 71 receivership or similar proceeding relating to the Company, any Guarantor, or their property, an assignment for the benefit of creditors or any marshaling of the Company's or any Guarantor's assets and liabilities, the holders of Senior Debt shall be entitled to receive payment in full in cash of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the applicable Senior Debt whether or not allowed as a claim in any such proceeding) before the Holders of Notes will be entitled to receive any payment with respect to the Notes or under the Subsidiary Guarantee, and until all Obligations with respect to Senior Debt are paid in full in cash, any distribution to which the Holders of Notes would be entitled shall be made to the holders of Senior Debt (except that Holders of Notes may receive and retain Permitted Junior Securities and payments made from the trust created pursuant to Article 8 hereof). To the extent any payment of Senior Debt (whether by or on behalf of the Company or any Subsidiary, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. To the extent the obligation to repay any Senior Debt is declared to be fraudulent, invalid, or otherwise set aside under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then the obligations so declared fraudulent, invalid or otherwise set aside (and all other amounts that would come due with respect thereto had such obligation not been affected) shall be deemed to be reinstated and outstanding as Senior Debt for all purposes hereof as if such declaration, invalidity or setting aside had not occurred. SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT. The Company and the Guarantors also may not make any payment upon or in respect of the Notes or the Subsidiary Guarantees (except in Permitted Junior Securities or from the trust created pursuant to Article 8 hereof) if (i) a default in the payment of the principal of, premium, if any, or interest on Senior Debt occurs and is continuing or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that currently, or with the passage of time or giving of notice, permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and, in the case of any such default described in this clause (ii), the Trustee receives a notice of such default of the type referred to in this clause (ii) (a "Payment Blockage Notice") from the Company or the holders of any Designated Senior Debt. Payments on the Notes may and shall be resumed (a) 184 72 in the case of a payment default, upon the date on which such default is cured or waived in writing by the holders of the applicable Senior Debt and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived in writing by the holders of Designated Senior Debt or 179 days after the date on which the applicable Payment Blockage Notice is received by the Trustee, unless the maturity of any Designated Senior Debt has been accelerated. No new period of payment blockage may be commenced under clause (ii) above unless and until (i) 360 days have elapsed since the initial effectiveness of the immediately prior Payment Blockage Notice and (ii) all scheduled payments of principal of, premium, if any, and interest on the Notes that have come due have been paid in full in cash. No nonpayment default that existed and was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived in writing or cured for a period of not less than 90 days. In the event that the Company or any Guarantor makes any payment to the Trustee or any Holder of any Note prohibited by the foregoing, such payment will be required to be held in trust for and paid over to the holders of Senior Debt (or the representative thereof). The Trustee and the Holders of the Notes will not challenge or contest the enforceability or validity of the Senior Credit Facility or any obligation, Lien or encumbrance thereunder. SECTION 10.05. ACCELERATION OF SECURITIES. If payment of the Notes is accelerated because of an Event of Default, the Company shall promptly notify holders of Senior Debt of the acceleration. SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER. In the event that the Trustee or any Holder receives any payment of any Obligations with respect to the Notes at a time when the Trustee or such Holder, as applicable, has actual knowledge that such payment is prohibited by Sections 10.03 or 10.04 hereof, such payment shall be held by the Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith over and delivered, upon written request, to, the holders of Senior Debt as their interests may appear or their Representative under the indenture or other agreement (if any) pursuant to which Senior Debt may have been issued, as their respective interests may appear, for application to the payment of all Obligations with respect to Senior Debt remaining unpaid to the extent necessary to pay such Obligations in full in cash in accordance with their terms, after giving effect to any concurrent payment or distribution to or for the holders of Senior Debt. With respect to the holders of Senior Debt, the Trustee undertakes to perform only such obligations on the part of the Trustee as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the holders of Senior Debt shall be read into this Indenture against the Trustee. The Trustee 185 73 shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if the Trustee shall pay over or distribute to or on behalf of Holders or the Company or any other Person money or assets to which any holders of Senior Debt shall be entitled by virtue of this Article 10, except if such payment is made as a result of the bad faith or willful misconduct or gross negligence of the Trustee. SECTION 10.07. NOTICE BY COMPANY. The Company shall promptly notify the Trustee and the Paying Agent of any facts known to the Company that would cause a payment of any Obligations with respect to the Notes to violate this Article 10, but failure to give such notice shall not affect the subordination of the Notes to the Senior Debt as provided in this Article 10. SECTION 10.08. SUBROGATION. After all Senior Debt is paid in full in cash and until the Notes are paid in full, Holders of Notes shall be subrogated (equally and ratably with all other Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt to receive distributions applicable to Senior Debt to the extent that distributions otherwise payable to the Holders of Notes have been applied to the payment of Senior Debt. A distribution made under this Article 10 to holders of Senior Debt that otherwise would have been made to Holders of Notes is not, as between the Company and Holders, a payment by the Company on the Notes. SECTION 10.09. RELATIVE RIGHTS. This Article 10 defines the relative rights of Holders of Notes and holders of Senior Debt. Nothing in this Indenture shall: (1) impair, as between the Company and Holders of Notes, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms; (2) affect the relative rights of Holders of Notes and creditors of the Company other than their rights in relation to holders of Senior Debt; or (3) prevent the Trustee or any Holder of Notes from exercising its available remedies upon a Default or Event of Default, subject to the rights of holders and owners of Senior Debt to receive distributions and payments otherwise payable to Holders of Notes. If the Company fails because of this Article 10 to pay principal of or interest on a Note on the due date, the failure is still a Default or Event of Default. 186 74 SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right of any holder of Senior Debt to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Company or any Holder or by the failure of the Company or any Holder to comply with this Indenture. Trustee and Holders agree that they will not challenge the validity, enforceability or perfection of any Senior Debt or the liens, guarantees and security interests securing the same and that as between the holders of the Senior Debt on the one hand and the Trustee and Holders on the other, the terms hereof shall govern even if all or part of the Senior Debt or such liens and security interests are avoided, disallowed, subordinated, set aside or otherwise invalidated in any judicial proceeding or otherwise, regardless of the theory upon which such action is premised. Without in any way limiting the generality of this section 10.10, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Trustee or the Holders and without impairing or releasing the subordination provided in this Article 10 or the obligations hereunder of the Holders to the holders of Senior Debt, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, the Senior Credit Facility or any instrument evidencing the same or any agreement under which Senior Debt is outstanding or secured: (b) sell, exchange, release, foreclose against or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (c) release any Person liable in any manner for the collection of Senior Debt; and (d) exercise or refrain from exercising any rights against the Company, any Subsidiary thereof or any other Person. SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a distribution is to be made or a notice given to holders of any Senior Debt, the distribution may be made and the notice given to their Representative. Upon any payment or distribution of assets of the Company referred to in this Article 10, the Trustee and the Holders of Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction or upon any certificate of such Representative(s) or of the liquidating trustee or agent or other Person making any distribution to the Trustee or to the Holders of Notes for the purpose of ascertaining the Persons entitled to participate in such distribution, all holders of the Senior Debt and other Indebtedness of the Company, the amount 187 75 thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding the provisions of this Article 10 or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment or distribution by the Trustee, and the Trustee and the Paying Agent may continue to make payments on the Notes, unless the Trustee shall have received at its Corporate Trust Office at least two Business Days prior to the date of such payment written notice of facts that would cause the payment of any Obligations with respect to the Notes to violate this Article 10. Only the Company or a Representative may give the notice. Nothing in this Article 10 shall impair the claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof. The Trustee in its individual or any other capacity may hold Senior Debt with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION. Each Holder of Notes, by the Holder's acceptance thereof, authorizes and directs the Trustee on such Holder's behalf to take such action as may be necessary or appropriate to effectuate the subordination as provided in this Article 10 and the subordination of the Subsidiary Guarantees as provided in Section 11.02, and appoints the Trustee to act as such Holder's attorney-in-fact for any and all such purposes, including, in the event of any dissolution, winding up, liquidation or reorganization of the Company or any Subsidiary (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of creditors or otherwise), the filing of a claim for the unpaid balance of its Notes in the form required in those proceedings. If the Trustee does not file a proper proof of claim or proof of debt in the form required in any proceeding referred to in Section 6.09 hereof at least 30 days before the expiration of the time to file such claim, the Representatives are hereby authorized to file an appropriate claim for and on behalf of the Holders of the Notes. SECTION 10.14. AMENDMENTS. The provisions of this Article 10 or Section 11.02 or 11.06 (including, without limitation, any definitions or other sections included by reference or incorporation or the terms and conditions of the Subsidiary Guarantees) shall not be amended or modified without the written consent of the holders of all Senior Debt. 188 76 ARTICLE 11. SUBSIDIARY GUARANTEES SECTION 11.01. GUARANTEE. Subject to this Article 11, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (a) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. 189 77 Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Subsidiary Guarantee. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. SECTION 11.02. SUBORDINATION OF SUBSIDIARY GUARANTEE. The Obligations of each Guarantor under its Subsidiary Guarantee pursuant to this Article 11 shall be junior and subordinated to the prior payment in full in cash of the Senior Debt of such Guarantor on the same basis as the Notes are junior and subordinated to Senior Debt of the Company. For the purposes of the foregoing sentence, the Trustee and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to this Indenture, including Article 10 hereof. SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY. Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Subsidiary Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Subsidiary Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor under its Subsidiary Guarantee and this Article 11 shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Subsidiary Guarantee not constituting a fraudulent transfer or conveyance. 190 78 SECTION 11.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE. To evidence its Subsidiary Guarantee set forth in Section 11.01, each Guarantor hereby agrees that a notation of such Subsidiary Guarantee substantially in the form included in Exhibit E shall be endorsed by an Officer of such Guarantor on each Note authenticated and delivered by the Trustee and that this Indenture shall be executed on behalf of such Guarantor by its President, Treasurer or one of its Vice Presidents. Further, the Company shall cause all future Guarantors to execute a Supplemental Indenture substantially in the form of Exhibit F. Each Guarantor hereby agrees that its Subsidiary Guarantee set forth in Section 11.01 shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. If an Officer whose signature is on this Indenture or on the Subsidiary Guarantee no longer holds that office at the time the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed, the Subsidiary Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set forth in this Indenture on behalf of the Guarantors. In the event that the Company creates or acquires any new Subsidiaries subsequent to the date of this Indenture, if required by Section 4.17 hereof the Company shall cause such Subsidiaries to execute supplemental indentures to this Indenture and Subsidiary Guarantees in accordance with Section 4.17 hereof and this Article 11, to the extent applicable; provided, that all Subsidiaries that have properly been designated as Unrestricted Subsidiaries in accordance with this Indenture (i) will not be subject to the requirements of Section 4.17 hereof and (ii) will be released from all Obligations under any Subsidiary Guarantee, in each case for so long as they continue to constitute Unrestricted Subsidiaries. SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS. No Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another corporation, Person or other entity whether or not affiliated with such Guarantor unless (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to a supplemental indenture, in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Registration Rights Agreement; (ii) immediately after giving effect to such transaction, no 191 79 Default or Event of Default exists; and (iii) except in the case of a merger of a Guarantor with or into another Guarantor or a merger of a Guarantor with or into the Company, the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof. SECTION 11.06. RELEASES FOLLOWING SALE OF ASSETS OR CAPITAL STOCK. In the event of a sale or other disposition of all or substantially all of the assets of any Guarantor (other than to the Company or another Guarantor), by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor (other than to the Company or another Guarantor), then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee and any such acquiring corporation will not be required to assume any obligations of such Guarantor under the applicable Subsidiary Guarantee; provided that such sale or other disposition complies with all applicable provisions of this Indenture including, without limitation, Section 4.10 or Article 10 hereof. The Trustee will provide any written confirmation or evidence of the termination of such Subsidiary Guarantee as reasonably required by the Representative. Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under this Indenture as provided in this Article 11. ARTICLE 12. MISCELLANEOUS SECTION 12.01. TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by TIA Section 318(c), the imposed duties shall control. SECTION 12.02. NOTICES. Any notice or communication by the Company, any Guarantor or the Trustee to the others is duly given if in writing and delivered in Person or mailed by first class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the other's address 192 80 If to the Company and/or any Guarantor: TransTechnology Corporation 150 Allen Road Liberty Corner, NJ 07938 Telecopier No.: (908) 903-1616 Attention: General Counsel With a copy to: Hahn Loeser & Parks LLP 3300 BP Tower 200 Public Square Cleveland, OH 44114 Telecopier No. (216) 241-2825 Attention: Ronald F. O'Keefe If to the Trustee: State Street Bank and Trust Company 2 Avenue de Lafayette Boston, MA 02101 Telecopier No. (617)-662-1465 Attention: Thomas Belamarich Re: TransTechnology Corporation The Company, any Guarantor or the Trustee, by notice to the others may designate additional or different addresses for subsequent notices or communications. All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery. Any notice or communication to a Holder shall be mailed by first class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar. Any notice or communication shall also be so mailed to any Person described in TIA Section 313(c), to the extent required by the TIA. Failure to mail a notice 193 81 or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it. If the Company mails a notice or communication to Holders, it shall mail a copy to the Trustee and each Agent at the same time. SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES. Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA ss. 312(c). SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (a) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 12.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied. SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA Section 314(e) and shall include: (a) a statement that the Person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 194 82 (c) a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been satisfied; and (d) a statement as to whether or not, in the opinion of such Person, such condition or covenant has been satisfied. SECTION 12.06. RULES BY TRUSTEE AND AGENTS. The Trustee may make reasonable rules for action by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions. SECTION. 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS. No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or such Guarantor under the Notes, the Subsidiary Guarantees, this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. SECTION 12.08. GOVERNING LAW. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Company or its Subsidiaries or of any other Person. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 12.10. SUCCESSORS. All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. 195 83 SECTION 12.11. SEVERABILITY. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 12.12. COUNTERPART ORIGINALS. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table and Headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof. [Signatures on following page] 196 Dated as of ______, _____ SIGNATURES: THE COMPANY: TRANSTECHNOLOGY CORPORATION By: /s/ Joseph F. Spanier ----------------------------------- Name:Joseph F. Spanier Title: Vice President THE GUARANTORS: TRANSTECHNOLOGY ACQUISITION CORPORATION By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary PALNUT FASTENERS, INC. By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary INDUSTRIAL RETAINING RING COMPANY By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary RETAINERS, INC. By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 197 RANCHO TRANSTECHNOLOGY CORPORATION By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INDUSTRIES By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INTERNATIONAL SALES, INC. By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 198 TRANSTECHNOLOGY SEEGER, INC. By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SEEGER INC. By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TCR CORPORATION By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary NORCO, INC. By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary AEROSPACE RIVET MANUFACTURERS CORPORATION By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary ELLISON RING & WASHER INC. By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 199 TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY CANADA CORPORATION By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY INTERNATIONAL CORPORATION By: /s/ Gerald C. Harvey ----------------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 200 STATE STREET BANK AND TRUST COMPANY, AS TRUSTEE By: /s/ Jill Olson ----------------------------------- Name: JILL OLSON Title: Vice President 201 EXHIBIT A-1 (Face of Note) ============================================================================= CUSIP: [Series A] [Series B] Senior Subordinated Notes due 2009 No.: $_____________ TransTechnology Corporation promises to pay to____________________________________________________________ or registered assigns, the principal sum of__________________________________________________________ Dollars on __________, 2009. Interest Payment Dates: August 31, November 30, February 28 and May 31 Record Dates: August 15, November 15, February 14 and May 15 DATED: ____________, 200_ TRANSTECHNOLOGY CORPORATION BY:____________________________ Name: Title: (SEAL) This is one of the [Global] Notes referred to in the within-mentioned Indenture: State Street Bank and Trust Company, as Trustee By:_____________________________ Name: Title: ============================================================================== 202 (Back of Note) [Series A] [Series B] Senior Subordinated Notes due 2009 [INSERT THE GLOBAL NOTE LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] [INSERT THE PRIVATE PLACEMENT LEGEND, IF APPLICABLE PURSUANT TO THE PROVISIONS OF THE INDENTURE] Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. TransTechnology Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at [if Fixed Rate, insert applicable Fixed Rate] [the Variable Rate, as such term is defined in the Indenture to which this Note is subject] per annum from _____________ until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages semi-annually on August 31, November 31, February 28 and May 31 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand to the extent lawful at a rate that is 2% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the August 15, November 15, February 14, or May 15 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. Principal, premium, if any, and 203 interest and Liquidated Damages on the Notes will be payable at the office or agency of the Company maintained for such purpose or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium, interest and Liquidated Damages with respect to Notes the Holders of which have given wire transfer instructions to the Company prior to the Record Date will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued in denominations of $1,000 and integral multiples thereof. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE AND SUBORDINATION. The Company issued the Notes under an Indenture dated as of August 31, 2000 ("the Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are general unsecured obligations of the Company limited to $75.0 million in aggregate principal amount. The payment of the Notes will, to the extent set forth in the Indenture, be subordinated in right of payment to the prior payment in full in cash or cash equivalents of all Senior Debt. 5. OPTIONAL REDEMPTION. (a) The Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 10 nor more than 30 days' notice, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon and Liquidated 204 Damages under and as defined in the Registration Rights Agreement referred to below with respect thereto, to the applicable redemption date. (b) Notwithstanding the provisions of clause (a), any Notes held by a Fixed Rate Holder (as defined in the Indenture) shall not be subject to redemption at the Company's option until August 31, 2005, and from and after August 31, 2005 the amount required to be paid in redemption of any such Note shall be equal to the outstanding principal amount thereof, PLUS any accrued but unpaid interest and Liquidated Damages thereon, to the applicable redemption date, PLUS a premium equal to the product of (i) the principal amount of such Note multiplied by (ii) the percentage calculated by multiplying (A) the fixed interest rate applicable to such Note by (B) the percentage set forth in the table below opposite the period in which such redemption occurs:
Period Percentage ------ ---------- From and including August 31, 2005 through August 30, 2006 50% From and including August 31, 2006 through August 30, 2007 33.33% From and including August 31, 2007 through August 30, 2008 16.66% From and including August 31, 2008 through August 30, 2009 0%
6. MANDATORY REDEMPTION. Except as set forth in Paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, each Holder of Notes will have the right to require the Company to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 15 Business Days following any Change of Control, the Company will mail a notice to each Holder describing the 205 transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $5.0 million the Company will be required to make an offer to all Holders of Notes and all holders of other pari passu Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture and such other Indebtedness. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such other Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. 8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class mail at least 10 days but not more than 30 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. Notes in denominations larger than $1,000 may be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 206 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company or the Registrar is not required to transfer or exchange any Note selected for redemption. Also, the Company or the Registrar is not required to transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Notes or the Subsidiary Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes) and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). Without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation, or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by the Company or any of its Subsidiaries for 30 days after notice to comply with Section 4.07, 207 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by the Company or any of its Subsidiaries for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, which default results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $5.0 million or more (other than Existing Indebtedness to the extent it is secured by or paid by the drawing against a letter of credit permitted to be issued under the Indenture); (vi) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries as set forth in the Indenture; and (viii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid in any material respect or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least a majority in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency as set forth in the Indenture, with respect to the Company, any Significant Subsidiary or any group of Subsidiaries, that taken together would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver 208 to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any Guarantor, as such, shall not have any liability for any obligations of the Company or any Guarantor under the Notes, the Subsidiary Guarantees, the Indenture or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of August 31, 1999, between the Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience 209 to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: TransTechnology Corporation 150 Allen Road Liberty Corner, NJ 07893 Attention: General Counsel 210 ASSIGNMENT FORM To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to ------------------------------------------------------------------------------ (Insert assignee's soc. sec. or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. - ------------------------------------------------------------------------------- Date: Your Signature: ------------- --------------------------- (Sign exactly as your name appears on the Note) SIGNATURE GUARANTEE: - --------------------------------------- Participant in a Recognized Signature Guarantee Medallion Program 211 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: [ ] Section 4.10 [] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $___________ Date: Your Signature: ----------------------- --------------------- (Sign exactly as your name appears on the Note) Tax Identification No.: ------------- SIGNATURE GUARANTEE: - -------------------------------- Participant in a Recognized Signature Guarantee Medallion Program 212 SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE(1) The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made:
Amount of Amount of Principal Amount decrease in increase in of this Signature of Principal Principal Global Note authorized Amount of Amount of following such decrease officer of Date of this Global this Global decrease(or Trustee or Exchange Note Note increase) Custodian -------- ---- ---- --------- ---------
- ------------------------------------------- (1) This should be included only if the Note is issued in global form. 213 EXHIBIT A-2 (Face of Regulation S Temporary Global Note) =============================================================================== CUSIP: _________ [Series A] [Series B] Senior Subordinated Notes due 2009 No. ______ $__________ TransTechnology Corporation promises to pay to_____________________________________________________________ or registered assigns, the principal sum of ________________________________________________________ Dollars on ________________, 2009. Interest Payment Dates: August 31, November 30, February 28 and May 31 Record Dates: August 15, November 15, February 14 and May 15 DATED:__________________, 1999 TRANSTECHNOLOGY CORPORATION By: --------------------------- Name: Title: [(SEAL)] This is one of the [Global] Notes referred to in the within-mentioned Indenture: State Street Bank and Trust Company, as Trustee By:__________________________ Name: Title: =============================================================================== 214 A2-2 (Back of Regulation S Temporary Global Note) [Series A] [Series B] Senior Subordinated Notes due 2009 THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY. THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER JURISDICTIONS. 215 Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated. 1. INTEREST. TransTechnology Corporation, a Delaware corporation (the "Company"), promises to pay interest on the principal amount of this Note at [if Fixed Rate insert applicable Fixed Rate][the Variable Rate, as such term is defined in the Indenture to which this Note is subject] per annum from ________________________ until maturity and shall pay the Liquidated Damages payable pursuant to Section 5 of the Registration Rights Agreement referred to below. The Company will pay interest and Liquidated Damages quarterly on August 31, November 31, February 28 and May 31 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of original issuance; provided that if there is no existing Default in the payment of interest, and if this Note is authenticated between a record date referred to on the face hereof and the next succeeding Interest Payment Date, interest shall accrue from such next succeeding Interest Payment Date. The Company shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand to the extent lawful at a rate that is 2% per annum in excess of the rate then in effect; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Liquidated Damages (without regard to any applicable grace periods) from time to time on demand at the same rate to the extent lawful. Interest will be computed on the basis of a 360-day year of twelve 30-day months. Until this Regulation S Temporary Global Note is exchanged for one or more Regulation S Permanent Global Notes, the Holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Note shall in all other respects be entitled to the same benefits as other Notes under the Indenture. 2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except defaulted interest) and Liquidated Damages to the Persons who are registered Holders of Notes at the close of business on the August 15, November 15, February 14, or May 15 next preceding the Interest Payment Date, even if such Notes are cancelled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest. Principal, premium, if any, and interest and Liquidated Damages on the Notes will be payable at the office or 216 agency of the Company maintained for such purpose or, at the option of the Company, payment of interest and Liquidated Damages may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders of Notes; provided that all payments of principal, premium, interest and Liquidated Damages with respect to Notes the Holders of which have given wire transfer instructions to the Company prior to the Record Date will be required to be made by wire transfer of immediately available funds to the accounts specified by the Holders thereof. Until otherwise designated by the Company, the Company's office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes will be issued in denominations of $1,000 and integral multiples thereof. Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. 3. PAYING AGENT AND REGISTRAR. Initially, State Street Bank and Trust Company, the Trustee under the Indenture, will act as Paying Agent and Registrar. The Company may change any Paying Agent or Registrar without notice to any Holder. The Company or any of its Subsidiaries may act in any such capacity. 4. INDENTURE AND SUBORDINATION. The Company issued the Notes under an Indenture dated as of August 31, 2000 ("Indenture") between the Company and the Trustee. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code Sections 77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. The Notes are general unsecured obligations of the Company limited to $75.0 million in aggregate principal amount. The payment of the Notes will, to the extent set forth in the Indenture, be subordinated in right of payment to the prior payment in full in cash or cash equivalents of all Senior Debt. 5. OPTIONAL REDEMPTION. (a) The Notes will be subject to redemption at any time at the option of the Company, in whole or in part, upon not less than 10 nor more than 30 days' notice, at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest thereon and Liquidated Damages under and as defined in the Registration Rights Agreement referred to below with respect thereto, to the applicable redemption date. 217 A2-5 (b) Notwithstanding the provisions of clause (a), any Notes held by a Fixed Rate Holder (as defined in the Indenture) shall not be subject to redemption at the Company's option until August 31, 2005, and from and after August 31, 2005 the amount required to be paid in redemption of any such Note shall be equal to the outstanding principal amount thereof, PLUS any accrued but unpaid interest and Liquidated Damages thereon, to the applicable redemption date, PLUS a premium equal to the product of (i) the principal amount of such Note multiplied by (ii) the percentage calculated by multiplying (A) the fixed interest rate applicable to such Note by (B) the percentage set forth in the table below opposite the period in which such redemption occurs:
Period Percentage ------ ---------- From and including August 31, 2005 through August 30, 2006 50% From and including August 31, 2006 through August 30, 2007 33.33% From and including August 31, 2007 through August 30, 2008 16.66% From and including August 31, 2008 through August 30, 2009 0%
6. MANDATORY REDEMPTION. Except as set forth in Paragraph 7 below, the Company shall not be required to make mandatory redemption payments with respect to the Notes. 7. REPURCHASE AT OPTION OF HOLDER. (a) If there is a Change of Control, each Holder of Notes will have the right to require the Company to make an offer (a "Change of Control Offer") to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such Holder's Notes at an offer price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase (the "Change of Control Payment"). Within 15 Business Days following any Change of Control, the Company will mail a notice to each Holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be 218 A2-6 no earlier than 30 days and no later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control. (b) If the Company or a Restricted Subsidiary consummates any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will be required to make an offer to all Holders of Notes and all holders of other pari passu Indebtedness containing provisions similar to those set forth in the Indenture with respect to offers to purchase or redeem with the proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount of Notes and such other pari passu Indebtedness that may be purchased out of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of the principal amount thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the date of purchase, in accordance with the procedures set forth in the Indenture and such other Indebtedness. To the extent that any Excess Proceeds remain after consummation of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If the aggregate principal amount of Notes and such other Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such other Indebtedness to be purchased on a pro rata basis. Upon completion of such offer to purchase, the amount of Excess Proceeds shall be reset at zero. 8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class mail at least 10 days but not more than 30 days before the redemption date to each Holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. Notes in denominations larger than $1,000 may be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption. 9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. The transfer of Notes may be registered and Notes may 219 A2-7 be exchanged as provided in the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company or the Registrar is not required to transfer or exchange any Note selected for redemption. Also, the Company or the Registrar is not required to transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed. This Regulation S Temporary Global Note is exchangeable in whole or in part for one or more Global Notes only (i) on or after the termination of the 40-day restricted period (as defined in Regulation S) and (ii) upon presentation of certificates (accompanied by an Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon exchange of this Regulation S Temporary Global Note for one or more Global Notes, the Trustee shall cancel this Regulation S Temporary Global Note. 10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated as its owner for all purposes. 11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the Indenture, the Notes or the Subsidiary Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes) and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes). Without the consent of any Holder of Notes, the Company and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Company's obligations to Holders of the Notes in case of a merger or consolidation or sale of all or substantially all of the Company's assets, to make any change that would provide any additional rights or benefits to the Holders of the Notes or that does not adversely affect the legal rights under the Indenture of any such Holder, or to comply with the requirements of the Commission in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act. 12. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages 220 A2-8 with respect to the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of principal of or premium, if any, on the Notes (whether or not permitted by the subordination provisions of the Indenture); (iii) failure by the Company or any of its Subsidiaries for 30 days after notice to comply with Section 4.07, 4.09, 4.10 or 4.15 of the Indenture; (iv) failure by the Company or any of its Subsidiaries for 60 days after notice to comply with any of its other agreements in the Indenture or the Notes or (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Company or any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now exists, or is created after the date of the Indenture, which default results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $5.0 million or more (other than Existing Indebtedness to the extent it is secured by or paid by the drawing against a letter of credit permitted to be issued under the Indenture); (vi) failure by the Company or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) certain events of bankruptcy or insolvency with respect to the Company or any of its Significant Subsidiaries as set forth in the Indenture; and (viii) except as permitted by the Indenture, any Subsidiary Guarantee shall be held in any judicial proceeding to be unenforceable or invalid in any material respect or shall cease for any reason to be in full force and effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Subsidiary Guarantee. If any Event of Default occurs and is continuing, the Trustee or the Holders of at least a majority in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency as set forth in the Indenture, with respect to the Company, any Significant Subsidiary or any group of Subsidiaries, that taken together would constitute a Significant Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, Holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. The Holders of a 221 A2-9 majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of, the Notes. The Company is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Company is required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. 13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not the Trustee; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. 14. NO RECOURSE AGAINST OTHERS. A director, officer, employee, incorporator or stockholder, of the Company or any Guarantor, as such, shall not have any liability for any obligations of the Company or any Guarantor under the Notes, the Subsidiary Guarantees, the Indenture or the Registration Rights Agreement or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 15. AUTHENTICATION. This Note shall not be valid until authenticated by the manual signature of the Trustee or an authenticating agent. 16. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under the Indenture, Holders of Restricted Global Notes and Restricted Definitive Notes shall have all the rights set forth in the Registration Rights Agreement dated as of August 31, 1999, between the Company and the parties named on the signature pages thereof (the "Registration Rights Agreement"). 222 A2-10 18. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement. Requests may be made to: TransTechnology Corporation 150 Allen Road Liberty Corner, NJ 07893 Attention: General Counsel 223 A2-11 (Assignment Form) To assign this Note, fill in the form below: (I) or (we) assign and transfer this Note to - ------------------------------------------------------------------------------- (Insert assignee's soc. sec. or tax I.D. no.) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint________________________________________________________ to transfer this Note on the books of the Company. The agent may substitute another to act for him. - ------------------------------------------------------------------------------ Date: _____________________ Your Signature: _______________________________ (Sign exactly as your name appears on the Note) SIGNATURE GUARANTEE: - ------------------------------- Participant in a Recognized Signature Guarantee Medallion Program 224 A2-12 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Note purchased by the Company pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box below: [ ] Section 4.10 [ ] Section 4.15 If you want to elect to have only part of the Note purchased by the Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the amount you elect to have purchased: $___________ - ------------------------------------------------------------------------------- Date: Your Signature: ------------------------ ------------------------------- (Sign exactly as your name appears on the Note) Tax Identification No.: ----------------- SIGNATURE GUARANTEE: - -------------------------------- Participant in a Recognized Signature Guarantee Medallion Program 225 A2-13 SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE(2) The following exchanges of a part of this Regulation S Temporary Global Note for an interest in another Global Note, or of other Restricted Global Notes for an interest in this Regulation S Temporary Global Note, have been made:
Amount of Amount of Principal Amount decrease in increase in of this Signature of Principal Principal Global Note authorized Amount of Amount of following such decrease officer of Date of this Global this Global decrease(or Trustee or Exchange Note Note increase) Custodian -------- ---- ---- --------- ---------
- ------------------------------------------- (2) This should be included only if the Note is issued in global form. 226 EXHIBIT B FORM OF CERTIFICATE OF TRANSFER TransTechnology Corporation 150 Allen Road Liberty Corner, NJ 07893 Attention: General Counsel [Registrar address block] Re: Series Senior Subordinated Notes due 2009 --------------------------------------------- Reference is hereby made to the Indenture, dated as of _____________ (the "INDENTURE"), between TransTechnology Corporation, as issuer (the "COMPANY"), and State Street Bank and Trust Company, as trustee. Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture. ______________, (the "TRANSFEROR") owns and proposes to transfer the Note[s] or interest in such Note[s] specified in Annex A hereto, in the principal amount of $___________ in such Note[s] or interests (the "Transfer"), to __________ (the "TRANSFEREE"), as further specified in Annex A hereto. In connection with the Transfer, the Transferor hereby certifies that: [CHECK ALL THAT APPLY] 1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a "qualified institutional buyer" within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement 227 B-2 Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 2. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE TEMPORARY REGULATION S GLOBAL NOTE, THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person (other than an initial purchaser). Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note, the Temporary Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act. 3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one): (a) [ ] such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act; or 228 B-3 (b) [ ] such Transfer is being effected to the Company or a subsidiary thereof; or (c) [ ] such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act; or (d) [ ] such Transfer is being effected to an Institutional Accredited Investor and pursuant to an exemption from the registration requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor hereby further certifies that it has not engaged in any general solicitation within the meaning of Regulation D under the Securities Act and the Transfer complies with the transfer restrictions applicable to beneficial interests in a Restricted Global Note or Restricted Definitive Notes and the requirements of the exemption claimed, which certification is supported by (1) a certificate executed by the Transferee in the form of Exhibit D to the Indenture and (2) if such Transfer is in respect of a principal amount of Notes at the time of transfer of less than $250,000, an Opinion of Counsel provided by the Transferor or the Transferee (a copy of which the Transferor has attached to this certification), to the effect that such Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Global Note and/or the Definitive Notes and in the Indenture and the Securities Act. 4. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE. (a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend 229 printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture. (c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture. This certificate and the statements contained herein are made for your benefit and the benefit of the Company. [Insert Name of Transferor] By: ---------------------------------- Name: Title: Dated: ______________________, 230 B-5 ANNEX A TO CERTIFICATE OF TRANSFER 1. The Transferor owns and proposes to transfer the following: [CHECK ONE OF (a) OR (b)] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP _________), or (ii) [ ] Regulation S Global Note (CUSIP__________), or (b) [ ] a Restricted Definitive Note. 2. After the Transfer the Transferee will hold: [CHECK ONE] (a) [ ] a beneficial interest in the: (i) [ ] 144A Global Note (CUSIP ________), or (ii) [ ] Regulation S Global Note (CUSIP ________), or (iii) [ ] Unrestricted Global Note (CUSIP ________); or (b) [ ] a Restricted Definitive Note; or (c) [ ] an Unrestricted Definitive Note, in accordance with the terms of the Indenture. 231 EXHIBIT C --------- Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ----------------------------------------- TransTechnology Corporation 150 Allen Road Liberty Corner, NJ 07938 Attention: General Counsel Ladies and Gentlemen: In connection with our proposed purchase of $_________ aggregate principal amount of the Series ____ Senior Subordinated Notes due 2009 (the "Notes") of TransTechnology Corporation (the "Company"), we confirm that: 1. We understand that the Notes have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Notes prior to (x) the date which is two years (or such shorter period of time as permitted by Rule 144 under the Securities Act) after the later of the date of original issue of the Notes being acquired or any predecessor to such Notes or the last date on which the Company or any affiliate of the Company was the owner of the Notes being acquired or any predecessor of such Notes or (y) such later date, if any, as may be required by any subsequent change in applicable law (the "Resale Restriction Termination Date") only (a) to the Company or a subsidiary thereof, (b) pursuant to a registration statement which has been declared effective under the Securities Act, (c) so long as the Notes are eligible for resale pursuant to Rule 144A under the Securities Act, to a person we reasonably believe is a "qualified institutional buyer" under Rule 144A (a "QIB") that purchases for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States to "foreign purchasers" (as defined below) in offshore transactions meeting the requirements of Rule 904 of Regulation S under the Securities Act, (e) to an institutional "accredited investor" within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act (an "Accredited Investor") that is purchasing for its own account or for the account of such an institutional "accredited investor" in each case in a minimum principal amount of the Notes of $250,000, for investment purposes and not with a 232 C-2 view to or for offer or sale in connection with any distribution in violation of the Securities Act or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, in each case in accordance with applicable securities laws of any state of the United States or any other applicable jurisdiction, subject, in each of the foregoing cases, to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and to compliance with any applicable state securities laws. The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Notes is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Trustee, which shall provide, among other things, that the transferee is an Accredited Investor within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the Securities Act and that it is acquiring such Notes for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Company, the Trustee and the Transfer Agent and Registrar reserve the right prior to any offer, sale or other transfer prior to the Resale Restriction Termination Date of the Notes pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certification and/or other information satisfactory to the Company and the Trustee. 2. We are an Accredited Investor purchasing Notes for our own account or for the account of one or more QIBs or Accredited Investors, and we are acquiring the Notes for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act or the securities laws of any state of the United States and we have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment in the Notes for an indefinite period. 3. We are acquiring the Notes purchased by us for our own account or for one or more accounts as to each of which we exercise sole investment discretion and we and any such account are (a) a QIB, aware that the sale is being made in reliance on Rule 144A under the Securities Act, (b) an Accredited Investor, or (c) a person other than a U.S. person ("foreign purchasers"), which term shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners (other than an estate or trust) in offshore transactions meeting the requirements of Rules 903 and 904 of Regulation S under the Securities Act. 233 C-3 4. We have received a copy of the Offering Memorandum and acknowledge that we have had access to such financial and other information, and have been afforded the opportunity to ask such questions of representatives of the Company and receive answers thereto, as we deem necessary in order to verify the information contained in the Offering Memorandum. 5. We are not purchasing the Notes for or on behalf of, and will not transfer the Securities to, any pension or welfare plan (as defined in Section 3 of ERISA, except as may be permitted under ERISA and as described under "Notice to Investors" in the Offering Memorandum. 6. In the event that we purchase any Notes, we will acquire Notes having an outstanding principal amount of at least $250,000 for our own account and $250,000 for each account for which we are acting. We understand that the Trustee and the Transfer Agent will not be required to accept for registration of transfer any Notes acquired by us, except upon presentation of evidence satisfactory to the Company and the Trustee that the foregoing restrictions on transfer have been complied with. We further understand that the Notes purchased by us will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of the first paragraph of this letter. We further agree to provide to any person acquiring any of the Notes from us a notice advising such person that transfers of such Notes are restricted as stated herein and that certificates representing such Notes will bear a legend to that effect. We represent that you, the Company, the Trustee and others are entitled to rely upon the truth and accuracy of our acknowledgements, representations and agreements set forth herein, and we agree to notify you promptly in writing if any of our acknowledgements, representations or agreements herein cease to be accurate and complete. You are also irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. We represent to you that we have full power to make the foregoing acknowledgements, representations and agreements on our own behalf and on behalf of any investor account for which we are acting as fiduciary agent. As used herein, the terms "offshore transaction," "United States" and "U.S. person" have the respective meanings given to them in Regulation S under the Securities Act. 234 C-4 THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Very truly yours, (Name of Purchaser) By:____________________ Date:__________________ Upon transfer, the Securities would be registered in the name of the new beneficial owner. 235 EXHIBIT D --------- Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S ------------------------ State Street Bank and Trust Company Corporate Trust Department 2 Avenue de Lafayette, 6th Floor Boston, MA 02111 Re: TransTechnology Corporation (the "Company") Series ___ Senior Subordinated Notes due 2009 (the "Notes") Ladies and Gentlemen: In connection with our proposed sale of $______ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Notes was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; (5) we have advised the transferee of the transfer restrictions applicable to the Notes; 236 D-2 (6) if the circumstances set forth in Rule 904(c) under the Securities Act are applicable, we have complied with the additional conditions therein, including (if applicable) sending a confirmation or other notice stating that the Notes may be offered and sold during the restricted period specified in Rule 903(c)(2) or (3), as applicable, in accordance with the provisions of Regulation S; pursuant to registration of the Notes under the Securities Act; or pursuant to an available exemption from the registration requirements under the Securities Act; and (7) if the sale is made during a restricted period and the provisions of Rule 903(c)(3) are applicable thereto, we confirm that such sale has been made in accordance with such provisions. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By:________________________ Authorized Signature 237 EXHIBIT E FORM OF SUBORDINATED SUBSIDIARY GUARANTEE For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in the Indenture dated as of August 31, 2000 (the "Indenture") among TransTechnology Corporation, the Guarantors listed on the signature page thereto, and State Street Bank and Trust Company, as trustee (the "Trustee"), and subject to the provisions in the Indenture, (a) the due and punctual payment of the principal of, premium, if any, and interest on the Notes (as defined in the Indenture), whether at maturity, by acceleration, redemption or otherwise, the due and punctual payment of interest on overdue principal and premium, and, to the extent permitted by law, interest, and the due and punctual performance of all other obligations of the Company to the Holders or the Trustee all in accordance with the terms of the Indenture and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to this Subsidiary Guarantee and the Indenture are expressly set forth in Article 11 of the Indenture and reference is hereby made to the Indenture for the precise terms of this Subsidiary Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee, on behalf of such Holder, to take such action as may be necessary or appropriate to effectuate the subordination as provided in the Indenture and (c) appoints the Trustee attorney-in-fact of such Holder for such purpose; provided, however, that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be so subordinated and subject in right of payment upon any defeasance of this Note in accordance with the provisions of the Indenture. The terms of Articles 10 and 11 of the Indenture are incorporated herein by reference. [Name of Guarantor] By:________________________ Name: Title: 238 EXHIBIT F FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY SUBSEQUENT GUARANTORS SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of ________________, among __________________ (the "Guaranteeing Subsidiary"), a subsidiary of TransTechnology Corporation (or its permitted successor), a Delaware corporation (the "Company"), the Company, the other Guarantors (as defined in the Indenture referred to herein) and State Street Bank and Trust Company, as trustee under the indenture referred to below (the "Trustee"). W I T N E S S E T H WHEREAS, the Company has heretofore executed and delivered to the Trustee an indenture (the "Indenture"), dated as of _______________ providing for the issuance of an aggregate principal amount of up to $75.0 million of Senior Subordinated Notes due 2009 (the "Notes"); WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Company's Obligations under the Notes and the Indenture on the terms and conditions set forth herein (the "Subsidiary Guarantee"); and WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture. NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Guaranteeing Subsidiary and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows: 1. Capitalized Terms. Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture. 2. Agreement to Guarantee. The Guaranteeing Subsidiary hereby agrees as follows: (a) Along with all Guarantors named in the Indenture, to jointly and severally Guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its 239 F-2 successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Company hereunder or thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. (b) The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. (c) The following is hereby waived: diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever. (d) This Subsidiary Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and the Indenture. (e) If any Holder or the Trustee is required by any court or otherwise to return to the Company, the Guarantors, or any Custodian, Trustee, liquidator or other similar official acting in 240 relation to either the Company or the Guarantors, any amount paid by either to the Trustee or such Holder, this Subsidiary Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. (f) The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. (g) As between the Guarantors, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Subsidiary Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Subsidiary Guarantee. (h) The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantee. (i) The obligations hereunder shall be subject to the subordination provisions set forth in Article 10 of the Indenture. 3. Execution and Delivery. Each Guaranteeing Subsidiary agrees that the Subsidiary Guarantees shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Subsidiary Guarantee. 4. Guaranteeing Subsidiary May Consolidate, Etc., on Certain Terms. (a) The Guaranteeing Subsidiary may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another corporation, Person or entity whether or not affiliated with such Guarantor unless: (i) subject to Section 11.05 and 11.06 of the Indenture, the Person formed by or surviving any such consolidation or merger (if other than a Guarantor or the Company) 241 F-4 unconditionally assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes, the Indenture and the Subsidiary Guarantee on the terms set forth herein or therein; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) except in the case of a merger of a Guarantor with or into another Guarantor or a merger of a Guarantor with or into the Company, the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 4.09 of the Indenture. (b) In case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantee endorsed upon the Notes and the due and punctual performance of all of the covenants and conditions of the Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor. Such successor corporation thereupon may cause to be signed any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in all respects have the same legal rank and benefit under the Indenture as the Subsidiary Guarantees theretofore and thereafter issued in accordance with the terms of the Indenture as though all of such Subsidiary Guarantees had been issued at the date of the execution hereof. (c) Except as set forth in Articles 4 and 5 of the Indenture, and notwithstanding clauses (a) and (b) above, nothing contained in the Indenture or in any of the Notes shall prevent any consolidation or merger of a Guarantor with or into the Company or another Guarantor, or shall prevent any sale or conveyance of the property of a Guarantor as an entirety or 242 F-5 substantially as an entirety to the Company or another Guarantor. 5. Releases. (a) In the event of a sale or other disposition of all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all to the Capital Stock of any Guarantor (other than to the Company or another Guarantor), then such Guarantor (in the event of a sale or other disposition, by way of merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor (other than to the Company or another Guarantor)) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under its Subsidiary Guarantee and any such acquiring corporation will not be required to assume any obligations of such Guarantor under the applicable Subsidiary Guarantee; provided that such sale or other disposition complies with all applicable provisions of the Indenture including, without limitation, Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such sale or other disposition was made by the Company in accordance with the provisions of the Indenture, including without limitation Section 4.10 of the Indenture, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. (b) Any Guarantor not released from its obligations under its Subsidiary Guarantee shall remain liable for the full amount of principal of and interest on the Notes and for the other obligations of any Guarantor under the Indenture as provided in Article 11 of the Indenture. 6. No Recourse Against Others. No past, present or future director, officer, employee, incorporator, stockholder or agent of the Guaranteeing Subsidiary, as such, shall have any liability for any obligations of the Company or any Guaranteeing Subsidiary under the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities 243 under the federal securities laws and it is the view of the SEC that such a waiver is against public policy. 7. New York Law to Govern. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 8. Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 9. Effect of Headings. The Section headings herein are for convenience only and shall not affect the construction hereof. 10. The Trustee. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary and the Company. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed and attested, all as of the date first above written. Dated: _______________, ____ [Guaranteeing Subsidiary] By:___________________________ Name: Title: 244 EXHIBIT E ------------------------------------------------------------------------ REGISTRATION RIGHTS AGREEMENT Dated as of August 31, 1999 by and among TransTechnology Corporation, the Guarantors named herein, and BankBoston, N.A., as Administrative Agent ------------------------------------------------------------------------ 245 This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of August 31, 1999, by and among TransTechnology Corporation, a Delaware corporation (the "Company"), the Guarantors listed on the signature pages hereto as such (together with any future subsidiary of the Company that executes a guarantee in accordance with the provisions of the Purchase Agreement referred to below, the "Guarantors"), and BankBoston, N.A., in its capacity as administrative agent for the initial purchasers (the "Initial Purchasers"), of the Company's Bridge Notes in the original principal amount of $75,000,000 (the "Bridge Notes") under and pursuant to that certain Senior Subordinated Note Purchase Agreement, dated as of August 31, 1999 (the "Purchase Agreement"), by and among the Company, the Administrative Agent, BancBoston Robertson Stephens Inc., as the arranger (in such capacity, the "Arranger") and the Initial Purchasers. This Agreement is made pursuant to the Purchase Agreement. In order to induce the Initial Purchasers to purchase the Bridge Notes, the Company and the Guarantors (collectively, the "Issuers") have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 2 of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The Securities Act of 1933, as amended. ADMINISTRATIVE AGENT: As defined in the preamble hereto. AFFILIATE: With respect to any specified Person, any Person directly or indirectly controlling or controlled by such specified Person, or any Person under direct or common control with such specified Person. BRIDGE NOTES: As defined in the preamble hereto. BUSINESS DAY: Any day other than a Saturday, a Sunday or a day on which banking institutions in Boston, Massachusetts, or at any other place of payment hereunder are authorized by law, regulation or executive order to remain closed. BROKER-DEALER: Any broker or dealer registered as such under the Exchange Act. CLOSING DATE: The date of this Agreement. COMMISSION: The Securities and Exchange Commission. 246 -2- CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Series B Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Issuers to the Registrar under the Indenture of Series B Notes in the same aggregate principal amount as the aggregate principal amount of Series A Notes that were tendered by Holders thereof pursuant to the Exchange Offer. DAMAGES PAYMENT DATE: With respect to the Notes, each Interest Payment Date. EFFECTIVENESS TARGET DATE: As defined in Section 5 hereof. EXCHANGE ESCROW AGREEMENT: As defined in the Purchase Agreement. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. EXCHANGE OFFER: The registration by the issuers under the Act of the Series B Notes pursuant to a Registration Statement pursuant to which the Issuers offer the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Series B Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. GUARANTORS: As defined in the preamble hereto. HOLDERS: As defined in Section 2(b) hereof. INDEMNIFIED HOLDER: As defined in Section 8(a) hereof. INDENTURE: The Indenture, dated as of the date hereof, among the Issuers and State Street Bank and Trust Company, as trustee (the "Trustee"), pursuant to which the Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. INITIAL MATURITY DATE: August 31, 2000. INITIAL PURCHASERS: As defined in the preamble hereto. INTEREST PAYMENT DATE: As defined in the Notes. LIQUIDATED DAMAGES: As defined in Section 5 hereof. 247 -3- NASD: National Association of Securities Dealers, Inc. NOTES: The Series A Notes and the Series B Notes. PERSON: An individual, partnership, corporation, limited liability company, limited liability partnership, trust or unincorporated organization, or a government or agency or political subdivision thereof. PROSPECTUS: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. PURCHASE AGREEMENT: As defined in the preamble hereto. RECORD HOLDER: With respect to any Damages Payment Date relating to the Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. REGISTRATION DEFAULT: As defined in Section 5 hereof. REGISTRATION STATEMENT: Any registration statement of the Issuers relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. SERIES A NOTES: The Company's Series A Senior Subordinated Notes due 2009 to be issued under the Indenture in exchange for Term Notes pursuant to Section 5 of the Purchase Agreement, together with the guarantee thereof by any Guarantor. SERIES B NOTES: The Company's Series B Senior Subordinated Notes due 2009 to be issued pursuant to the Indenture in the Exchange Offer, together with the guarantee thereof by any Guarantor. SHELF FILING DEADLINE: As defined in Section 4 hereof. SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof. TERM NOTE: As defined in the Purchase Agreement. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. 248 -4- TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to occur of (a) the date on which such Note is exchanged in the Exchange Offer and the Note for which it is exchanged is entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Note has been effectively registered under the Act and disposed of in accordance with a Shelf Registration Statement or (c) the date on which such Note is permitted to be distributed to the public pursuant to Rule 144 under the Act or by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein). UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. WARRANT HOLDERS' AGREEMENT: As defined in the Purchase Agreement. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) TRANSFER RESTRICTED SECURITIES. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. A Holder is deemed a "selling Holder" whenever such Holder notifies the Company of such Holder's intent to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Issuers shall (i) cause to be filed with the Commission as soon as practicable after the Initial Maturity Date, but in no event later than 60 days after the Initial Maturity Date, an Exchange Offer Registration Statement, (ii) use commercially reasonable efforts to cause such Registration Statement to become effective at the earliest possible time, but in no event later than 120 days after the Initial Maturity Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Act, and (C) cause all necessary filings in connection with the registration and qualification of the Series B Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit the Exchange Offer to be Consummated, and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Series B Notes to be offered in exchange for the Transfer Restricted 249 -5- Securities and to permit resales of Notes held by Broker-Dealers as contemplated by Section 3(c) below. (b) The Company shall use commercially reasonable efforts to cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 Business Days. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Series B Notes shall be included in the Exchange Offer Registration Statement. The Company shall use commercially reasonable efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 Business Days thereafter. (c) The Company shall indicate in a "Plan of Distribution" section contained in the Prospectus contained in the Exchange Offer Registration Statement that any Broker-Dealer who holds Series A Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchange such Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with any resales of the Series B Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. Subject to Section 4(c), the Issuers shall use commercially reasonable efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 180 days from the date on which the Exchange Offer Registration Statement is declared effective. The Issuers shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 180 day period in order to facilitate such resales. 250 -6- SECTION 4. SHELF REGISTRATION (a) SHELF REGISTRATION. If (i) the Issuers are not required to file an Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) if any Holder of Transfer Restricted Securities shall notify the Company within 20 Days after the Exchange Offer shall have been Consummated (A) that such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) that such Holder may not resell the Series B Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) that such Holder is a Broker-Dealer and holds Series A Notes acquired directly from the Company or one of its Affiliates, then the Issuers shall: (x) use commercially reasonable efforts to file a shelf registration statement pursuant to Rule 415 under the Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement") on or prior to the earliest to occur of (1) the 60th day after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement or (2) the 60th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) above (such earliest date being the "Shelf Filing Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 120th day after the obligation to file the Shelf Registration Statement arises. Subject to Section 4(c), the Issuers shall use commercially reasonable efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years following the Closing Date. (b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 15 Business Days after receipt of a request therefor, such information as the Company may 251 -7- reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages (as defined) pursuant to Section 5 hereof unless and until such Holder shall have used its best efforts to provide all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. (c) The Company shall be entitled to suspend the effectiveness of any Shelf Registration Statement and the duration of such suspension shall be excluded from the calculation of the two-year period referred to in Section 4(a). Such suspension shall be effected only if the Board of Directors of the Company determines reasonably and in good faith that the effectiveness of the Shelf Registration Statement would materially impede, delay or interfere with any financing, offer or sale of securities, acquisition, corporate reorganization or other significant transaction involving the Company or any of its Affiliates or require disclosure of material information which the Company has a lawful and bona fide business purpose for preserving as confidential, which financing, offer or sale of securities, acquisition, corporate reorganization or other significant transaction is under active consideration by the Company at the time of such suspension described above; PROVIDED, HOWEVER, that the Company shall not be entitled to more than one suspension, which suspension shall be no longer than six weeks in duration. If the Company shall so suspend the effectiveness of a Shelf Registration Statement it shall, as promptly as possible, deliver a certificate signed by the President, Chief Executive Officer or Chief Financial Officer of the Company to the Initial Purchasers and Holders of Transfer Restricted Securities as to such determination, and such Initial Purchasers and Holders shall receive an extension of the applicable registration period equal to the number of days of the suspension. SECTION 5. LIQUIDATED DAMAGES If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 30 Business Days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose (except pursuant to Section 4(c)) prior to the expiration of the time period specified by this Agreement without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default", and each period during which a Registration Default has occurred and is continuing, a "Registration Default Period"), the Issuers hereby jointly and severally agree that liquidated damages ("Liquidated Damages"), in 252 -8- addition to the base interest that would otherwise accrue on the Transfer Restricted Securities, shall accrue at a per annum rate of 0.25% of the aggregate principal amount of such Transfer Restricted Securities outstanding for the first 90 days of the Registration Default Period, at a per annum rate of 0.50% of the aggregate principal amount of such Transfer Restricted Securities for the second 90 days of the Registration Default Period, at a per annum rate of 0.75% of the aggregate principal amount of such Transfer Restricted Securities for the third 90 days of the Registration Default Period and at a per annum rate of 1.0% of the aggregate principal amount of such Transfer Restricted Securities outstanding thereafter for the remaining portion of the Registration Default Period. All accrued liquidated damages shall be paid to Record Holders by the Company by wire transfer of immediately available funds or by federal funds check on each Damages Payment Date. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the accrual of Liquidated Damages with respect to such Transfer Restricted Securities will cease immediately. All obligations of the Issuers set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Security shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the Exchange Offer, the Issuers shall comply with all of the provisions of Section 6(c) below, shall use commercially reasonable efforts to effect such exchange and shall comply with all of the following provisions: (i) If in the reasonable opinion of counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable law, the Issuers hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Issuers to Consummate an Exchange Offer for such Series A Notes. The Issuers hereby agree to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. The Issuers hereby agree, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted, and (C) diligently pursue a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the time that it is Consummated, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration 253 -9- Statement) to the effect that (A) it is not an affiliate of the Issuers, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Series B Notes to be issued in the Exchange Offer, (C) it is acquiring the Series B Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Issuers' preparations for the Exchange Offer and (D) such other customary representations as the Issuers may reasonably request. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Series B Notes obtained by such Holder in exchange for Series A Notes acquired by such Holder directly from the Company or an Affiliate thereof. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Issuers shall provide a supplemental letter to the Commission (A) stating that the Issuers are registering the Exchange Offer in reliance on the position of the Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC. (available June 5, 1991) and, if applicable, any no-action letter obtained pursuant to clause (i) above, and (B) including a representation that neither the Company nor any Guarantor has entered into any arrangement or understanding with any Person to distribute the Series B Notes to be received in the Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Exchange Offer is acquiring the Series B Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Series B Notes received in the Exchange Offer. (b) SHELF REGISTRATION STATEMENT. In connection with any Shelf Registration Statement, the Issuers shall comply with all the provisions of Section 6(c) below and shall use their commercially reasonable efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Issuers will as expeditiously as possible prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended and lawful method or methods of distribution thereof. 254 -10- (c) GENERAL PROVISIONS. Subject to Section 4(c), in connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes by Broker-Dealers), the Issuers shall: (i) use commercially reasonable efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Act or any regulation thereunder, financial statements of the Guarantors) for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Issuers shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its commercially reasonable efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been exchanged or cease to be Transfer Restricted Securities; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state 255 -11- securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Upon receipt of written notice of any stop order described in the preceding clause (C), selling Holders shall refrain from delivering any Prospectus or Prospectus Supplement in the jurisdiction issuing such stop order until notification by the Issuers that such stop order has been lifted or withdrawn. Upon the receipt of written notice of any fact or event described in the preceding clause (D), selling Holders shall refrain from delivering any Prospectus or Prospectus Supplement requiring amendment or supplement as described therein. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Issuers shall use commercially reasonable efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish to each of the selling Holders and each of the underwriter(s), if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review of such Holders and underwriter(s), if any, for a period of at least three Business Days, and the Issuers will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which a selling Holder of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s), if any, shall reasonably object within three Business Days after the receipt thereof; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the selling Holders and to the underwriter(s), if any, make the Issuers representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request, provided that the Company may require any such Person to enter into a customary confidentiality agreement; (vi) subject to the receipt of confidentiality agreements as provided above, make available at reasonable times for inspection by the selling Holders, 256 -12- any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Issuers and cause the Issuers' officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Issuers are notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (viii) cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Notes covered thereby or the underwriter(s), if any; (ix) furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Issuers hereby consent to the use of the Prospectus and any amendment or supplement thereto in accordance with this Agreement by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) enter into such agreements (including an underwriting agreement), and make such reasonable and customary representations and warranties, and take all such other actions in connection therewith as reasonably necessary in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to 257 -13- such extent as may be reasonably requested by any Initial Purchaser or by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Issuers shall: (A) furnish to the selling Holders and each underwriter, if any, in the event of a Shelf Registration Statement, and furnish to any Holder tendering Notes in an Exchange Offer, if any, in the event of an Exchange Offer, in each case, in such substance and scope as they may reasonably request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the Consummation of the Exchange Offer and, if applicable, the effectiveness of the Shelf Registration Statement: (1) a certificate, dated the date the Exchange Offer is Consummated or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed by (y) the President or any Vice President and (z) a principal financial or accounting officer of the Company confirming, as of the date thereof, the matters set forth in Sections 8.1 - 8.5 of the Purchase Agreement and such other matters as such parties may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Issuers, covering the matters customarily opined to in connection with the registration of securities as contemplated by Sections 3 and 4 of this Agreement and such other matter as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company and the Guarantors, representatives of the independent public accountants for the Company and the Guarantors, representatives of the Holders and their counsel in connection with the preparation of the Registration Statement and related Prospectus and have considered the matters required to be stated therein and the statements contained therein and, although they have not independently verified and are not passing upon and assume no responsibility for the accuracy, completeness or fairness of such statements, on the basis of the foregoing, they hereby confirm that no facts came to their attention that caused them to believe that the Registration Statement and related Prospectus, as of their date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which 258 -14- they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel expresses no belief or opinion with respect to, assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of exhibits, the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Issuers' independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Issuers pursuant to this clause (xi), if any. If at any time during which a Registration Statement is required to be effective under this Agreement the Issuers become aware that the representations and warranties of the Issuers contemplated in clause (A)(1) above cease to be true and correct, the Issuers shall so advise the Initial Purchaser and the underwriter(s), if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing; (xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions (within the United States, Canada or, with respect to sales to institutions, the United Kingdom) as the selling Holders or underwriter(s) may reasonably request and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that neither the Company nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; 259 -15- (xiii) to the extent lawful, issue, upon the request of any Holder of Series A Notes covered by the Shelf Registration Statement, Series B Notes, having an aggregate principal amount equal to the aggregate principal amount of Series A Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Series B Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Notes, as the case may be; in return, the Series A Notes held by such Holder shall be surrendered to the Company for cancellation; (xiv) cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two Business Days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xv) use commercially reasonable efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities within the United States, as may be reasonably necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; (xvi) subject to Section 6(c)(i), if any fact or event contemplated by clause (c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material- fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities that are in a form eligible for deposit with The Depository Trust Company; (xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use commercially reasonable efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities (within the United States, Canada or the United Kingdom) as may be necessary to enable the 260 -16- Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xix) otherwise commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xx) if so required under the TIA, cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use commercially reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; (xxi) provide promptly to each Holder upon request each document filed by the Company with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Issuers' expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice. 261 -17- SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Issuers' performance of or compliance with this Agreement will be borne by the Company or the respective Guarantor, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by any Initial Purchaser or Holder with the NASD (and, if applicable, the reasonable fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Series B Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone incurred by the Company the Guarantors and their agents; (iv) all fees and disbursements of counsel for the Company and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities, (v) all application and filing fees in connection with listing Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Issuers (including the expenses of any special audit and comfort letters required by or incident to such performance). The Issuers will bear their internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by any issuer. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Issuers will reimburse the Initial Purchaser and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Company and the Guarantors will, jointly and severally, indemnify and hold harmless each Holder against any losses, claims, damages or liabilities, joint or several, to which such Holder may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, and will 262 -18- reimburse each Holder for any legal or other expenses reasonably incurred by such Holder in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement or Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Holder expressly for use therein. (b) Each Holder will, severally and not jointly, indemnify and hold harmless the Company and the Guarantors against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Registration Statement or Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use therein; and will reimburse the Company and the Guarantors for any legal or other expenses reasonably incurred by the Company and the Guarantors in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or 263 -19- claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand and the Holders on the other from the sale by the Company of the Series A Notes. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Guarantors on the one hand and the Holders on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand and the Holders on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Notes (before deducting expenses) received by the Company and the Guarantors bear to the total proceeds received by such holder upon the sale of the Notes giving rise to such indemnification obligations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors on the one hand or the Holders on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Guarantors agree, and the Holders shall be deemed to have agreed, that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Holder shall be required to contribute any amount in excess of the amount by which the total net proceeds received by such Holder with respect to the Notes exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent 264 -20- misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Series A Notes held by each of the Holders hereunder and not joint. (e) The obligations of the Company and the Guarantors under this Section 8 shall be in addition to any liability which the Company and the Guarantors may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Holder within the meaning of the Act; and the obligations of the Holders under this Section 8 shall be in addition to any liability which the respective Holders may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and the Guarantors and to each person, if any, who controls the Company within the meaning of the Act the amount by which the total net proceeds received by such Holder with respect to the Notes exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of misrepresentation within the meaning of Section 11(a) of the Act shall be entitled to contribution from any person who was not guilty of such misrepresentation. (f) Notwithstanding anything to the contrary in this Section 8, the Company and the Guarantors shall not be required to indemnify and hold harmless any party with respect to any loss, liability, claim, damage or expense to the extent arising out of (x) the use of a Prospectus relating to a Shelf Registration Statement during any period when its use has been suspended pursuant to Section 4(c) after the Issuers have provided (and such party has actually received) written notice of such suspension pursuant to Section 12(e); PROVIDED that the Company shall have established beyond a reasonable doubt in a court of competent jurisdiction that such Holder actually received such written notice on a timely basis and that such loss, liability, claim, damage or expense would have been completely avoided had such notice been complied with or (y) the use of an outdated Prospectus relating to a Shelf Registration Statement following the delivery of an updated Prospectus correcting the untrue statement or omission giving rise to the loss, liability, claim, damage or expense to any Holder; provided, that the Company shall have established beyond a reasonable doubt in a court of competent jurisdiction that (i) any such untrue statement or omission was fully corrected in such updated Prospectus, (ii) that the delivery of such updated Prospectus by such Holder would not have given rise to such loss, liability, claim, damage or expense and (iii) such Holder was provided with sufficient quantities of such updated Prospectus and written notice of suspension of the prior Prospectus, each on a timely basis. Any amounts paid by the Issuers to a Holder pursuant to this Agreement as a result of such losses, liabilities, claims, damages or expenses shall be returned to the Issuer, if it shall be finally determined by a court of competent jurisdiction that such Holder was not entitled to indemnification by the Issuers by virtue of this Section 8(f). SECTION 9. RULE 144A The Issuers hereby agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of 265 -21- Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration with respect to any Notes hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements, and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 12. MISCELLANEOUS (a) REMEDIES. The Issuers agree that monetary damages (including the Liquidated Damages contemplated hereby) would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) NO INCONSISTENT AGREEMENTS. The Issuers will not, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any of the Guarantors have previously entered into any agreement granting any registration rights with respect to its securities to any Person, other than the Warrant Holders' Agreement. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to any of the holders of the Issuers' securities under any agreement in effect on the date hereof. (c) ADJUSTMENTS AFFECTING THE NOTES. The Issuers will not take any action, or permit any change to occur, with respect to the terms of the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. 266 -22- (d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Issuers have obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered. (e) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Issuers: TransTechnology Corporation 150 Allen Road Liberty Corner, New Jersey 07938 Telecopier No.: (908) 903-1616 Attention: Chief Financial Officer with a copy to F. Ronald O'Keefe, Esq. Hahn Loeser & Parks LLP 3300 BP America Building 200 Public Square Cleveland, Ohio 44114 Telecopier No.: (216) 241-2824 All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. 267 -23- Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) SEVERABILITY. In the event that anyone or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement, the Indenture, the Notes and the Exchange Escrow Agreement, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Issuers with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [Signature page follows] 268 IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first set forth above. THE COMPANY: TRANSTECHNOLOGY CORPORATION By: --------------------------- Name: Joseph F. Spanier Title: Vice President & CFO THE GUARANTORS: TRANSTECHNOLOGY ACQUISITION CORPORATION By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary PALNUT FASTENERS, INC. By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary INDUSTRIAL RETAINING RING COMPANY By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary RETAINERS, INC. By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 269 RANCHO TRANSTECHNOLOGY CORPORATION By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INDUSTRIES By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INTERNATIONAL SALES, INC. By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY SEEGER, INC. By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 270 SEEGER INC. By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TCR CORPORATION By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary NORCO, INC. By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary AEROSPACE RIVET MANUFACTURERS CORPORATION By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary ELLISON RING & WASHER INC. By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 271 TRANSTECHNOLOGY CANADA CORPORATION By: --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary THE ADMINISTRATIVE AGENT: BANKBOSTON, N.A., as Administrative Agent on behalf of the Initial Purchasers and Holders By: --------------------------- Name: Robert W. MacElhiney Title: Vice President 272 EXHIBIT F FORM OF COMPLIANCE CERTIFICATE ----------- --, --- To each of the Lenders party to the Purchase Agreement referred to below c/o BankBoston, N.A., as Administrative Agent 100 Federal Street Boston, Massachusetts 02110 Ladies and Gentlemen: Reference is made to the Senior Subordinated Note Purchase Agreement dated as of August 31, 1999 (as amended, restated, modified, varied and in effect from time to time, the "Purchase Agreement"), by and among TransTechnology, the lending institutions party thereto (the "Lenders"), and BankBoston, N.A., as administrative agent for the Lenders (the "Administrative Agent"). Capitalized terms which are used herein without definition and which are defined in the Purchase Agreement shall have the respective meanings assigned to such terms in the Purchase Agreement. Pursuant to Section 9.4(c) of the Purchase Agreement, the principal financial or accounting officer of TransTechnology hereby certifies to each of you as follows: (a) the information furnished in the calculations attached hereto was true and correct as of the last day of the fiscal [year] [quarter] next preceding the date of this certificate; (b) as of the date of this certificate, there exists no Default or Event of Default or condition which would, with either or both the giving of notice or the lapse of time, result in a Default or an Event of Default; and (c) the financial statements delivered herewith were prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods (except, in the case of quarterly statements, for year-end adjustments and provisions for footnotes and, in all cases, except as disclosed therein). IN WITNESS WHEREOF, the undersigned officer has executed this Compliance Certificate as of the date first written above. TRANSTECHNOLOGY CORPORATION By:_______________________________ Title: [Worksheet to be attached] 273 EXHIBIT G SUBORDINATED GUARANTY SUBORDINATED GUARANTY (this "Guaranty"), dated as of August 31, 1999, by TRANSTECHNOLOGY ACQUISITION CORPORATION, a Delaware corporation, PALNUT FASTENERS, INC., a Delaware corporation, INDUSTRIAL RETAINING RING COMPANY, a New Jersey corporation, RETAINERS, INC., a New Jersey corporation, RANCHO TRANSTECHNOLOGY CORPORATION, a California corporation, TRANSTECHNOLOGY SYSTEMS & SERVICES, INC., a Michigan corporation, ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC., a Delaware corporation, SSP INDUSTRIES, a California corporation, SSP INTERNATIONAL SALES, INC., a California corporation, TRANSTECHNOLOGY SEEGER, INC., a Delaware corporation, SEEGER, INC., a Delaware corporation, TCR CORPORATION, a Minnesota corporation, NORCO, INC., a Connecticut corporation, AEROSPACE RIVET MANUFACTURERS CORPORATION, a California corporation, ELLISON RING & WASHER, INC., a Virginia corporation, TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC, a Delaware limited liability company, TRANSTECHNOLOGY CANADA CORPORATION, an Ontario corporation and TRANSTECHNOLOGY INTERNATIONAL CORPORATION, a U.S. Virgin Islands corporation (each a "Guarantor" and collectively, the "Guarantors"), in favor of (i) BankBoston, N.A., a national banking association, as Administrative Agent (hereinafter, in such capacity, the "Administrative Agent") for itself and the other lending institutions (hereinafter, collectively, the "Lenders") which are or may become parties to a Senior Subordinated Note Purchase Agreement dated as of August 31, 1999 (as amended, restated, modified, varied and in effect from time to time, the "Purchase Agreement"), by and among TransTechnology Corporation, a Delaware corporation (the "Company"), the Lenders, and the Administrative Agent, (ii) each of the Holders of the Notes (as such terms are defined in the Purchase Agreement). WHEREAS, the Guarantors are members of a group of related corporations, the success of any one of which is dependent in part on the success of the other members of such group; WHEREAS, each of the Guarantors expects to receive substantial direct and indirect benefits from the extensions of credit to the Company by the Holders pursuant to the Purchase Agreement (which benefits are hereby acknowledged); WHEREAS, it is a condition precedent to the Lenders' purchasing the Notes under the Purchase Agreement that each Guarantor execute and deliver to the Administrative Agent, for the benefit of each of the Holders of the Notes, a guarantee substantially in the form hereof; and WHEREAS, each Guarantor wishes to guarantee the Company's Obligations to the Holders under or in respect of the Purchase Agreement as provided herein. 274 -2- NOW, THEREFORE, each Guarantor hereby agrees for the benefit of the Holders as follows: 1. DEFINITIONS. All capitalized terms used herein without definition that are defined in the Purchase Agreement shall have the respective meanings provided therefor in the Purchase Agreement. References herein to the Administrative Agent shall, if and for so long as any Exchange Notes are outstanding under the Indenture, be deemed to include the Trustee under and as defined in the Indenture. 2. GUARANTEE OF PAYMENT AND PERFORMANCE; SUBORDINATION. (a) IN GENERAL. Each Guarantor hereby, jointly and severally, unconditionally guarantees to each Holder of a Note and to the Administrative Agent, irrespective of the validity or enforceability of the Purchase Agreement, the Indenture, the Notes or the obligations of the Company thereunder, that: (i) the principal of and interest on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Company to the Holders or the Administrative Agent under the Notes, the Purchase Agreement, the Indenture or any of the other Loan Documents will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; (ii) without limiting the foregoing, the Liquidated Damages payable under the Registration Rights Agreement will be promptly paid in full when due; and (iii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, each Guarantor shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection. The obligations of the Guarantors under this Section 2(a) are referred to herein as the "Obligations". (b) SUBORDINATION. Notwithstanding any other provision of this Guaranty, payment under this Guaranty shall be, in the manner and to the extent set forth in Section 11 of the Purchase Agreement, junior and subordinated in right of payment to the prior payment in full of all amounts due and owing upon all Senior Debt (as defined in the Purchase Agreement) at any time outstanding as if a payment under this Guaranty were a payment under the Notes (or any of them); and in furtherance thereof, the Administrative Agent and the Holders shall have the right to receive and/or retain payments by any of the Guarantors only at such times as they may receive and/or retain payments in respect of the Notes pursuant to the Purchase Agreement. 3. GUARANTOR'S AGREEMENT TO PAY ENFORCEMENT COSTS, ETC. Each Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to the Holders and to the Administrative Agent, on demand, all reasonable costs 275 -3- and expenses (including court costs and legal expenses) incurred or expended by any Holder or the Administrative Agent in connection with the Obligations, this Guaranty and the enforcement thereof, together with interest on amounts recoverable under this Section 3 from the time when such amounts become due until payment, whether before or after judgment, at the rate of interest for overdue principal set forth in the Purchase Agreement, PROVIDED that if such interest exceeds the maximum amount permitted to be paid under applicable law, then such interest shall be reduced to such maximum permitted amount. 4. FOREIGN CURRENCY OBLIGATIONS. The Guarantors shall make payment relative to each Obligation in the currency (the "Original Currency") in which TransTechnology is required to pay such Obligation. If any Guarantor makes payment relative to any Obligation to the Lenders of the Administrative Agent in a currency (the "Other Currency") other than the Original Currency (whether voluntary or pursuant to an order or judgement of a court of tribunal of any jurisdiction), such payment shall constitute a discharge of the liability of such Guarantor hereunder in respect of such Obligation only to the extent of the amount of the Original Currency which the Administrative Agent is able to purchase at Boston, Massachusetts with the amount it receives on the date of receipt in accordance with its normal practice. If the amount of the Original Currency which the Administrative Agent is able to purchase is less than the amount of such currency originally due in respect of the relevant Obligation, such Guarantor shall indemnify and save the Administrative Agent harmless from and against any loss or damage arising as a result of such deficiency. This indemnity shall constitute an obligation separate and independent from the other obligations contained in this Guarantee, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any Lender or the Administrative Agent and shall continue in full force and effect notwithstanding any judgment or order in respect of any amount due hereunder or under any judgement or order. 5. GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS. The Guarantors may not consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another corporation, Person or other entity whether or not affiliated with such Guarantor unless (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor pursuant to an assumption agreement, in form and substance reasonably satisfactory to the Administrative Agent, under the Notes and the Purchase Agreement; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) except in the case of a merger of a Guarantor with or into another Guarantor or a merger of a Guarantor with or into the Company, the Company would be permitted by virtue of the Company's pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such transaction, to incur at least $1.00 of additional 276 -4- Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Section 10.1 of the Purchase Agreement. 6. RELEASES FOLLOWING SALE OF ASSETS OR CAPITAL STOCK. In the event of a sale or other disposition of all or substantially all of the assets of a Guarantor (other than to the Company or another Guarantor), by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Capital Stock of any Guarantor (other than to the Company or another Guarantor), then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise, of all of the Capital Stock of such Guarantor) or the corporation acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be released and relieved of any obligations under this Guaranty and any such acquiring corporation will not be required to assume any obligations of such Guarantor under this Guaranty; provided that such sale or other disposition complies with all applicable provisions of the Purchase Agreement. 7. WAIVERS BY GUARANTORS; HOLDERS' FREEDOM TO ACT. Each Guarantor agrees that the Obligations will be paid and performed strictly in accordance with their respective terms, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Holder with respect thereto. The Guarantors hereby agree that their Obligations hereunder shall be unconditional, irrespective of the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Guaranty shall not be discharged except by complete performance of the Obligations. Without limiting the generality of the foregoing, each Guarantor agrees to the provisions of any instrument evidencing, securing or otherwise executed in connection with any Obligation and agrees that the Obligations of such Guarantor hereunder shall not be released or discharged, in whole or in part, or otherwise affected by (a) the failure of any Holder to assert any claim or demand or to enforce any right or remedy against the Company or any other entity or other person primarily or secondarily liable with respect to any of the Obligations; (b) any extensions, compromise, refinancing, consolidation or renewals of any Obligation; (c) any change in the time, place or manner of payment of any of the Obligations or any rescissions, waivers, compromise, refinancing, consolidation or other amendments or modifications of any of the terms or provisions of the Purchase Agreement, the Indenture, the Notes, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any of the Obligations, (d) the addition, substitution or release of any entity or other person primarily or secondarily liable for any Obligations; (e) the adequacy of any rights which any Holder may have against any 277 -5- collateral security or other means of obtaining repayment of any of the Obligations; (f) the impairment of any collateral securing any of the Obligations, including without limitation the failure to perfect or preserve any rights which any Holder might have in such collateral security or the substitution, exchange, surrender, release, loss or destruction of any such collateral security; or (g) any other act or omission which might in any manner or to any extent vary the risk of the Guarantors or otherwise operate as a release or discharge of any Guarantor, all of which may be done without notice to such Guarantor. To the fullest extent permitted by law, each Guarantor hereby expressly waives any and all rights or defenses arising by reason of (i) any "one action" or "anti-deficiency" law which would otherwise prevent any Holder from bringing any action, including any claim for a deficiency, or exercising any other right or remedy (including any right of set-off), against such Guarantor before or after such Holder's commencement or completion of any foreclosure action, whether judicially, by exercise of power of sale or otherwise, or (ii) any other law which in any other way would otherwise require any election of remedies by any Holder. 8. UNENFORCEABILITY OF OBLIGATIONS AGAINST COMPANY. If for any reason the Company has no legal existence or is under no legal obligation to discharge any of the Obligations, or if any of the Obligations have become irrecoverable from the Company by reason of the Company's insolvency, bankruptcy or reorganization or by other operation of law or for any other reason, this Guaranty shall nevertheless be binding on the Guarantors to the same extent as if the Guarantors at all times had been the principal obligor on all such Obligations. In the event that acceleration of the time for payment of any of the Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Company, or for any other reason, all such amounts otherwise subject to acceleration under the terms of the Purchase Agreement, the Indenture, the Notes, the other Loan Documents or any other agreement evidencing, securing or otherwise executed in connection with any Obligation shall be immediately due and payable by the Guarantor. 9. SUBROGATION. 9.1. WAIVER OF RIGHTS. Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders and the Administrative Agent, on the other hand, (x) the maturity of the obligations under the Notes guaranteed hereby may be accelerated as provided in the Purchase Agreement for the purposes of this Guaranty, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in the Purchase Agreement, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guaranty. The Guarantors shall have the right to seek contribution from any non-paying 278 -6- Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Guaranty. 9.2. PROVISIONS SUPPLEMENTAL. The provisions of this ss.8 shall be supplemental to and not in derogation of any rights and remedies of the Holders or the Administrative Agent under any separate subordination agreement which a Holder or the Administrative Agent may at any time and from time to time enter into with the Guarantor. 10. TAXES AND SETOFF BY GUARANTOR. All payments to be made by the Guarantors hereunder shall be made without set-off or counterclaim and without deduction for any taxes, levies, duties, fees, deductions, withholdings, restrictions or conditions of any nature whatsoever. If at any time any applicable law, regulation or international agreement requires any Guarantor to make any such deduction or withholding from any such payment, the sum due from such Guarantor in respect to such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, the Administrative Agent, for and on behalf of the Lenders, receives a net sum equal tot he sum which it would have received had no deduction or withholding been required. 11. FURTHER ASSURANCES. Each Guarantor agrees that it will from time to time, at the request of the Majority Holders, do all such things and execute all such documents as the Majority Holders may consider necessary or desirable to give full effect to this Guaranty and to perfect and preserve the rights and powers of the Holders and the Administrative Agent hereunder, including endorsing a notation of this Guaranty substantially in the form included in Exhibit E to the Indenture on each Exchange Note authenticated and delivered by the Trustee pursuant to Section 5 of the Purchase Agreement and the provisions of the Exchange Escrow Agreement. Each Guarantor hereby agrees that this Guaranty shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of this Guaranty. If an Officer whose signature is on this Guaranty no longer holds that office at the time the Trustee authenticates any Exchange Note on which this Guaranty is endorsed, this Guaranty shall be valid nevertheless. The delivery of any Exchange Note by the Trustee, pursuant to and after the authentication thereof under the Indenture, shall constitute due delivery of this Guaranty on behalf of the Guarantors. Each Guarantor acknowledges and confirms that it has established its own adequate means of obtaining from the Company on a continuing basis all information desired by such Guarantor concerning the financial condition of the Company and that such Guarantor will look to the Company and not to any Holder in order for such Guarantor to keep adequately informed of changes in the Company's financial condition. 279 -7- 12. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force and effect until the indefeasible repayment in full, in cash, of all of the Obligations. If any Holder or the Administrative Agent is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to the Administrative Agent or such Holder, this Guaranty, to the extent theretofore discharged, shall be reinstated in full force and effect. 13. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon each Guarantor, such Guarantor's successors and assigns, and shall inure to the benefit of the Holders and their successors, transferees and assigns. Without limiting the generality of the foregoing sentence, each Holder may assign or otherwise transfer the Notes, the other Loan Documents or any other agreement or note held by it evidencing, securing or otherwise executed in connection with the Obligations, or sell participations in any interest therein, to any other entity or other person, and such other entity or other person shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to such Holder herein, all in accordance with the Purchase Agreement. The Guarantors may not assign any of their obligations hereunder. 14. LIMITATION ON GUARANTORS' LIABILITY. Each Guarantor hereby confirms that it is the intention of such party that this Guaranty not constitute a fraudulent transfer or conveyance for purposes of the United States Bankruptcy Code or another insolvency code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to this Guaranty. To effectuate the foregoing intention, the Guarantors hereby irrevocably agree that the obligations of such Guarantor under this Guaranty shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Guaranty, result in the obligations of such Guarantor under this Guaranty not constituting a fraudulent transfer or conveyance. 15. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of this Guaranty nor consent to any departure by the Guarantors therefrom shall be effective unless the same shall be in writing and signed by the Majority Holders. No failure on the part of any Holder to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. 16. NOTICES. All notices and other communications called for hereunder shall be made in writing and, unless otherwise specifically provided herein, shall be 280 -8- deemed to have been duly made or given when delivered by hand or mailed first class, postage prepaid, or, in the case of telegraphic or telexed notice, when transmitted, answer back received, addressed as follows: if to a Guarantor, c/o the Company at its address set forth in Section 21 of the Purchase Agreement, if to the Administrative Agent, at its address set forth in Section 21 of the Purchase Agreement, if to the Trustee, at its address set forth in the Indenture, and if to a Holder, at the address for notices for such Holder set forth in the register referred to in Section 20.3 of the Purchase Agreement, or at such address as either party may designate in writing to the other. 17. GOVERNING LAW; CONSENT TO JURISDICTION. THIS GUARANTEE IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). Each Guarantor agrees that any suit for the enforcement of this Guaranty may be brought in the courts of the Commonwealth of Massachusetts or any federal court sitting therein and consents to the nonexclusive jurisdiction of such court and to service of process in any such suit being made upon the Guarantors by mail at the address specified by reference in Section 14. Each Guarantor hereby waives any objection that it may now or hereafter have to the venue of any such suit or any such court or that such suit was brought in an inconvenient court. 18. WAIVER OF JURY TRIAL. THE ADMINISTRATIVE AGENT ON BEHALF OF THE LENDERS AND EACH GUARANTOR HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS GUARANTEE, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY OF SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, each Guarantor hereby waives any right which it may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. Each Guarantor (a) certifies that no Holder nor any representative, agent or attorney of any Holder has represented, expressly or otherwise, that any Holder would not, in the event of litigation, seek to enforce the foregoing waivers and (b) acknowledges that, in entering into the Purchase Agreement and the other Loan Documents to which any Holder is a party, the Holders are relying upon, among other things, the waivers and certifications contained in this Section 16. 19. MISCELLANEOUS. This Guaranty constitutes the entire agreement of the Guarantors with respect to the matters set forth herein. The rights and remedies herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Guaranty shall be in addition to any other guarantee of or collateral security for any of the Obligations. The invalidity or unenforceability of any one or more sections of this Guaranty shall not affect the validity or enforceability of its remaining provisions. Captions are for the ease of reference only and shall not affect the meaning of the relevant provisions. The meanings of all 281 -9- defined terms used in this Guaranty shall be equally applicable to the singular and plural forms of the terms defined. 282 IN WITNESS WHEREOF, each of the Guarantors has caused this Subordinated Guaranty to be executed and delivered as of the date first above written. TRANSTECHNOLOGY ACQUISITION CORPORATION By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary PALNUT FASTENERS, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary INDUSTRIAL RETAINING RING COMPANY By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary RETAINERS, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary RANCHO TRANSTECHNOLOGY CORPORATION By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 283 TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INDUSTRIES By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INTERNATIONAL SALES, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY SEEGER, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SEEGER INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 284 TCR CORPORATION By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary NORCO, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary AEROSPACE RIVET MANUFACTURERS CORPORATION By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary ELLISON RING & WASHER INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY CANADA CORPORATION By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 285 TRANSTECHNOLOGY INTERNATIONAL CORPORATION By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary The Administrative Agent hereby executes this Guaranty on behalf of itself and the other Lenders solely for the purpose of Section 18 hereof: BANKBOSTON, N.A. By: /s/Robert W. MacElhiney --------------------------- Name: Robert W. MacElhiney Title: Vice President 286 EXHIBIT H FORM OF ASSIGNMENT AND ACCEPTANCE Dated as of _____ __, ____ Reference is made to the Senior Subordinated Note Purchase Agreement dated as of August 31, 1999 (as amended, restated, modified, varied and in effect from time to time, the "Purchase Agreement"), by and among TransTechnology Corporation, a Delaware corporation ("TransTechnology"), the lending institutions party thereto (the "Lenders"), and BankBoston, N.A., as administrative agent for the Lenders (the "Administrative Agent"). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to such terms in the Purchase Agreement. _______________ (the "ASSIGNOR") and _______________ (the "ASSIGNEE") hereby agree as follows: 1. ASSIGNMENT. Subject to the terms and conditions of this Assignment and Acceptance, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes without recourse to the Assignor, a $_______ interest in and to the rights, benefits, indemnities and obligations of the Assignor under the Purchase Agreement equal to _______% in respect of the Loans immediately prior to the Effective Date (as hereinafter defined). 2. ASSIGNOR'S REPRESENTATIONS. The Assignor (i) represents and warrants that (A) it is legally authorized to enter into this Assignment and Acceptance, (B) as of the Effective Date (as hereinafter defined), immediately after giving effect to this Assignment and Acceptance, its Commitment is $_______, its Commitment Percentage is _______%, and the aggregate outstanding principal balance of its Loans equals $_______________, and (C) immediately after giving effect to all assignments which have not yet become effective, the Assignor's interest in the Loans will be sufficient to give effect to this Assignment and Acceptance, (ii) makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Purchase Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Purchase Agreement, the other Loan Documents or any other instrument or document furnished pursuant thereto or the attachment, perfection or priority of any security interest or mortgage, other than that it is the legal and beneficial owner of the interest being assigned by it hereunder free and clear of any claim or encumbrance; (iii) makes no representation or warranty and assumes no 287 -2- responsibility with respect to the financial condition of TransTechnology or any of its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by TransTechnology or any of its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations of any of its obligations under the Purchase Agreement or any of the other Loan Documents or any other instrument or document delivered or executed pursuant thereto; and (iv) attaches hereto the Bridge Note [, Term Note and Exchange Note] delivered to it under the Purchase Agreement. The Assignor requests that TransTechnology exchange the Assignor's Bridge Note [and/or Term Note and/or Exchange Note] for new Bridge Notes [and/or Term Notes and/or Exchange Notes] payable to the Assignor and Assignee as follows: Notes payable to Amount of Bridge Note: Amount of Amount of - ---------------- --------------------- --------- --------- the order of: Term Note: Exchange Note: - ---------------- ----------- -------------- Assignor $__________ $__________ $__________ Assignee $__________ $__________ $__________ 3. ASSIGNEE'S REPRESENTATIONS. The Assignee (i) represents and warrants that (A) it is duly and legally authorized to enter into this Assignment and Acceptance, (B) the execution, delivery and performance of this Assignment and Acceptance do not conflict with any provision of law or of the charter or by-laws of the Assignee, or of any agreement binding on the Assignee, (C) all acts, conditions and things required to be done and performed and to have occurred prior to the execution, delivery and performance of this Assignment and Acceptance, and to render the same the legal, valid and binding obligation of the Assignee, enforceable against it in accordance with its terms, have been done and performed and have occurred in due and strict compliance with all applicable laws; (ii) confirms that it has received a copy of the Purchase Agreement, together with copies of the most recent financial statements delivered pursuant to Sections 8.4 and 9.4 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; (iii) agrees that it will, independently and without reliance upon the Assignor, the Administrative Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Purchase Agreement; (iv) appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Purchase Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (v) agrees that it will perform in accordance with their terms all the obligations which by 288 -3- the terms of the Purchase Agreement are required to be performed by it as a Lender. 4. EFFECTIVE DATE. The effective date for this Assignment and Acceptance shall be _____ __, ____ (the "EFFECTIVE DATE"). Following the execution of this Assignment and Acceptance, each party hereto shall deliver its duly executed counterpart hereof to the Administrative Agent for acceptance by the Administrative Agent and recording in the Register by the Administrative Agent. SCHEDULE 1 to the Purchase Agreement shall thereupon be replaced as of the Effective Date by SCHEDULE 1 annexed hereto. 5. RIGHTS UNDER PURCHASE AGREEMENT. Upon such acceptance and recording, from and after the Effective Date, (i) the Assignee shall be a party to the Purchase Agreement and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a Lender thereunder, and (ii) the Assignor shall, with respect to that portion of its interest under the Purchase Agreement assigned hereunder, relinquish its rights and be released from its obligations under the Purchase Agreement; PROVIDED, HOWEVER, that the Assignor shall retain its rights to be indemnified pursuant to Section 18 of the Purchase Agreement with respect to any claims or actions arising prior to the Effective Date. 6. PAYMENTS. Upon such acceptance of this Assignment and Acceptance by the Administrative Agent and such recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the rights and interests assigned hereby (including payments of principal, interest, fees and other amounts) to the Assignee. The Assignor and the Assignee shall make any appropriate adjustments in payments for periods prior to the Effective Date by the Administrative Agent or with respect to the making of this assignment directly between themselves. 7. GOVERNING LAW. THIS ASSIGNMENT AND ACCEPTANCE IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT TO BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). 8. COUNTERPARTS. This Assignment and Acceptance may be executed in any number of counterparts which shall together constitute but one and the same agreement. 289 -4- IN WITNESS WHEREOF, intending to be legally bound, each of the undersigned has caused this Assignment and Acceptance to be executed on its behalf by its officer or officers thereunto duly authorized, as of the date first above written. ASSIGNOR: By: ________________________________________ Name: Title: ASSIGNEE: By: ________________________________________ Name: Title: 290 -5- SCHEDULE 1 EX-10.29 5 EXHIBIT 10.29 1 ------------------------------------------------------------------------ WARRANT AGREEMENT Dated as of August 31, 1999 By and Between TRANSTECHNOLOGY CORPORATION and STATE STREET BANK AND TRUST COMPANY as Warrant Agent Warrants to Purchase Common Stock Par Value $.01 Per Share - ------------------------------------------------------------------------ 2 TABLE OF CONTENTS ----------------- Page ---- ARTICLE I ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION OF WARRANT CERTIFICATES SECTION 1.01. Issuance of Warrants ................................... 1 SECTION 1.02. Form of Warrant Certificates ........................... 2 SECTION 1.03. Execution of Warrant Certificates ...................... 2 SECTION 1.04. Authentication and Delivery ............................ 3 SECTION 1.05. Temporary Warrant Certificates ......................... 3 SECTION 1.06. Registration ........................................... 4 SECTION 1.07. Registration of Transfers or Exchanges ................. 4 SECTION 1.08. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant Certificates ...........................12 SECTION 1.09. Offices for Exercise, etc ..............................12 SECTION 1.10. Legend on Shares .......................................13 ARTICLE II DURATION, EXERCISE OF WARRANTS; EXERCISE PRICE AND REPURCHASE OF WARRANTS SECTION 2.01. Release and Duration of Warrants .......................14 SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery ......14 SECTION 2.03. Cancellation of Warrant Certificates ...................17 ARTICLE III OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANTS SECTION 3.01. Enforcement of Rights ..................................17 SECTION 3.02. Obtaining Stock Exchange Listings.......................17 ARTICLE IV CERTAIN COVENANTS OF THE COMPANY SECTION 4.01. Payment of Taxes........................................18 SECTION 4.02. Rules 144 and 144A......................................18 -i 3 ARTICLE V ADJUSTMENTS SECTION 5.01. Adjustment of Exercise Rate; Notices....................18 SECTION 5.02. Fractional Shares.......................................25 SECTION 5.03. Certain Distributions...................................25 ARTICLE VI CONCERNING THE WARRANT AGENT SECTION 6.0 1. Warrant Agent..........................................26 SECTION 6.02. Conditions of Warrant Agent's Obligations...............26 SECTION 6.03. Resignation and Appointment of Successor................30 ARTICLE VII MISCELLANEOUS SECTION 7.01. Amendment...............................................31 SECTION 7.02. Notices and Demands to the Company and Warrant Agent...................................32 SECTION 7.03. Addresses for Notices to Parties and for Transmission of Documents.......................32 SECTION 7.04. Notices to Holders......................................33 SECTION 7.05. APPLICABLE LAW; SUBMISSION TO JURISDICTION....................................33 SECTION 7.06. Persons Having Rights Under Agreement...................33 SECTION 7.07. Headings................................................33 SECTION 7.08. Counterparts............................................33 SECTION 7.09. Inspection of Agreement.................................33 SECTION 7.10. Availability of Equitable Remedies......................34 SECTION 7.11. Obtaining of Governmental Approvals.....................34 -ii- 4 EXHIBIT A - Form of Warrant Certificate ............................A-1 EXHIBIT B - Certificate To Be Delivered upon Exchange or Registration of Transfer of Warrants ...................B-1 EXHIBIT C - Form of Transferee Certificate for Institutional Accredited Investors ...................................C-1 EXHIBIT D - Form of Transferee Certificate for Regulation S Transfers...............................................D-1 INDEX OF DEFINED TERMS ---------------------- Defined Term Section - ------------ Affiliate..........................................................5.01(d) Agreement..........................................................Recitals Business Day ......................................................2.01 Capital Stock......................................................5.01(l) Cashless Exercise..................................................2.02(c) Cashless Exercise Ratio............................................2.02(c) Closing Date.......................................................1.01 Common Stock.......................................................Recitals Company............................................................Recitals Current Market Value...............................................5.01(1) Definitive Warrants................................................1.02 Depository.........................................................1.02 Distribution.......................................................5.03 Distribution Rights................................................5.03 Election To Exercise...............................................2.02(b) Exercise Date......................................................2.02(d) Exercise Price.....................................................2.02(a) Exercise Rate......................................................2.02(a) Expiration Date ...................................................2.01 Fundamental Transaction............................................5.01(d) Global Shares......................................................2.02(f) Global Warrants....................................................1.02 Holders............................................................1.06 Independent Financial Expert.......................................5.01(1) Institutional Accredited Investor..................................1.07(a)(y)(C) Lenders............................................................Recitals Loans..............................................................Recitals Non-Restricted Warrants............................................1.07(y) Non-U.S. Person....................................................1.07(a)(y)(F) Officers' Certificate..............................................1.07(d) Person.............................................................2.02(a) Private Placement Legend...........................................1.07(g) Prospectus.........................................................4.02 QIB................................................................1.07(a)(y)(B) Registrar..........................................................1.06 Registration Rights Agreement......................................Recitals -iii- 5 Related Parties....................................................6.02(e) Requisite Warrant Holders..........................................7.01 Resale Restriction Termination Date................................1.07(a)(y) Responsible Officer................................................6.02(q) Securities Act.....................................................1.07(a)(y) Shares.............................................................1.01 Subject Class......................................................4.04 Surviving Person...................................................5.01(d) Time of Determination..............................................5.01(1) Trustee............................................................Recitals Warrant Agent......................................................Recitals Warrant Agent Office...............................................1.09 Warrant Certificates...............................................Recitals Warrant Exercise Office............................................2.02(b) Warrant Register...................................................1.06 Warrants...........................................................Recitals -iv- 6 WARRANT AGREEMENT WARRANT AGREEMENT ("AGREEMENT"), dated as of August 31, 1999 by and between TRANSTECHNOLOGY CORPORATION, a Delaware corporation (together with any successor thereto, the "COMPANY"), and STATE STREET BANK AND TRUST COMPANY, as warrant agent (with any successor Warrant Agent, the "WARRANT AGENT"). WHEREAS, the Company has entered into a Senior Subordinated Note Purchase Agreement (the "LOAN AGREEMENT") dated August 31, 1999, with BankBoston, N.A. ("BANKBOSTON"), the other lenders party thereto (including BankBoston in its capacity as such, the "Lenders") and BankBoston as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT") in which the Lenders have agreed to purchase Notes of the Company in an aggregate principal amount of $75,000,000 (the "NOTES"); and WHEREAS, it is a condition precedent to the Lenders' obligation to purchase the Notes from the Company that the Company agree to enter into this Agreement providing for the issuance of 731,197 Warrants (each, a "WARRANT") which shall be held in escrow and released therefrom in accordance with the terms and conditions hereof and of the Warrant Escrow Agreement dated of even date herewith among the Company, the Administrative Agent, the Warrant Agent and State Street Bank and Trust Company, in its capacity as escrow agent (the "WARRANT ESCROW AGREEMENT"), representing the right to purchase 10.0% of the fully diluted common stock of the Company as of the Closing Date (as defined below), each Warrant initially entitling the holder thereof to purchase one share of common stock, par value $.01 per share (the "COMMON STOCK"), of the Company (subject to adjustment as set forth herein and in the Warrants). The certificates evidencing the Warrants are herein referred to collectively as the "WARRANT CERTIFICATES"; and WHEREAS, the Company desires the Warrant Agent as warrant agent to assist the Company in connection with the issuance, exchange, cancellation, replacement and exercise of the Warrants, and in this Agreement wishes to set forth, among other things, the terms and conditions on which the Warrants may be issued, exchanged, canceled, replaced and exercised; NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION OF WARRANT CERTIFICATES ------------------------------------ SECTION 1.01. ISSUANCE OF WARRANTS. The Warrants shall be originally issued on the Closing Date under and as defined in the Loan Agreement (the "CLOSING DATE") and shall be held in escrow until released to the Holders (as defined in Section 1.06) pursuant to and in accordance with the terms and conditions of the Warrant Escrow Agreement. 7 -2- Each Warrant Certificate shall evidence the number of Warrants specified therein, and each Warrant evidenced thereby shall, when exercisable as provided herein and therein, represent the right, subject to the provisions contained herein and therein, to purchase from the Company (and the Company shall issue and sell to the holder of such Warrant) one fully paid, registered and non-assessable share of Common Stock at an exercise price of $0.01 per share. The number of shares of Common Stock issuable upon exercise of a Warrant is subject to adjustment after the Closing Date as provided herein and in the Warrant Certificate. The shares purchasable upon exercise of a Warrant are hereinafter referred to as the "Shares" and, unless the context otherwise requires, such term shall also include any other securities or property purchasable and deliverable upon exercise of a Warrant as provided in Article V, subject to adjustment as provided herein and in the Warrant Certificate. SECTION 1.02. FORM OF WARRANT CERTIFICATES. The Warrant Certificates will initially be issued in global form (the "GLOBAL WARRANTS"), substantially in the form of EXHIBIT A hereto, and may subsequently be issued in registered form as definitive Warrant Certificates (the "DEFINITIVE WARRANTS"), also substantially in the form of EXHIBIT A attached hereto, as set forth in Section 1.08 (except that Warrants may be issued upon transfer, exchange or replacement without the Private Placement Legend as and to the extent provided in Section 1.07(g)). Any Global Warrants to be delivered pursuant to this Agreement shall bear the legend set forth in EXHIBIT B attached hereto. Such Global Warrants shall represent such of the outstanding Warrants as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Warrants from time to time endorsed thereon and that the aggregate amount of outstanding Warrants represented thereby may from time to time be reduced or increased, as appropriate. Any endorsement of a Global Warrant to reflect the amount of any increase or decrease in the amount of outstanding Warrants represented thereby shall be made by the Warrant Agent and the Depository (as defined below) in accordance with instructions given by the holder thereof. The Depository Trust Company shall act as the Depository with respect to the Global Warrants upon their release from escrow under the Warrant Escrow Agreement until a successor shall be appointed by the Company and the Warrant Agent. SECTION 1.03. EXECUTION OF WARRANT CERTIFICATES. The Warrant Certificates shall be executed on behalf of the Company by the chairman of its Board of Directors, its president or any vice president and attested by its secretary or assistant secretary. Such signatures may be the manual or facsimile signatures of the present or any future such officers. Typographical and other minor errors or defects in any such reproduction of any such signature shall not affect the validity or enforceability of any Warrant Certificate that has been duly countersigned and delivered by the Warrant Agent. In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificate so signed shall be countersigned and delivered by the Warrant Agent or disposed of by the Company, such Warrant Certificate nevertheless may be countersigned and 8 -3- delivered or disposed of as though the person who signed such Warrant Certificate had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by such persons as, at the actual date of the execution of such Warrant Certificate, shall be the proper officers of the Company, although at the date of the execution and delivery of this Agreement any such person was not such an officer. SECTION 1.04. AUTHENTICATION AND DELIVER. Subject to the immediately following paragraph, Warrant Certificates shall be authenticated by manual signature and dated the date of authentication by the Warrant Agent and shall not be valid for any purpose unless so authenticated and dated. The Warrant Certificates shall be numbered and shall be registered in the Warrant Register (as defined in Section 1.06 hereof). Upon the receipt by the Warrant Agent of a written order of the Company, which order shall be signed by the chairman of its Board of Directors, its president or any vice president and attested by its secretary or assistant secretary, and shall specify the amount of Warrants to be authenticated, whether the Warrants are to be Global Warrants or Definitive Warrants, the date of such Warrants and such other information as the Warrant Agent may reasonably request, without any further action by the Company, the Warrant Agent is authorized, upon receipt from the Company at any time and from time to time of the Warrant Certificates, duly executed as provided in Section 1.03 hereof, to authenticate the Warrant Certificates and deliver them as provided in and pursuant to such order of the Company. Such authentication shall be by a duly authorized signatory of the Warrant Agent (although it shall not be necessary for the same signatory to sign all Warrant Certificates). In case any authorized signatory of the Warrant Agent who shall have authenticated any of the Warrant Certificates shall cease to be such authorized signatory before the Warrant Certificate shall be disposed of by the Company or the Warrant Agent, such Warrant Certificate nevertheless may be delivered or disposed of as though the person who authenticated such Warrant Certificate had not ceased to be such authorized signatory of the Warrant Agent; and any Warrant Certificate may be authenticated on behalf of the Warrant Agent by such persons as, at the actual time of authentication of such Warrant Certificates, shall be the duly authorized signatories of the Warrant Agent, although at the time of the execution and delivery of this Agreement any such person is not such an authorized signatory. The Warrant Agent's authentication on all Warrant Certificates shall be in substantially the form set forth in EXHIBIT A hereto. SECTION 1.05. TEMPORARY WARRANT CERTIFICATES. Pending the preparation of definitive Warrant Certificates, the Company may execute, and the Warrant Agent shall authenticate and deliver, temporary Warrant Certificates, which are printed, lithographed, typewritten or otherwise produced, substantially of the tenor of the definitive Warrant Certificates in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers 9 -4- executing such Warrant Certificates may determine, as evidenced by their execution of such Warrant Certificates. If temporary Warrant Certificates are issued, the Company will cause definitive Warrant Certificates to be prepared without unreasonable delay. After the preparation of definitive Warrant Certificates, the temporary Warrant Certificates shall be exchangeable for definitive Warrant Certificates upon surrender of the temporary Warrant Certificates at any office or agency maintained by the Company for that purpose pursuant to Section 1.09 hereof. Subject to the provisions of Section 4.01 hereof, such exchange shall be without charge to the holder. Upon surrender for cancellation of any one or more temporary Warrant Certificates, the Company shall execute, and the Warrant Agent shall authenticate and deliver in exchange therefor, one or more definitive Warrant Certificates representing in the aggregate a like number of Warrants. Until so exchanged, the holder of a temporary Warrant Certificate shall in all respects be entitled to the same benefits under this Agreement as a holder of a definitive Warrant Certificate. SECTION 1.06. REGISTRATION. The Company will keep, at the office or agency maintained by the Company for such purpose, a register or registers in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of, and registration of transfer and exchange of, Warrants as provided in this Article. Each person designated by the Company from time to time as a person authorized to register the transfer and exchange of the Warrants is hereinafter called, individually and collectively, the "Registrar." The Company hereby initially appoints the Warrant Agent as Registrar. Upon written notice to the Warrant Agent and any acting Registrar, the Company may appoint a successor Registrar for such purposes. The Company will at all times designate one person (who may be the Company and who need not be a Registrar) to act as repository of a master list (the "WARRANT REGISTER") of names and addresses of the registered holders of Warrants ("HOLDERS"). The Warrant Agent will act as such repository unless and until some other person is, by written notice from the Company to the Warrant Agent and the Registrar, designated by the Company to act as such. The Company shall cause each Registrar to furnish to such repository, on a current basis, such information as to all registrations of transfer and exchanges effected by such Registrar, as may be necessary to enable such repository to maintain the Warrant Register on as current a basis as is practicable. SECTION 1.07. REGISTRATION OF TRANSFERS OR EXCHANGES. (a) TRANSFER OR EXCHANGE OF DEFINITIVE WARRANTS. When Definitive Warrants are presented to the Warrant Agent with a request from the Holder thereof: (i) to register the transfer of the Definitive Warrants; or 10 -5- (ii) to exchange such Definitive Warrants for an equal number of Definitive Warrants of other authorized denominations, the Warrant Agent shall register the transfer or make the exchange as requested if the requirements under this Warrant Agreement as set forth in this Section 1.07 hereof for such transactions are met; PROVIDED, HOWEVER, that the Definitive Warrants presented or surrendered by Holder for registration of transfer or exchange: (x) shall be duly endorsed or accompanied by a written instruction of transfer or exchange in form satisfactory to the Company and the Warrant Agent, duly executed by such Holder or by its attorney, duly authorized in writing; (y) in the case of Warrants the offer and sale of which have not been registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"), and that are presented for transfer or exchange by an owner who is not and for the preceding three months has not been an Affiliate of the Company prior to (X) the date which is two years (or such shorter period as may be prescribed by Rule 144(k) (or any successor provision thereto)) after the later of the date of release from escrow under the Warrant Escrow Agreement of such Warrants and the last date on which the Company or any Affiliate of the Company was the owner of such Warrants, or any predecessor thereto, and (Y) such later date, if any, as may be required by any subsequent change in applicable law (the "RESALE RESTRICTION TERMINATION DATE"), such Warrants shall be accompanied by the following additional information and documents, as applicable (PROVIDED, however, that the requirements of paragraphs (B) through (F) shall not apply to any Non-Restricted Warrants (as defined in Section 1.07(g)): (A) if such Warrants are being delivered to the Warrant Agent by a Holder for registration in the name of such a beneficial holder, without transfer, a certification from such Holder to that effect (in substantially the form of EXHIBIT C hereto); or (B) if such Warrants are being transferred to a qualified institutional buyer (as defined in Rule 144A under the Securities Act) (a "QIB") in reliance on and accordance with Rule 144A under the Securities Act, a certification from the transferor to that effect (in substantially the form of EXHIBIT C hereto); or (C) if such Warrants are being transferred to an institutional "accredited investor" within the meaning of subparagraph (a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501 under the Securities Act (an "INSTITUTIONAL ACCREDITED INVESTOR") in reliance on and in accordance with Regulation D under the Securities Act or a 11 -6- statutory private placement exemption, delivery by the transferor of a certification to that effect (in substantially the form of EXHIBIT C hereto), and delivery by the proposed transferee of a Transferee Certificate for Institutional Accredited Investors (in substantially the form of EXHIBIT D hereto); or (D) if such Warrants are being transferred in reliance on and accordance with Regulation S under the Securities Act, delivery by the transferor of a certification to that effect (in substantially the form of EXHIBIT C hereto), and a Certificate for Regulation S Transfers in the form of EXHIBIT E hereto, PROVIDED that the Company may, based upon the views of its own counsel, instruct the Warrant Agent not to register such transfer; or (E) if such Warrants are being transferred in reliance on and accordance with Rule 144 under the Securities Act, delivery by the transferor of (i) a certification from the transferor to that effect (in substantially the form of EXHIBIT C hereto), and (ii) an opinion of counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or (F) if such Warrants are being transferred in reliance on and accordance with another exemption from the registration requirements of the Securities Act, a certification from the transferor to that effect (in substantially the form of EXHIBIT C hereto) and an opinion of counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; provided that the Company may, based upon the views of its own counsel, instruct the Warrant Agent not to register such transfer in any case where the proposed transferee is not a QIB, NON-U.S. PERSON or Institutional Accredited Investor. A "NON-U.S. PERSON" shall mean a Person who is not a "U.S. person" as defined in Rule 902(o) under the Securities Act. (b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE WARRANT FOR A BENEFICIAL INTEREST IN A GLOBAL WARRANT. A Definitive Warrant may not be transferred by a holder for a beneficial interest in a Global Warrant except upon satisfaction of the requirements set forth below. Upon receipt by the Warrant Agent of a Definitive Warrant, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Warrant Agent and the Company, together with: (A) certification from such holder (in substantially the form of EXHIBIT C hereto) that such Definitive Warrant is being 12 -7- transferred to a QIB in accordance with Rule 144A under the Securities Act; and (B) written instructions directing the Warrant Agent to make, or to direct the Depository to make, an endorsement on the Global Warrant to reflect an increase in the aggregate amount of the Warrants represented by the Global Warrant (together with sufficient information concerning the participant account at the Depository to which the interest is to be transferred); then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct the Depository to cause, in accordance with the standing instructions and procedures existing between the Depository and the Warrant Agent, the number of Shares represented by the Global Warrant to be increased accordingly. If no Global Warrant is then outstanding, the Company shall issue and the Warrant Agent shall upon written instructions from the Company authenticate and deliver to the Depository a new Global Warrant in the appropriate amount. (c) TRANSFER OR EXCHANGE OF GLOBAL WARRANTS. The transfer or exchange of Global Warrants or beneficial interests therein shall be effected through the Depository, in accordance with this Section 1.07 (including the restrictions on transfer set forth herein), the Private Placement Legend (if such Global Warrant bears the Private Placement Legend), and the procedures of the Depository therefor. (d) TRANSFER OR EXCHANGE OF A BENEFICIAL INTEREST IN A GLOBAL WARRANT FOR A DEFINITIVE WARRANT. (i) Any Holder having a beneficial interest in a Global Warrant may transfer or exchange such beneficial interest for a Definitive Warrant upon receipt by the Warrant Agent of written instructions or such other form of instructions as is customary for the Depository and in form satisfactory to the Warrant Agent and the Company from the Depository or its nominee on behalf of any person having a beneficial interest in a Global Warrant, including a written order containing registration and delivery instructions and, in the case of any such transfer or exchange prior to the Resale Restriction Termination Date of an interest in a Global Warrant bearing the Private Placement Legend, the following additional information and documents: (A) if such beneficial interest is being transferred to the person designated by the Depository as being the beneficial owner, a certification from such person to that effect (in substantially the form of EXHIBIT C hereto); or (B) if such beneficial interest is being transferred to a QIB in reliance on and accordance with Rule 144A under the Securities Act, a certification from the transferor to that effect (in substantially the form of EXHIBIT C hereto); or 13 -8- (C) if such beneficial interest is being transferred to an Institutional Accredited Investor, delivery by the transferor of certification to that effect in reliance on and in accordance with Regulation D under the Securities Act or a statutory private placement exemption (in substantially the form of EXHIBIT C hereto), and delivery by the proposed transferee of a Transferee Certificate for Institutional Accredited Investors (in substantially the form of EXHIBIT D hereto); or (D) if such beneficial interest is being transferred in reliance on and accordance with Regulation S under the Securities Act, delivery by the transferor of (i) a certification to that effect (in substantially in the form of EXHIBIT C hereto), and (ii) a Certificate for Regulation S Transfers in the form of EXHIBIT E hereto; provide that the Company may, based upon the views of its own counsel, instruct the Warrant Agent not to register such transfer; or (E) if such beneficial interest is being transferred in reliance on and accordance with Rule 144 under the Securities Act, delivery by the transferor of (i) a certification to that effect (in substantially the form of EXHIBIT C hereto) and (ii) an opinion of counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; or (F) if such beneficial interest is being transferred in reliance on and accordance with another exemption from the registration requirements of the Securities Act, a certification from the transferor to that effect (in substantially the form of EXHIBIT C hereto) and an opinion of counsel reasonably satisfactory to the Company to the effect that such transfer is in compliance with the Securities Act; PROVIDED that the Company may instruct the Warrant Agent not to register such transfer in any case where the proposed transferee is not a QIB, Non-U.S. Person or Institutional Accredited Investor; then the Warrant Agent will cause, in accordance with the standing instructions and procedures existing between the Depository and the Warrant Agent, the aggregate amount of the Global Warrant to be reduced and, following such reduction, the Company will execute and, upon receipt of an authentication order in the form of an officers' certificate (a certificate signed by two officers of the Company, one of whom must be its principal executive officer, principal financial officer or principal accounting officer, in form satisfactory to the Warrant Agent and the Company) (an "OFFICERS' CERTIFICATE"), the Warrant Agent will authenticate and deliver to the transferee a Definitive Warrant. 14 -9- (ii) Definitive Warrants issued in exchange for a beneficial interest in a Global Warrant pursuant to this Section 1.07(d) shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Warrant Agent in writing. The Warrant Agent shall deliver such Definitive Warrants to the persons in whose names such Warrants are so registered (or as such registered owner or the Depository may otherwise direct) and adjust the Global Warrant pursuant to Section 1.07(h). (e) RESTRICTIONS ON TRANSFER OR EXCHANGE OF GLOBAL WARRANTS. Notwithstanding any other provisions of this Agreement (other than the provisions set forth in Section 1.07(f), a Global Warrant may not be transferred or exchanged as a whole except by the Depository to a nominee of the Depository acceptable to the Company or by a nominee of the Depository to the Depository or another nominee of the Depository acceptable to the Company or by the Depository or any such nominee to a successor Depository acceptable to the Company or a nominee of such successor Depository acceptable to the Company. (f) AUTHENTICATION OF DEFINITIVE WARRANTS IN ABSENCE OF DEPOSITORY. If at any time: (i) the Depository for the Global Warrants notifies the Company that the Depository is unwilling or unable to continue as Depository for the Global Warrant and a successor Depository for the Global Warrant is not appointed by the Company within 90 days after delivery of such notice; or (ii) the Company, at its sole discretion, notifies the Warrant Agent in writing that it elects to cause the issuance of Definitive Warrants for all Global Warrants under this Agreement; then the Company will execute, and the Warrant Agent will, upon receipt of an Officers' Certificate requesting the authentication and delivery of Definitive Warrants, authenticate and deliver Definitive Warrants, in an aggregate number equal to the aggregate number of Warrants represented by the Global Warrant, in exchange for such Global Warrant. (g) PRIVATE PLACEMENT LEGEND. Upon the registration of transfer, exchange or replacement of Warrant Certificates not bearing the legend set forth in the first paragraph of EXHIBIT A attached hereto (the "PRIVATE PLACEMENT LEGEND"), the Warrant Agent shall deliver Warrant Certificates that do not bear the Private Placement Legend (the Warrants represented thereby being referred to herein as the "NON-RESTRICTED WARRANTS") and any such transfer, exchange or replacement or any subsequent transfer, exchange or replacement of any Non-Restricted Warrants shall not be subject to the requirements of Section 1.07(a)(y), paragraphs (B) through (F), or Section 1.07(d)(i), paragraphs (A) through (F), as the case may be). Upon the registration of transfer, exchange or replacement of Warrant Certificates 15 -10- bearing the Private Placement Legend, the Warrant Agent shall deliver Warrant Certificates that bear the Private Placement Legend unless, and the Warrant Agent is hereby authorized to deliver Warrant Certificates without the Private Placement Legend if, (i) the transferor certifies to the Warrant Agent and the Company that the requested transfer is by an owner who is not and for the preceding three months has not been an affiliate of the Company, and such transfer is being made after the date which is two years (or such shorter period as may be prescribed by Rule 144(k) (or any successor provision thereto) under the Securities Act or any successor provision thereunder) after the later of the date of release from escrow of such Warrant under the Warrant Escrow Agreement or the last day on which the Company or any of its Affiliates was the owner of such Warrant or any predecessor security, or (ii) there is delivered to the Warrant Agent an opinion of counsel reasonably satisfactory to the Company to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act, or (iii) the Warrants to be transferred or exchanged represented by such Warrant Certificates are being transferred or exchanged pursuant to an effective registration statement under the Securities Act. (h) CANCELLATION OR ADJUSTMENT OF A GLOBAL WARRANT. At such time as all beneficial interests in a Global Warrant have either been exchanged for Definitive Warrants, redeemed, repurchased or canceled, such Global Warrant shall be returned to the Company or, upon written order to the Warrant Agent in the form of an Officers' Certificate from the Company, retained and canceled by the Warrant Agent. At any time prior to such cancellation, if any beneficial interest in a Global Warrant is exchanged for Definitive Warrants, redeemed, repurchased or canceled, the number of Warrants represented by such Global Warrant shall be reduced and an endorsement shall be made on such Global Warrant by the Warrant Agent or by the Depository on the Warrant Agent's direction to reflect such reduction. (i) OBLIGATIONS WITH RESPECT TO TRANSFERS OR EXCHANGES OF DEFINITIVE WARRANTS. (i) To permit registrations of transfers or exchanges in accordance with the terms hereof, the Company shall execute, at the Warrant Agent's request, and the Warrant Agent shall authenticate Definitive Warrants and Global Warrants. (ii) All Definitive Warrants and Global Warrants issued upon any registration, transfer or exchange of Definitive Warrants or Global Warrants in accordance with the terms hereof shall be the valid obligations of the Company, entitled to the same benefits under this Warrant Agreement as the Definitive Warrants or Global Warrants surrendered upon the registration of transfer or exchange. (iii) Prior to due presentment for registration of transfer of any Warrant, the Warrant Agent and the Company may deem and treat the person in whose name any Warrant is registered as the absolute owner of such Warrant, and neither the Warrant Agent nor the Company shall 16 -11- be liable therefor or affected by notice to the contrary. The foregoing shall not preclude the Warrant agent from relying upon any certification or proxy from the Depository with respect to beneficial owners of interests in the Warrants. (j) TRANSFERS BY AFFILIATES. Notwithstanding any other provision of this Agreement, no transfer of a Warrant by a person who is an Affiliate of the Company shall be made unless in compliance with applicable law. The Warrant Agent shall not register the transfer of any Warrant by a person with respect to whom the Warrant Agent has received prior written notice from the Company that such person (or with respect to whom a Responsible Officer of the Warrant Agent otherwise has actual knowledge, without hereby imposing or implying any duty of inquiry or investigation on the part of the Warrant Agent, that such person) is at the time of such transfer, or was at any time during the three months proceeding such transfer, an Affiliate of the Company unless such transfer is consented to by the Company. In connection with any such transfer, the Company shall be entitled to require that such person provide to the Company an opinion of counsel reasonably satisfactory to the Company that such transfer is in compliance with applicable law. (k) Unless and until expressly notified in writing to the contrary by the Company (prior to the related transfer), the Warrant Agent may conclusively presume (absent actual knowledge to the contrary by a Responsible Officer of the Warrant Agent) that any Warrant being presented for transfer or exchange is presented by an owner who is not, and for the preceding three months has not been, an Affiliate of the Company. If, in any instance, the Warrant Agent shall have been notified by the Company (or a Responsible Officer of the Warrant Agent otherwise shall have actual knowledge) that a Warrant is being presented by an owner which is, or during the preceding three months at any time was, an Affiliate of the Company, registration of such transfer shall be subject to the terms of Section 1.07(j). (l) Unless and until notified in writing to the contrary by the Company (in advance of the related transfer or exchange), which notice specifically identifies a different Resale Restriction Termination Date, the Warrant Agent shall be entitled to presume conclusively, in good faith, that the Resale Restriction Termination Date with respect to any Warrant is the date which is two (2) years after the date of release of such Warrant from escrow under the Warrant Escrow Agreement. (m) The Warrant Agent shall be under no obligation to register the Warrants under the Securities Act. In the event of the registration of the Warrants under the Securities Act, the Company shall give prompt written notice thereof (including specification of the effective date thereto) to the Warrant Agent, on which the Warrant agent may rely conclusively. (n) Notwithstanding anything contained in this Agreement to the contrary, neither the Warrant Agent nor the Registrar shall be responsible or liable for determining compliance with applicable federal or state securities laws (including, without limitation, the Securities Act or any particular rule or regulation 17 -12- promulgated thereunder); PROVIDED, HOWEVER, that if a specified transfer certificate or opinion of counsel is required by the express terms of this Section 1.07 to be delivered to the Warrant Agent or the Registrar prior to the registration of a proposed transfer, the Warrant Agent and/or Registrar, as applicable, shall be under a duty to receive such certificate or opinion of counsel and to examine the same to determine whether it conforms on its face to the requirements hereof (and the Warrant Agent or Registrar, as the case may be, shall promptly notify the party delivering the same if it determines that such certificate or opinion does not conform to such requirements). SECTION 1.08. LOST, STOLEN, DESTROYED, DEFACED OR MUTILATED WARRANT CERTIFICATES. Upon receipt by the Company and the Warrant Agent (or any agent of the Company or the Warrant Agent, if requested by the Company) of evidence satisfactory to them of the loss, theft, destruction, defacement, or mutilation of any Warrant Certificate and of an indemnity bond satisfactory to them and, in the case of mutilation or defacement, upon surrender thereof to the Warrant Agent for cancellation, then, in the absence of notice to the Company or the Warrant Agent that such Warrant Certificate has been acquired by a bona fide purchaser or holder in due course, the Company shall execute, and an authorized signatory of the Warrant Agent shall manually authenticate and deliver, in exchange for or in lieu of the lost, stolen, destroyed, defaced or mutilated Warrant Certificate, a new Warrant Certificate representing a like number of Warrants, bearing a number or other distinguishing symbol not contemporaneously outstanding. Upon the issuance of any new Warrant Certificate under this Section in a name other than the prior registered holder of the lost, stolen, destroyed, defaced or mutilated Warrant Certificate, the Company may require the payment from the holder of such Warrant Certificate of a sum sufficient to cover any tax, stamp tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Warrant Agent and the Registrar) in connection therewith. Every substitute Warrant Certificate executed and delivered pursuant to this Section in lieu of any lost, stolen or destroyed Warrant Certificate shall constitute a contractual obligation of the Company, and shall be entitled to the benefits of (but shall be subject to all the limitations of rights set forth in) this Agreement equally and proportionately with any and all other Warrant Certificates duly executed and delivered hereunder. The provisions of this Section 1.08 are exclusive with respect to the replacement of lost, stolen, destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the extent lawful) any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement of lost, stolen, destroyed, defaced or mutilated Warrant Certificates. The Warrant Agent is hereby authorized to authenticate in accordance with the provisions of this Agreement, and deliver, the new Warrant Certificates required pursuant to the provisions of this Section. SECTION 1.09. OFFICES FOR EXERCISE, ETC. So long as any of the Warrants remain outstanding, the Company will designate and maintain in the City of Boston, Commonwealth of Massachusetts: (a) an office or agency where the Warrant 18 -13- Certificates may be presented for exercise, (b) an office or agency where the Warrant Certificates may be presented for registration of transfer and for exchange (including the exchange of temporary Warrant Certificates for definitive Warrant Certificates pursuant to Section 1.05 hereof), and (c) an office or agency where notices and demands to or upon the Company in respect of the Warrants or of this Agreement may be served. The Company may from time to time change or rescind such designation, as it may deem desirable or expedient; PROVIDED, HOWEVER, that an office or agency shall at all times be maintained in the City of Boston, Commonwealth of Massachusetts, as provided in the first sentence of this Section. In addition to such office or offices or agency or agencies, the Company may from time to time designate and maintain one or more additional offices or agencies within or outside the City of Boston, where Warrant Certificates may be presented for exercise or for registration of transfer or for exchange, and the Company may from time to time change or rescind such designation, as it may deem desirable or expedient. The Company will give to the Warrant Agent written notice of the location of any such office or agency and of any change of location thereof. The Company hereby designates the Warrant Agent at its principal corporate trust office identified in Section 7.03 in the City of Boston, Commonwealth of Massachusetts (the "WARRANT AGENT OFFICE"), as the initial agency maintained for each such purpose. In case the Company shall fail to maintain any such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notice may be served at the Warrant Agent Office and the Company appoints the Warrant Agent as its agent to receive all such presentations, surrenders, notices and demands. SECTION 1.10. LEGEND ON SHARES. The Shares issued upon exercise of Warrants shall bear the following legend: "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT ONLY, AND MAY NOT BE OFFERED, SOLD, TRANSFERRED (BY MERGER OR OTHERWISE), ASSIGNED, DEVISED, EXCHANGED, GIFTED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS AND UNTIL REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ANY APPLICABLE STATE SECURITIES LAWS OR UNLESS SUCH TRANSFER IS EXEMPT FROM REGISTRATION, AND AN ACCEPTABLE OPINION OF COUNSEL IS DELIVERED TO THE COMPANY WITH REGARD TO SUCH EXEMPTION, OR IS OTHERWISE IN COMPLIANCE WITH THE ACT AND SUCH STATE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A WARRANT HOLDERS' AGREEMENT DATED AS OF AUGUST 31, 1999 AMONG THE COMPANY, THE HOLDERS OF THE WARRANTS AND BANKBOSTON, N.A., AS ADMINISTRATIVE AGENT, A COPY OF WHICH IS ON FILE WITH THE WARRANT AGENT." 19 -14- ARTICLE II DURATION, EXERCISE OF WARRANTS; EXERCISE PRICE AND REPURCHASE OF WARRANTS -------------------------------- SECTION 2.01. RELEASE AND DURATION OF WARRANTS. Subject to the terms and conditions established herein, the Warrants shall expire at 5:00 p.m., Boston time, on August 31, 2010. The applicable date of expiration of a particular Warrant is referred to herein as the "EXPIRATION DATE" of such Warrant. Each Warrant shall be held in escrow by the escrow agent under the Warrant Escrow Agreement until it has been released in accordance with the terms and conditions of the Warrant Escrow Agreement. Each Warrant that has been so released may be exercised (in whole or in part) on any Business Day (as defined below) on or after the date of its release and on or prior to the close of business on the Expiration Date. Any Warrant not exercised before the close of business on the Expiration Date shall become void, and all rights of the holder under the Warrant Certificate evidencing such Warrant and under this Agreement shall cease. "BUSINESS DAY" shall mean any day on which (i) banks in Boston, Massachusetts, (ii) the principal U.S. securities exchange or market, if any, on which any Common Stock is listed or admitted to trading and (iii) the principal U.S. securities exchange or market, if any, on which the Warrants are listed or admitted to trading are open for business. SECTION 2.02. EXERCISE, EXERCISE PRICE, SETTLEMENT AND DELIVERY. (a) Subject to the provisions of this Agreement, after a Warrant is released from escrow in accordance with the terms and conditions of the Warrant Escrow Agreement a holder of a Warrant shall have the right to purchase from the Company on or after the date of its release and on or prior to the close of business on the Expiration Date one fully paid, registered and non-assessable share of Common Stock (and any other securities or property purchasable or deliverable upon exercise of such Warrant as provided in Article V), subject to adjustment in accordance with Article V hereof, at the purchase price of $0.01 for each share purchased (the "EXERCISE PRICE"). The number of Shares for which a particular Warrant may be exercised (the "EXERCISE RATE") shall be subject to adjustment from time to time as set forth in Article V hereof. "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity, including any predecessor of any such entity. (b) Warrants may be exercised by (i) surrendering at any office or agency maintained for that purpose by the Company pursuant to Section 1.09 (each a "WARRANT EXERCISE OFFICE") the Warrant Certificate evidencing such Warrants with the form of election to exercise Shares set forth on the reverse side of the Warrant Certificate (the "ELECTION TO EXERCISE") duly completed and signed by the registered 20 -15- Holder or Holders thereof or by the duly appointed legal representative thereof or by a duly authorized attorney, and in the case of a transfer, such signature shall be guaranteed by an eligible guarantor institution, and (ii) paying in full the Exercise Price for each such Warrant exercised. Each Warrant may be exercised in whole or in part, in which case a new Warrant Certificate shall be issued for the unexercised portion. (c) Simultaneously with the exercise of each Warrant, payment in full of the aggregate Exercise Price may be made, at the option of the Holder, (i) by United States dollars or by certified or official bank check, (ii) by the surrender (which surrender shall be evidenced by cancellation of the number of Warrants represented by any Warrant Certificate presented in connection with such Cashless Exercise) of a Warrant or Warrants (represented by one or more Warrant Certificates), and without payment of the Exercise Price in cash, for such number of Shares equal to the product of (1) the number of Shares for which such Warrant (or part thereof) is exercisable with payment in cash of the aggregate Exercise Price as of the date of exercise and (2) the Cashless Exercise Ratio or (iii) with any combination of (i) and (ii). For purposes of this Agreement, the "CASHLESS EXERCISE RATIO" shall equal a fraction, the numerator of which is the excess of the Current Market Value per share of the Common Stock on the date of exercise over the Exercise Price per share as of the date of exercise and the denominator of which is the Current Market Value per share of the Common Stock on the date of exercise. An exercise of a Warrant in accordance with the immediately preceding sentences is herein called a "CASHLESS EXERCISE." Upon surrender of a Warrant Certificate representing more than one Warrant in connection with the Holder's option to elect a Cashless Exercise, the number of Shares deliverable upon a Cashless Exercise shall be equal to the Cashless Exercise Ratio multiplied by the product of (a) the number of Warrants (or part thereof) that the Holder specifies is to be exercised pursuant to a Cashless Exercise and (b) the number of Shares for which such Warrant (or part thereof) is then exercisable (without giving effect to the Cashless Exercise option). All provisions of this Agreement shall be applicable with respect to an exercise of a Warrant Certificate pursuant to a Cashless Exercise for less than the full number of Warrants represented thereby. No payment or adjustment shall be made on account of any dividends on the Shares issued upon exercise of a Warrant. If the Company has not effected the registration under the Securities Act of the offer and sale of the Shares by the Company to the holders of the Warrants upon the exercise thereof, the Company may elect to require that holders of the Warrants effect the exercise of the Warrants solely pursuant to the Cashless Exercise option and may also amend the Warrants to eliminate the requirement for payment of the Exercise Price with respect such. Cashless Exercise option. The Warrant Agent shall have no obligation under this section to calculate the Cashless Exercise Ratio. (d) Upon such surrender of a Warrant Certificate and payment and collection of the Exercise Price at any Warrant Exercise Office (other than any Warrant Exercise Office that also is an office of the Warrant Agent), such Warrant Certificate and payment shall be promptly delivered to the Warrant Agent. The "EXERCISE DATE" for a Warrant shall be the date when all of the items referred to in the first sentence of paragraphs (b) and (c) of this Section 2.02 are received by the 21 -16- Warrant Agent at or prior to 11:00 a.m., New York City time, on a Business Day and the exercise of the Warrants will be effective as of such Exercise Date. If any items referred to in the first sentence of paragraphs (b) and (c) are received after 11:00 a.m., New York City time, on a Business Day, the exercise of the Warrants to which such item relates will be effective on the next succeeding Business Day. Notwithstanding the foregoing, in the case of an exercise of Warrants on the Expiration Date, if all of the items referred to in the first sentence of paragraphs (b) and (c) are received by the Warrant Agent at or prior to 5:00 p.m., New York City time, on the Expiration Date, the exercise of the Warrants to which such items relate will be effective on the Expiration Date. (e) Upon the exercise of a Warrant in accordance with the terms hereof, the receipt of a Warrant Certificate and payment of the Exercise Price (or election of the Cashless Exercise option), the Warrant Agent shall: (i) except to the extent exercise of the Warrant has been effected through Cashless Exercise, cause an amount equal to the aggregate Exercise Price to be paid to the Company by crediting the same to the account designated by the Company in writing to the Warrant Agent for that purpose; (ii) advise the Company immediately by telephone of the amount so deposited to the Company's account and promptly confirm such telephonic advice in writing; and (iii) promptly advise the Company in writing of the number of Warrants (or part thereof) exercised in accordance with the terms and conditions of this Agreement and the Warrant Certificates, the instructions of each exercising holder of the Warrant Certificates with respect to delivery of the Shares to which such holder is entitled upon such exercise, and such other information as the Company shall reasonably request. (f) Subject to Section 5.02 hereof, as soon as practicable after the exercise of any Warrant or Warrants in accordance with the terms hereof, the Company shall issue or cause to be issued to or upon the written order of the registered holder of the Warrant Certificate evidencing such exercised Warrant or Warrants, a certificate or certificates evidencing the Shares to which such holder is entitled (and, in the case of any Warrant exercised only in part, a new Warrant Certificate representing the unexercised portion thereof), registered in such name or names as may be directed by such holder pursuant to the Election to Exercise, as set forth on the reverse of the Warrant Certificate. Such certificate or certificates evidencing the Shares shall be deemed to have been issued and any persons who are designated to be named therein shall be deemed to have become the holder of record of such Shares as of the close of business on the Exercise Date; the Shares may, if a Depository has been appointed, initially be issued in global form (the "GLOBAL SHARES"). The Global Shares and any individual certificates evidencing Shares will be subject to substantially identical transfer restrictions and legends as required on the Warrant Certificates pursuant to Article I. Such Global Shares shall represent such of the outstanding Shares as shall be specified therein and each shall provide that it shall represent the aggregate amount of outstanding Shares from time to time endorsed thereon and that the aggregate amount of outstanding Shares represented thereby may from time to time be reduced or increased, as appropriate. Any endorsement of a Global Share to reflect the amount of any increase or decrease in the amount of outstanding Shares represented thereby shall be made by the registrar for the Shares and the 22 -17- Depository (referred to below) in accordance with instructions given by the holder thereof. [The Depository Trust Company] shall (if possible) act as the Depository with respect to the Global Shares until a successor shall be appointed by the Company and the registrar for the Shares. After such exercise of any Warrant or Shares, the Company shall also issue or cause to be issued to or upon the written order of the registered holder of such Warrant Certificate, a new Warrant Certificate, countersigned by the Warrant Agent pursuant to written instruction, evidencing the number of Warrants, if any, remaining unexercised unless such Warrants shall have expired. SECTION 2.03. CANCELLATION OF WARRANT CERTIFICATES. In the event the Company shall purchase or otherwise acquire Warrants, the Warrant Certificates evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if so delivered, shall at the Company's written instruction be canceled by it and retired. The Warrant Agent shall cancel all Warrant Certificates properly surrendered for exchange, substitution, transfer or exercise. Upon the Company's written request, the Warrant Agent shall deliver such canceled Warrant Certificates to the Company. ARTICLE III OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANTS ----------------------------- SECTION 3.01. ENFORCEMENT OF RIGHTS. (a) Notwithstanding any of the provisions of this Agreement, any Holder of any Warrant Certificate, without the consent of the Warrant Agent, the Holder may, in and for its own behalf, enforce, and may institute and maintain any suit, action or proceeding against the Company suitable to enforce, his right to exercise the Warrant or Warrants evidenced by his Warrant Certificate in the manner provided in such Warrant Certificate and in this Agreement. (b) Neither the Warrants nor any Warrant Certificate shall entitle the holders thereof to any of the rights of a holder of Shares, including, without limitation, the right to vote or to receive any dividends or other payments or to consent or to receive notice as stockholders in respect of the meetings of stockholders or for the election of directors of the Company or any other matter, or any rights whatsoever as stockholders of the Company, except as expressly provided herein. SECTION 3.02. OBTAINING STOCK EXCHANGE LISTINGS. The Company will from time to time take all commercially reasonable action so that the Shares, promptly upon their issuance upon the exercise of Warrants, will be listed on the principal securities exchanges and markets within the United States (including the Nasdaq National Market), if any, on which other shares of Common Stock are then listed. 23 -18- ARTICLE IV CERTAIN COVENANTS OF THE COMPANY -------------------------------- SECTION 4.01. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrants and of the Shares upon the exercise of Warrants; PROVIDED, HOWEVER, that the Company shall not be required to pay any tax or other governmental charge which may be payable in respect of any transfer or exchange of any Warrant Certificates or any certificates for Shares in a name other than the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant. In any such case, no transfer or exchange shall be made unless or until the person or persons requesting issuance thereof shall have paid to the Company the amount of such tax or other governmental charge or shall have established to the satisfaction of the Company that such tax or other governmental charge has been paid or an exemption is available therefrom. SECTION 4.02. RULES 144 AND 144A. The Company covenants that, following the release of Warrants pursuant to the Warrant Escrow Agreement, it will file any reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Securities and Exchange Commission thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, if at any time the Company is not required to file such reports, it will, upon the request of any holder or beneficial owner of Warrants, make available such information necessary to permit sales pursuant to Rule 144A under the Securities Act. ARTICLE V ADJUSTMENTS SECTION 5.01. ADJUSTMENT OF EXERCISE RATE; NOTICES. The Exercise Rate is subject to adjustment from time to time as provided in this Section 5.01. (a) ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If, after the Closing Date, the Company: (i) pays a dividend or makes a distribution on any of its Common Stock in shares of any of its Common Stock (other than any such dividend to the extent covered by Section 5.03); (ii) subdivides any of its outstanding shares of Common Stock into a greater number of shares; (iii) combines any of its outstanding shares of Common Stock into a smaller number of shares; (iv) pays a dividend or makes a distribution on any of its Common Stock in shares of any of its Capital Stock (other than any such dividend of 24 -19- Common Stock or rights, warrants, or options for its Common Stock to the extent covered by Section 5.03); or (v) issues by reclassification of any of its Common Stock any shares of any of its Capital Stock; then the Exercise Rate in effect immediately prior to such action for each Warrant then outstanding shall be adjusted so that the Holder of a Warrant thereafter exercised may receive the number of shares of Capital Stock of the Company which such Holder would have owned immediately following such action if such Holder had exercised the Warrant immediately prior to such action or immediately prior to the record date applicable thereto, if any (regardless of whether the Warrants then outstanding are then exercisable and without giving effect to the Cashless Exercise option). The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. In the event that such dividend or distribution is not so paid or made or such subdivision, combination or reclassification is not effected, the Exercise Rate shall again be adjusted to be the Exercise Rate which would then be in effect if such record date or effective date had not been so fixed. If after an adjustment a Holder of a Warrant upon exercise of such Warrant may receive shares of two or more classes of Capital Stock of the Company, the Exercise Rate shall thereafter be subject to adjustment upon the occurrence of an action taken with respect to any such class of Capital Stock as is contemplated by this Article V with respect to the Common Stock, on terms comparable to those applicable to Common Stock in this Article V. (b) ADJUSTMENT FOR SALE OF COMMON STOCK BELOW CURRENT MARKET VALUE. If, after the Closing Date, the Company grants or sells to any Person any Common Stock or any securities convertible into or exchangeable or exercisable for any Common Stock at a price below the then Current Market Value (other than (1) pursuant to the exercise of the Warrants, (2) pursuant to any security convertible into, or exchangeable or exercisable for shares of Common Stock outstanding as of the date of this Agreement, (3) upon the conversion, exchange or exercise of any convertible, exchangeable or exercisable security as to which upon the issuance thereof an adjustment pursuant to this Article V has been made (or as to which no such adjustment was required under this Article V), or (4) upon the conversion, exchange or exercise of convertible, exchangeable or exercisable securities of the Company outstanding on the date of this Agreement (to the extent in accordance with the terms of such securities as in effect on the date of this Agreement), the Exercise Rate for each Warrant then outstanding shall be adjusted in accordance with the formula: 25 -20- E' = E x (O + N) ---------------------- (O + [N x P/M]) where: E' = the adjusted Exercise Rate for each Warrant then outstanding; E = the then current Exercise Rate for each Warrant then outstanding; O = the number of shares of Common Stock outstanding immediately prior to the sale of Common Stock or issuance of securities convertible, exchangeable or exercisable for Common Stock; N = the number of shares of Common Stock so sold or the maximum stated number of shares of Common Stock issuable upon the conversion, exchange or exercise of any such convertible, exchangeable or exercisable securities, as the case may be; P = the proceeds per share of Common Stock received by the Company, which (i) in the case of shares of Common Stock is the amount payable to the Company in consideration for the sale and issuance of such shares; and (ii) in the case of securities convertible into or exchangeable or exercisable for shares of Common Stock is the amount payable to the Company in consideration for the sale and issuance of such convertible or exchangeable or exercisable securities, plus the minimum aggregate amount of additional consideration, other than the surrender of such convertible or exchangeable securities, payable to the Company upon exercise, conversion or exchange thereof in each case before deduction of any discounts, commissions, fees and other expenses of issuance and marketing; and M = the Current Market Value as of the Time of Determination or at the time of sale, as the case may be. The adjustment shall become effective immediately after the record date for the determination of stockholders entitled to receive the rights, warrants or options to which this paragraph (b) applies or upon consummation of the sale of Common Stock, as the case may be. To the extent that shares of Common Stock are not delivered prior to the expiration of any such rights or warrants, the Exercise Rate for each Warrant then outstanding shall be readjusted to the Exercise Rate which would otherwise be in effect had the adjustment made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered pursuant to the exercise of such rights or Warrants. In the event that such rights or warrants are not so issued, the Exercise Rate for each Warrant then outstanding shall again be adjusted to be the Exercise Rate which would then be in effect if such date fixed for determination of stockholders entitled to receive such rights or warrants had not been so fixed. 26 -21- No adjustment shall be made under this paragraph (b) if the application of the formula stated above in this paragraph (b) would result in a value of E' that is lower than the value of E. No adjustment in the Exercise Rate shall be made under this paragraph (b) upon the issuance, conversion, exchange or exercise of options to acquire shares of Common Stock to or by officers, directors or employees of the Company; provide that the exercise price of such options, at the time of issuance thereof, is at least equal to the then Current Market Value of the Common Stock underlying such options. (c) NOTICE OF ADJUSTMENT. Whenever the Exercise Rate is adjusted, the Company shall promptly mail to Holders of Warrants then outstanding at the addresses appearing on the Warrant Register a notice of the adjustment. The Company shall file with the Warrant Agent and any other Registrar such notice and a certificate from the Company's chief financial officer briefly stating the facts requiring the adjustment and the manner of computing it. The certificate shall be conclusive evidence that the adjustment is correct. Neither the Warrant Agent nor any such Registrar shall be under any duty or responsibility with respect to any such certificate except to exhibit the same during normal business hours to any holder desiring inspection thereof. (d) REORGANIZATION OF COMPANY; Special Distributions. (i) If (A) the Company, in a single transaction or through a series of related transactions, merges, consolidates or amalgamates with or into any other person or sells, assigns, transfers, leases, conveys or otherwise disposes of all or substantially all of its properties and assets to another person or group of affiliated persons, (B) the Company is a party to a merger or binding share exchange which reclassifies or changes its outstanding Common Stock or (C) all holders of Common Stock engage in an exchange of such Common Stock for shares of Capital Stock or other equity securities in any other entity (a "FUNDAMENTAL TRANSACTION"), as a condition to consummating any such transaction the person issuing the consideration in any such consolidation, merger or share exchange if other than the Company (the "SURVIVING PERSON"), shall enter into a supplemental warrant agreement. The supplemental warrant agreement shall provide (a) that each Warrant then outstanding shall thereafter be exercisable for the kind and amount of securities, cash or other assets which a holder thereof would have received upon consummation of the Fundamental Transaction if such holder had exercised the Warrant immediately before the effective date of the transaction (regardless of whether the Warrants are then exercisable and without giving effect to the Cashless Exercise option, provided that such exerciseability shall not be accelerated by such Fundamental Transaction), assuming (to the extent applicable) that such holder (i) was not a constituent person or an affiliate of a constituent person to such transaction, (ii) made no election with respect thereto, and (iii) was treated alike with the plurality of non-electing holders, and (b) that the Surviving Person shall succeed to and be substituted to every right and obligation of the Company in respect of this Agreement and the Warrants and thereafter TransTechnology Corporation shall no longer be considered the Company for purposes of this Agreement. The supplemental warrant agreement shall provide for adjustments 27 -22- which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article V. The Surviving Person shall mail to Holders of Warrants at the addresses appearing on the Warrant Register a notice briefly describing the supplemental warrant agreement. If the issuer of securities deliverable upon exercise of Warrants is an affiliate of the Surviving Person, that issuer shall join in the supplemental warrant agreement. (ii) Notwithstanding the foregoing, if the Company enters into a Fundamental Transaction with another Person and consideration is payable to holders of shares of Capital Stock (or other securities or property) of a class issuable or deliverable upon exercise of any Warrants that have been released from escrow and are then exercisable in exchange for their shares of Capital Stock in connection with such Fundamental Transaction, which consideration consists solely of cash, then the holders of such then exercisable Warrants shall be entitled to receive distributions on the date of such event on an equal basis with holders of such shares (or other securities issuable upon exercise of the Warrants) as if the Warrants had been exercised immediately prior to such event, less the Exercise Price therefor. Upon receipt of such payment, if any, the rights of a holder of such a Warrant shall terminate and cease and such holder's Warrants shall expire. (iii) If this paragraph (d) applies, it shall supersede the application of paragraph (a) of this Section 5.01. (iv) "AFFILIATE" of any specified Person means any other Person which, directly or indirectly, controls, is controlled by or is under direct or indirect common control with such specified Person. For purposes of this definition, "CONTROL," (including, with correlative meanings, the terms "CONTROLLING" "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. (e) COMPANY DETERMINATION FINAL. Any determination that the Company or the Board of Directors of the Company must make pursuant to this Article V is conclusive. (f) WARRANT AGENT'S ADJUSTMENT DISCLAIMER. The Warrant Agent has no duty to determine when an adjustment under this Article V should be made, how it should be made or what it should be. The Warrant Agent has no duty to determine whether a supplemental warrant agreement under paragraph (d) need be entered into or whether any provisions of any supplemental warrant agreement are correct. The Warrant Agent shall not be accountable for and makes no representation as to the validity or value of any securities or assets issued upon exercise of Warrants. The Warrant Agent shall not be responsible for the Company's failure to comply with any provision of this Article V. Among other things, the Company shall certify to the Warrant Agent the Current Market Value, in accordance with the definition thereof, and the current Exercise Rate, in either case upon request by the Warrant Agent from time to time, as may be reasonably required to enable the Warrant 28 -23- Agent to perform its duties hereunder, and on which the Warrant Agent may rely conclusively. (g) ADJUSTMENT FOR TAX PURPOSES. The Company may in its sole discretion make such increases in the Exercise Rate, in addition to those otherwise required by this Section, as it considers to be advisable in order that any event treated for Federal income tax purposes as a dividend of stock or stock rights shall not be taxable to the recipients. (h) UNDERLYING SHARES. The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock or Common Stock held in the treasury of the Company, for the purpose of effecting the exercise of Warrants, the full number of Shares then deliverable upon the exercise of all Warrants then outstanding and payment of the exercise price, and the shares so deliverable shall be fully paid and nonassessable and free from all liens and security interests created by the Company. (i) SPECIFICITY OF ADJUSTMENT. Irrespective of any adjustments in the number or kind of shares purchasable upon the exercise of the Warrants, Warrant Certificates theretofore or thereafter issued may continue to express the same number and kind of Shares per Warrant as are stated on the Warrant Certificates initially issuable pursuant to this Agreement. (j) VOLUNTARY ADJUSTMENT. The Company from time to time may in its sole discretion increase the Exercise Rate by any number and for any period of time (provided that such period is not less than 20 Business Days). Whenever the Exercise Rate is so increased, the Company shall mail to holders at the addresses appearing on the Warrant Register and file with the Warrant Agent a notice of the increase. The Company shall give the notice at least 15 days before the date the increased Exercise Rate takes effect. The notice shall state the increased Exercise Rate and the period it will be in effect. A voluntary increase in the Exercise Rate does not change or adjust the Exercise Rate otherwise in effect as determined by this Section 5.01. (k) MULTIPLE ADJUSTMENTS. After an adjustment to the Exercise Rate for outstanding Warrants under this Article V, any subsequent event requiring an adjustment under this Article V shall cause an adjustment to the Exercise Rate for outstanding Warrants as so adjusted. (l) DEFINITIONS. "CAPITAL STOCK" means, with respect to any person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of, such person's capital stock, partnership interests or any other participation, right or other interest in the nature of an equity interest in such Person, whether outstanding on the date of issuance of the Warrants or issued after such issue date, and any and all option, Warrant or other security convertible into or exercisable or exchangeable for any of the foregoing. 29 -24- "CURRENT MARKET VALUE" per share of Common Stock of the Company or any other security at any date means (i) if the security is not listed and traded on any national securities exchange or NASDAQ national market system, the fair market value of the security, determined in good faith by the Board of Directors of the Company and certified in a board resolution, (a) taking into account the most recently completed arm's-length transaction between the Company and a person other than an Affiliate of the Company and the closing of which occurs on such date or shall have occurred within the six-month period preceding such date, or (b) if no transaction shall have occurred during such six-month period, taking into account the fair market value of the security as determined by an Independent Financial Expert (PROVIDED that, in the case of the calculation of Current Market Value for determining the cash value of fractional shares, any such determination within six months that is, in the good faith judgment of the Board of Directors of the Company, a reasonable determination of value, may be utilized and PROVIDED, further that for purposes of determining the Cashless Exercise Ratio or the cash value of fractional shares, the Current Market Value may be determined in good faith by the Board of Directors), a copy of which board resolution is certified to the Warrant Agent by the president, any vice president or the chief financial officer of the Company, or (ii) (a) if the security is listed and traded on any national securities exchange or NASDAQ national market system, the average of the daily closing sales prices of the securities for the 20 consecutive days immediately preceding such date, or (b) if the security has so traded for less than 20 consecutive days immediately preceding such date, then the average of the closing sales prices for all of the trading days before such date for which closing sales prices are available, in the case of each of (ii)(a) and (ii)(b), as certified to the Warrant Agent by the president, any vice president or the chief financial officer of the Company. The closing sales price for each such trading day shall be in the case of a security listed or admitted to trading on any United States national securities exchange or quotation system, the closing sales price, regular way, on such day, or if no sale takes place on such day, the average of the closing bid and asked prices on such day. "INDEPENDENT FINANCIAL EXPERT" means a United States investment banking or valuation firm of national or regional standing in the United States (i) which does not, and whose directors, officers and employees or Affiliates do not have a direct or indirect material financial interest for its proprietary account in the Company or any of its Affiliates and (ii) which, in the judgment of the Board of Directors of the Company, is otherwise independent with respect to the Company and its Affiliates and qualified to perform the task for which it is to be engaged. "TIME OF DETERMINATION" means, (i) in the case of any distribution of securities or other property to existing stockholders to which paragraph (b) applies, the time and date of the determination of stockholders entitled to receive such securities or property or (ii) in the case of any other issuance and sale to which paragraph (b) applies, the time and date of such issuance or sale. (m) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED. No Adjustment in the Exercise Rate need be made unless the adjustment would require an increase of at least 1% in the Exercise Rate. Any adjustments that are not made shall be carried 30 -25- forward and taken into account in any subsequent adjustments. All calculations under this Section 5.01 shall be made to the nearest 1/1000th of a Share. SECTION 5.02. FRACTIONAL SHARES. The Company will not be required to issue fractional Shares upon exercise of the Warrants or distribute Share certificates that evidence fractional Shares. In the event a Holder is required by Section 2.02(c) to make a Cashless Exercise, the number of Shares issuable shall be rounded up to the nearest whole number. In addition, in no event shall any holder of Warrants be required to make any payment of a fractional cent. In lieu of fractional Shares, there shall be paid to the registered Holders of Warrant Certificates at the time Warrants evidenced thereby are exercised as herein provided an amount in cash equal to the same fraction of the Current Market Value per Share on the Business Day preceding the date the Warrant Certificates evidencing such Warrants are surrendered for exercise. Such payments will be made by check or by transfer to a bank account maintained by such registered Holder. If any Holder surrenders for exercise more than one Warrant Certificate, the number of Shares deliverable to such Holder may, at the option of the Company, be computed on the basis of the aggregate amount of all the Warrants exercised by such Holder. SECTION 5.03. CERTAIN DISTRIBUTIONS. Subject to the proviso set forth below, if at any time the Company grants, issues or sells options, convertible securities, or rights to purchase Capital Stock, warrants or other securities pro rata to the record holders of any Common Stock (the "DISTRIBUTION RIGHTS") or, without duplication, makes any dividend or otherwise makes any distribution, including, subject to applicable law, pursuant to any plan of liquidation ("DISTRIBUTION") on Common Stock (whether in cash, property, evidences of indebtedness or otherwise), then the Company shall grant, issue, sell or make to each registered holder of Warrants then outstanding, the aggregate Distribution Rights or Distribution, as the case may be, which such holder would have acquired if such holder had held the maximum number of Shares acquirable upon complete exercise of such holder's Warrants (without giving effect to the Cashless Exercise option) immediately before the record date for the grant, issuance or sale of such Distribution Rights or Distribution, as the case may be, or, if there is no such record date, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Distribution Rights or Distribution, as the case may be; PROVIDED that the Company shall not have to grant, issue, sell or make any Distribution Rights or Distribution in respect of any Warrants until such time as the applicable Warrant is released pursuant to the Warrant Escrow Agreement. The Company covenants not to (x) cause or suffer to exist any restriction or become effective any agreement that would not allow the Company to grant, issue, sell or make Distribution Rights or Distributions with respect to the Warrants or the Shares from and after the release of the Warrants pursuant to the Warrant Escrow Agreement, other than any such restriction or agreement affecting all shares of the Common Stock equally, or (y) do anything that would frustrate the Company's ability to grant, issue, sell or make Distribution Rights or Distributions with respect to the Warrants or the Shares equally with other shares of the Common Stock from and after the release of the Warrants pursuant to the Warrant Escrow Agreement. 31 -26- ARTICLE VI CONCERNING THE WARRANT AGENT SECTION 6.01. WARRANT AGENT. The Company hereby appoints State Street Bank and Trust Company as Warrant Agent of the Company in respect of the Warrants and the Warrant Certificates upon the terms and subject to the conditions herein and in the Warrant Certificates set forth; and State Street Bank and Trust Company hereby accepts such appointment. The Warrant Agent shall have the powers and authority specifically granted to and conferred upon it in the Warrant Certificates and hereby and such further powers and authority to act on behalf of the Company as the Company may hereafter grant to or confer upon it and it shall accept in writing (PROVIDED, HOWEVER that the Warrant Agent shall have only such duties and responsibilities with respect to the exercise thereof as are expressly set forth herein and as may be expressly set forth in any such acceptance). All of the terms and provisions with respect to such powers and authority contained in the Warrant Certificates are subject to and governed by the terms and provisions hereof. SECTION 6.02. CONDITIONS OF WARRANT AGENT'S OBLIGATIONS. The Warrant Agent accepts its obligations herein set forth upon the terms and conditions hereof and in the Warrant Certificates, including the following, to all of which the Company agrees and to all of which the rights hereunder of the holders from time to time of the Warrant Certificates shall be subject: (a) The Warrant Agent shall be entitled to compensation to be agreed upon with the Company in writing for all services rendered by it and the Company agrees promptly to pay such compensation and to reimburse the Warrant Agent for its reasonable out-of-pocket expenses (including reasonable fees and expenses of counsel) incurred without gross negligence, bad faith or willful misconduct on its part in connection with the services rendered by it hereunder. The Company also agrees to indemnify the Warrant Agent and any predecessor Warrant Agent, their directors, officers, affiliates, agents and employees for, and to hold them and their directors, officers, affiliates, agents and employees harmless against, any loss, liability or expense of any nature whatsoever (including, without limitation, reasonable fees and expenses of counsel) incurred without gross negligence, bad faith or willful misconduct on the part of the Warrant Agent or any such other person, arising out of or in connection with its acting as such Warrant Agent hereunder and its exercise of its rights and performance of its obligations hereunder. The obligations of the Company under this Section 6.02 shall survive the exercise and the expiration of the Warrant Certificates and the resignation and removal of the Warrant Agent. (b) In acting under this Agreement and in connection with the Warrant Certificates, the Warrant Agent is acting solely as agent of the Company and does not assume any obligation or relationship of agency or trust for or with any of the owners or holders of the Warrant Certificates. 32 -27- (c) The Warrant Agent may consult with counsel of its selection and any written opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such opinion. (d) The Warrant Agent shall be fully protected and shall incur no liability for or in respect of any action taken or omitted to be taken or thing suffered by it in reliance upon any Warrant Certificate, notice, direction, consent, certificate, affidavit, opinion of counsel, instruction, statement or other paper or document reasonably believed by it in good faith to be genuine and to have been presented or signed by the proper parties. (e) The Warrant Agent, and its officers, directors, affiliates and employees ("RELATED PARTIES"), may become the owners of, or acquire any interest in, Warrant Certificates, Shares or other obligations of the Company with the same rights that it or they would have if it were not the Warrant Agent hereunder and, to the extent permitted by applicable law, it or they may engage or be interested in any financial or other transaction with the Company and may act on, or as Depository, trustee or agent for, any committee or body of holders of shares or other obligations of the Company as freely as if it were not the Warrant Agent hereunder. Nothing in this Agreement shall be deemed to prevent the Warrant Agent or such Related Parties from acting in any other capacity for the Company. (f) The Warrant Agent shall not be under any liability for interest on, and shall not be required to invest, any monies at any time received by it pursuant to any of the provisions of this Agreement or of the Warrant Certificates. In no instance shall the Warrant Agent have any liability under or pursuant to this Agreement for special or consequential damages (including without limitation loss of profits), whether or not advised of the likelihood thereof. (g) The Warrant Agent shall not be under any responsibility in respect of the validity of this Agreement (or any term or provision hereof) or the execution and delivery hereof (except the due execution and delivery hereof by the Warrant Agent) or in respect of the validity or execution of any Warrant Certificate (except its authentication thereof). (h) The recitals and other statements contained herein and in the Warrant Certificates (except as to the Warrant Agent's authentication thereon) shall be taken as the statements of the Company and the Warrant Agent assumes no responsibility for the correctness of the same. The Warrant Agent does not make any representation as to the validity or sufficiency of this Agreement or the Warrant Certificates, except for the due execution and delivery of this Agreement by the Warrant Agent, as to which it hereby so represents and warrants; PROVIDED, HOWEVER, that the Warrant Agent shall not be relieved of its duty to authenticate the Warrant Certificates as authorized by this Agreement. The Warrant Agent shall not be accountable 33 -28- for the use or application by the Company of the proceeds of the exercise of any Warrant. (i) Before the Warrant Agent acts or refrains from acting with respect to any matter contemplated by this Warrant Agreement, it may require: (1) an Officers' Certificate stating on behalf of the Company that, in the opinion of the signers, all conditions precedent, if any, provided for in this Warrant Agreement relating to the proposed action have been complied with; and (2) if reasonably necessary in the judgment of the Warrant Agent, an opinion of counsel for the Company (who may be the Company's general counsel) stating that, in the opinion of such counsel, all such conditions precedent have been complied with, provide that such matter is one customarily opined on by counsel. Each Officers' Certificate or, if requested, an opinion of counsel with respect to compliance with a condition or covenant provided for in this Warrant Agreement shall include: (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express his or her opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with. (j) The Warrant Agent shall be obligated to perform only such duties as are herein, and in the Warrant Certificates specifically set forth and no implied duties or obligations shall be read into this Agreement or the Warrant Certificates against the Warrant Agent. The Warrant Agent shall not be accountable or under any duty or responsibility for the use by the Company of any of the Warrant Certificates authenticated by the Warrant Agent and delivered by it to the Company pursuant to this Agreement. The Warrant Agent shall have no duty or responsibility in case of any default by the Company in the performance of its covenants or agreements contained in the Warrant Certificates or in the case of the receipt of any written demand from a holder of a Warrant Certificate with respect to such default, including, without limiting the generality of the foregoing, any duty or responsibility to 34 -29- initiate or attempt to initiate any proceedings at law or otherwise or, except as provided in Section 7.02 hereof, to make any demand upon the Company. (k) Unless otherwise specifically provided herein, any order, certificate, notice, request, direction or other communication from the Company made or given under any provision of this Agreement shall be sufficient if signed by its chairman of the Board of Directors, its president, its treasurer, its controller or any vice president or its secretary or any assistant secretary. (l) The Warrant Agent shall have no responsibility in respect of any adjustment pursuant to Article V hereof. (m) The Company agrees that it will perform, execute, acknowledge and deliver, or cause to be performed, executed, acknowledged and delivered, all such further and other acts, instruments and assurances as may reasonably be required by the Warrant Agent for the carrying out or performing by the Warrant Agent of the provisions of this Agreement. (n) The Warrant Agent is hereby authorized and directed to accept written instructions with respect to the performance of its duties hereunder from any one of the chairman of the Board of Directors, the president, the treasurer, the controller, any vice president or the secretary or assistant secretary of the Company or any other officer or official of the Company reasonably believed to be authorized to give such instructions and to apply to such officers or officials for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with such instructions with respect to any matter arising in connection with the Warrant Agent's duties and obligations arising under this Agreement. (o) Whenever in the performance of its duties under this Agreement the Warrant Agent shall deem it necessary or desirable that any fact or matter be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed on behalf of the Company by any one of the chairman of the Board of Directors, the president, the treasurer, the controller, any vice president or the secretary or assistant secretary of the Company or any other officer or official of the Company reasonably believed to be authorized to give such instructions and delivered to the Warrant Agent; and such certificate shall be full authorization to the Warrant Agent for any action taken or suffered in good faith by it under the provisions of this Agreement in reliance upon such certificate. (p) The Warrant Agent shall not be required to risk or expend its own funds in the performance of its obligations and duties hereunder. 35 -30- (q) As used herein, a "RESPONSIBLE OFFICER" of the Warrant Agent shall mean any officer working in its Corporate Trust Department and having responsibility for the administration of this Agreement, or to whom as specific matters concerning this Agreement is referred because of his or her familiarity with or knowledge of the subject matter. SECTION 6.03. RESIGNATION AND APPOINTMENT OF SUCCESSOR. (a) The Company agrees to use commercially reasonable efforts to provide that there shall at all times be a Warrant Agent hereunder. (b) The Warrant Agent may at any time resign as Warrant Agent by giving written notice to the Company of such intention on its part, specifying the date on which its desired resignation shall become effective; PROVIDED, HOWEVER, that such date shall be at least 30 days after the date on which such notice is given unless the Company agrees to accept less notice. Upon receiving such notice of resignation, the Company shall promptly appoint a successor Warrant Agent, qualified as provided in Section 6.03(d) hereof, by written instrument in duplicate signed on behalf of the Company, one copy of which shall be delivered to the resigning Warrant Agent and one copy to the successor Warrant Agent. As provided in Section 6.03(d) hereof, such resignation shall become effective upon the earlier of (x) the acceptance of the appointment by the successor Warrant Agent or (y) 60 days after receipt by the Company of notice of such resignation. The Company may, at any time and for any reason, and shall, upon any event set forth in the next succeeding sentence, remove the Warrant Agent and appoint a successor Warrant Agent by written instrument in duplicate, specifying such removal and the date on which it is intended to become effective, signed on behalf of the Company, one copy of which shall be delivered to the Warrant Agent being removed and one copy to the successor Warrant Agent. The Warrant Agent shall be removed as aforesaid if it shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Warrant Agent or of its property shall be appointed, or any public officer shall take charge or control of it or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. Any removal of the Warrant Agent and any appointment of a successor Warrant Agent shall become effective upon acceptance of appointment by the successor Warrant Agent as provided in Section 6.03(d). As soon as practicable after appointment of the successor Warrant Agent, the Company shall cause written notice of the change in the Warrant Agent to be given to each of the registered Holders of the Warrants in the manner provided for in Section 7.04 hereof. (c) Upon resignation or removal of the Warrant Agent, if the Company shall fail to appoint a successor Warrant Agent within a period of 30 days after receipt of such notice of resignation or removal, then the holder of any Warrant Certificate or the retiring Warrant Agent may apply to a court of competent jurisdiction for the appointment of a successor to the Warrant Agent reasonably acceptable to the Company. Pending appointment of a successor to the Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. 36 -31- (d) Any successor Warrant Agent, whether appointed by the Company or by a court, shall be a bank or trust company in good standing, incorporated under the laws of the United States of America or any State thereof and having, at the time of its appointment, a combined capital surplus of at least $50 million. Such successor Warrant Agent shall execute and deliver to its predecessor and to the Company an instrument accepting such appointment hereunder and all the provisions of this Agreement, and thereupon such successor Warrant Agent, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations of its predecessor hereunder, with like effect as if originally named as Warrant Agent hereunder, and such predecessor shall thereupon become obligated to (i) transfer and deliver, and such successor Warrant Agent shall be entitled to receive, all securities, records or other property on deposit with or held by such predecessor as Warrant Agent hereunder and (ii) upon payment of the amounts then due it pursuant to Section 6.02(a) hereof, pay over, and such successor Warrant Agent shall be entitled to receive, all monies deposited with or held by any predecessor Warrant Agent hereunder. (e) Any corporation or bank into which the Warrant Agent hereunder may be merged or converted, or any corporation or bank with which the Warrant Agent may be consolidated, or any corporation or bank resulting from any merger, conversion or consolidation to which the Warrant Agent shall be a party, or any corporation or bank to which the Warrant Agent shall sell or otherwise transfer all or substantially all of its corporate trust business, shall be the successor to the Warrant Agent under this Agreement (provided that such corporation or bank shall be qualified as aforesaid) without the execution or filing of any document or any further act on the part of any of the parties hereto. (f) No Warrant Agent under this Warrant Agreement shall be personally liable for any action or omission of any successor Warrant Agent. ARTICLE VII MISCELLANEOUS SECTION 7.01. AMENDMENT. This Agreement and the terms of the Warrants may be amended by the Company and the Warrant Agent, without the consent of the Holder of any Warrant Certificate, for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained herein or therein, or to effect any assumptions of the Company's obligations hereunder and thereunder by a successor corporation under the circumstances described in Section 5.01(d) hereof, or in any other manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the Holders of the Warrant Certificates. The Company and the Warrant Agent may amend, modify or supplement this Agreement and the terms of the Warrants, and waivers or departures from the terms hereof and thereof may be given, with the consent of the Requisite Warrant Holders (as defined below), for the purpose of adding any provision to or changing in 37 -32- any manner or eliminating any of the provisions of this Agreement or modifying in any manner the rights of the Holders of the outstanding Warrants; PROVIDED, HOWEVER, that no such modification that increases the Exercise Price or decreases the Exercise Rate, makes any change to Section 5.01(d), reduces the period of time during which the Warrants are exercisable hereunder, or effects any change to this Section 7.01 may be made with respect to any Warrant without the consent of the Holder of such Warrant. "REQUISITE WARRANT HOLDERS" means, with respect to any amendment, modification, supplement or waiver, the Holders of a majority in number of Shares represented by the Warrants that would be issuable assuming exercise thereof at the time such amendment, modification, supplement or waiver is voted upon. Notwithstanding any other provision of this Agreement, the Warrant Agent's consent must be obtained regarding any supplement or amendment which alters the Warrant Agent's rights or duties (it being expressly understood that the foregoing shall not be in derogation of the right of the Company to remove the Warrant Agent in accordance with Section 6.03 hereof). For purposes of any amendment, modification or waiver hereunder, Warrants held by the Company or any of its Affiliates shall be disregarded. Any modification or amendment made in accordance with this Agreement will be conclusive and binding on all present and future Holders of Warrant Certificates whether or not they have received written notice of or consented to such modification or amendment or waiver and whether or not notation of such modification or amendment is made upon such Warrant Certificates. Any instrument given by or on behalf of any Holder of a Warrant Certificate in connection with any consent to any modification or amendment will be conclusive and binding on all subsequent Holders of such Warrant Certificate. SECTION 7.02. NOTICES AND DEMANDS TO THE COMPANY AND WARRANT AGENT. If the Warrant Agent shall receive any notice or demand addressed to the Company by the Holder of a Warrant Certificate pursuant to the provisions hereof or of the Warrant Certificates, the Warrant Agent shall promptly forward such notice or demand to the Company. SECTION 7.03. ADDRESSES FOR NOTICES TO PARTIES AND FOR TRANSMISSION OF DOCUMENTS. All notices hereunder to the parties hereto shall be deemed to have been given when sent by certified or registered mail, postage prepaid, or by facsimile transmission, confirmed by first class mail, postage prepaid, addressed to any party hereto as follows: To the Company: TransTechnology Corporation 150 Allen Road Liberty Corner, NJ 07938 Facsimile No.: (908) 903-1616 Attention: General Counsel 38 -33- To the Warrant Agent: State Street Bank and Trust Company 2 Avenue de Lafayette Boston, MA 02111-1724 Facsimile No.: (617) 662 Attention: Corporate Trust Department Attention: TransTechnology Corporation Warrant Agreement or at any other address of which either of the foregoing shall have notified the other in writing. SECTION 7.04. NOTICES TO HOLDERS. Notices to Holders of Warrants shall be mailed to such Holders at the addresses of such Holders as they appear in the Warrant Register. Any such notice shall be sufficiently given if sent by first-class mail, postage prepaid. SECTION 7.05. APPLICABLE LAW; SUBMISSION TO JURISDICTION. THE VALIDITY, INTERPRETATION AND PERFORMANCE OF THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER AND OF THE RESPECTIVE TERMS AND PROVISIONS THEREOF SHALL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. SECTION 7.06 PERSONS HAVING RIGHTS UNDER AGREEMENT. Nothing in this Agreement expressed or implied nothing that may be inferred from any of the provisions hereof is intended, or shall be construed, to confer upon, or give to, any person or corporation other than the Company, the Warrant Agent, the Holders of the Warrant Certificates and, with respect to Section 4.03 and 4.04, the Holders of Shares issued pursuant to Warrants, any right, remedy or claim under or by reason of this Agreement or of any covenant, condition, stipulation, promise or agreement hereof; and all covenants (except for Section 4.03 which shall be for the benefit of all holders of Shares issued pursuant to Warrants), conditions, stipulations, promises and agreements in this Agreement contained shall be for the sole and exclusive benefit of the Company and the Warrant Agent and their successors and of the Holders of the Warrant Certificates. SECTION 7.07. HEADINGS. The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. SECTION 7.08. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original; but such counterparts shall together constitute but one and the same instrument. SECTION 7.09. INSPECTION OF AGREEMENT. A copy of this Agreement shall be available during regular business hours at the principal corporate trust office of the Warrant Agent, for inspection by the Holder of any Warrant Certificate. The 39 -34- Warrant Agent may require such Holder to submit its Warrant Certificate for inspection by it. SECTION 7.10. AVAILABILITY OF EQUITABLE REMEDIES. Since a breach of the provisions of this Agreement could not adequately be compensated by money damages, Holders of Warrants shall be entitled, in addition to any other right or remedy available to them, to an injunction restraining such breach or a threatened breach and to specific performance of any such provision of this Agreement, and in either case no bond or other security shall be required in connection therewith, and the parties hereby consent to such injunction and to the ordering of specific performance. SECTION 7.11. OBTAINING OF GOVERNMENTAL APPROVALS. The Company will from time to time take all action required to be taken by it which may be necessary to obtain and keep effective any and all material permits, consents and approvals of governmental agencies and authorities and securities acts filings under United States Federal and state laws, and the rules and regulations of all stock exchanges on which the Warrants are listed which may be or become requisite in connection with the issuance, sale, transfer, and delivery of the Warrant Certificates, the exercise of the Warrants or the issuance, sale, transfer and delivery of the Shares issued upon exercise of the Warrants. [Signature Page Follows] 40 IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by the parties hereto as of the day and year first above written. TRANSTECHNOLOGY CORPORATION By:/s/ Joseph F. Spanier -------------------------------------- Name: JOSEPH F. SPANIER Title: VICE PRESIDENT & CFO STATE STREET BANK AND TRUST COMPANY, as Warrant Agent By:/s/ Jill Olson -------------------------------------- Name: JILL OLSON Title: VICE PRESIDENT 41 A-1 EXHIBIT A [FORM OF WARRANT CERTIFICATE] [FACE] THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR 904 OF REGULATION S UNDER THE SECURITIES ACT ("REGULATION S"), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE RELEASE FROM ESCROW OF THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S, PURSUANT TO RULE 903 OR 904 OF REGULATION S, (E) TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION 42 A-2 FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND, TRANSFERS OF INTERESTS IN THIS WARRANT SHALL BE SUBJECT TO COMPLIANCE WITH THE FOREGOING (AND SHALL REQUIRE DELIVERY OF CERTAIN CERTIFICATES AND/OR OPINIONS TO EVIDENCE COMPLIANCE THEREWITH, PURSUANT TO AND AS SPECIFIED IN THE WARRANT AGREEMENT DESCRIBED ON THE REVERSE HEREOF). SUBJECT TO THE TERMS OF THE WARRANT AGREEMENT, THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE, PROVIDED THAT SUCH HOLDER IS NOT AN AFFILIATE OF THE COMPANY. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM IN REGULATION S. [TO APPLY SO LONG AS PUT RIGHT IS IN EFFECT:] THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A WARRANT HOLDERS' AGREEMENT DATED AS OF AUGUST 31, 1999, AMONG THE COMPANY, THE HOLDERS OF THE WARRANTS AND BANKBOSTON N.A., AS ADMINISTRATIVE AGENT, A COPY OF WHICH IS ON FILE WITH THE WARRANT AGENT. 43 A-3 [Subject to appropriate modification at the time of execution and delivery.] CUSIP #[ ] No. [ ] [ ] Warrants WARRANT CERTIFICATE TRANSTECHNOLOGY CORPORATION This Warrant Certificate certifies that [ ], or its registered assigns, is the registered holder of [ ] Warrants (the "Warrants") to purchase shares of Common Stock, par value $0.01 per share (the "Common Stock"), subject to the conditions contained herein and in the Warrant Agreement, of TRANSTECHNOLOGY CORPORATION, a Delaware corporation (the "Company," which term includes its successors and assigns). Each Warrant entitles the holder to purchase from the Company at any time from 9:00 a.m. Boston time on or after the date of issuance until 5:00 p.m., Boston time, on August 31, 2010 (the "Expiration Date"), [ ] fully paid, registered and non-assessable shares of Common Stock, subject to adjustment as provided in Article V of the Warrant Agreement, at the exercise price of $0.01 for each share purchased (the "Exercise Price") (the shares of Common Stock purchasable upon exercise of a Warrant being herein referred to as the "Shares" and, unless the context otherwise requires, such term shall also mean the other securities or property purchasable and deliverable upon exercise of a Warrant as provided in the Warrant Agreement dated as of August 31, 1999 (the "Warrant Agreement")), upon surrender of this Warrant Certificate and payment of the Exercise Price (i) in United States dollars or certified official or bank check, (ii) pursuant to the next sentence or (iii) in any combination of (i) and (ii), at any office or agency maintained for that purpose by the Company (the "Warrant Agent Office"), subject to the conditions set forth herein and in the Warrant Agreement. A Warrant may also be exercised solely by the surrender of the Warrant, and without the payment of the Exercise Price in cash, for such number of Shares equal to the product of (1) the number of Shares for which such Warrant is exercisable with payment of the Exercise Price as of the date of exercise and (2) the Cashless Exercise Ratio. For purposes of this Warrant, the "Cashless Exercise Ratio" shall equal a fraction, the numerator of which is the excess of the Current Market Value per share of the Common Stock on the date of exercise over the Exercise Price per share as of the date of exercise and the denominator of which is the Current Market Value per share of the Common Stock on the date of exercise. An exercise of a Warrant in accordance with the immediately preceding sentences is herein called a "Cashless Exercise." Upon surrender of a Warrant Certificate representing more than one Warrant in connection with the Holder's option to elect a Cashless Exercise, the number of Shares deliverable upon a Cashless Exercise shall be equal to the Cashless Exercise Ratio multiplied by the product of (a) the number of Warrants (or part thereof) that the holder specifies is to be exercised pursuant to a Cashless Exercise and (b) the number of Shares for which such Warrant (or part thereof) is then exercisable (without giving effect to the Cashless Exercise option). If the 44 A-4 Company has not effected the registration under the Securities Act of the offer and sale of the Shares by the Company to the holders of the Warrants upon the exercise thereof, the Company may elect to require that holders of the Warrants effect the exercise of the Warrants solely pursuant to the Cashless Exercise option and may also amend the Warrants to eliminate the requirement for payment of the Exercise Price with respect such Cashless Exercise option. All provisions of the Warrant Agreement shall be applicable with respect to an exercise of a Warrant Certificate pursuant to a Cashless Exercise for less than the full number of Warrants represented thereby. Capitalized terms used herein without being defined herein shall have the definitions ascribed to such terms in the Warrant Agreement. "CURRENT MARKET VALUE" per share of Common Stock of the Company or any other security at any date means (i) if the security is not listed and traded on any national securities exchange or NASDAQ national market system, the fair market value of the security, determined in good faith by the Board of Directors of the Company and certified in a board resolution, (a) taking into account the most recently completed arm's-length transaction between the Company and a person other than an Affiliate of the Company and the closing of which occurs on such date or shall have occurred within the six-month period preceding such date or (b) if no transaction shall have occurred during such six-month period, taking into account the fair market value of the security as determined by an Independent Financial Expert (PROVIDED THAT, in the case of the calculation of Current Market Value for determining the cash value of fractional shares, any such determination within six months that is, in the good faith judgment of the Board of Directors of the Company, a reasonable determination of value, may be utilized and PROVIDED, FURTHER that for purposes of determining the Cashless Exercise Ratio or the cash value of fractional shares, the Current Market Value may be determined in good faith by Board of Directors) or (ii) (a) if the security is listed and traded on any national securities exchange or NASDAQ national market system, the average of the daily closing sales prices of the securities for the 20 consecutive trading days immediately preceding such date,, a copy of which board resolutions shall be certified to the Warrant Agent by the president, any vice president or the chief financial officer of the Company, or (b) if the security has so traded for less than 20 consecutive trading days before such date, then the average of the closing sales prices for all of the trading days before such date for which closing sales prices are available, in the case of each of (ii)(a) and (ii)(b), as certified to the Warrant Agent by the president, any vice president or the chief financial officer of the Company. The closing sales price for each such trading day shall in the case of a security listed or admitted to trading on any United States national securities exchange or quotation system, the closing sales price, regular way, on such day, or if no sale takes place on such day, the average of the closing bid and asked prices on such day. "INDEPENDENT FINANCIAL EXPERT" means a United States investment banking or valuation firm of national or regional standing, (i) which does not, and whose directors, officers and employees or Affiliates do not have a direct or indirect material financial interest for its proprietary account in the Company or any of its Affiliates and (ii) which, in the judgment of the Board of Directors of the Company, 45 A-5 is otherwise independent with respect to the Company and its Affiliates and qualified to perform the task for which it is to be engaged. The Company has initially designated the principal corporate trust office of the Warrant Agent in the City of Boston, Commonwealth of Massachusetts, as the initial Warrant Agent Office. The number of Shares issuable upon exercise of the Warrants ("Exercise Rate") is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement. Any Warrants not exercised on or prior to 5:00 p.m., Boston time, on August 31, 2010 shall thereafter be void. If the Company merges, amalgamates or consolidates with or into, or sells all or substantially all of its property and assets to, another Person solely for cash, the holders of Warrants shall be entitled to receive distributions on the date of such event on an equal basis with holders of Shares (or other securities issuable upon exercise of the Warrants) as if the Warrants had been exercised immediately prior to such event (less the Exercise Price). Reference is hereby made to the further provisions on the reverse hereof which provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless authenticated by the Warrant Agent, as such term is used in the Warrant Agreement. THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. WITNESS the seal of the Company and signatures of its duly authorized officers. Dated: TRANSTECHNOLOGY CORPORATION By:________________________ Name: Title: Attest: By:__________________________ Name: Title: 46 A-6 Certificate of Authentication: This is one of the Warrants referred to in the within mentioned Warrant Agreement: STATE STREET BANK AND TRUST COMPANY, as Warrant Agent By:________________________________ Authorized Signatory 47 A-7 [FORM OF WARRANT CERTIFICATE] [REVERSE] TRANSTECHNOLOGY CORPORATION The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants expiring at 5:00 p.m., Boston time, on August 31, 2010 (the "Expiration Date"), each of which represents the right to purchase at any time on or after the date of issuance and on or prior to the Expiration Date [ ] shares of Common Stock, subject to adjustment as set forth in the Warrant Agreement. The Warrants are issued pursuant to a Warrant Agreement dated as of August 31, 1999 (the "Warrant Agreement"), duly executed and delivered by the Company to State Street Bank and Trust Company, as Warrant Agent (the "Warrant Agent"), which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Warrant Agent, the Company and the holders (the words "holders" or "holder" meaning the registered holders or registered holder) of the Warrants. If all of the items referred to in the preceding paragraph are received by the Warrant Agent at or prior to 11:00 a.m., Boston time, on a Business Day, the exercise of the Warrant to which such items relate will be effective on such Business Day. If any items referred to in the preceding paragraph are received after 11:00 a.m., Boston time, on a Business Day, the exercise of the Warrants to which such item relates will be deemed to be effective on the next succeeding Business Day. Notwithstanding the foregoing, in the case of an exercise of Warrants on the Expiration Date, if all of the items referred to in the preceding paragraph are received by the Warrant Agent at or prior to 5:00 p.m., Boston time, on such Expiration Date, the exercise of the Warrants to which such items relate will be effective on the Expiration Date. As soon as practicable after the exercise of any Warrant or Warrants, the Company shall issue or cause to be issued to or upon the written order of the registered holder of this Warrant Certificate, a certificate or certificates evidencing the Share or Shares to which such holder is entitled (and, in the case of any Warrant exercised only in part, a new Warrant Certificate representing the unexercised portion thereof), in fully registered form, registered in such name or names as may be directed by such holder pursuant to the Election to Exercise, as attached to this Warrant Certificate. Such certificate or certificates evidencing the Share or Shares shall be deemed to have been issued and any persons who are designated to be named therein shall be deemed to have become the holder of record of such Share or Shares as of the close of business on the date upon which the exercise of this Warrant was deemed to be effective as provided in the preceding paragraph. The Company will not be required to issue fractional shares of Common Stock upon exercise of the Warrants or distribute Share certificates that evidence 48 A-8 fractional shares of Common Stock. In lieu of fractional shares of Common Stock, there shall be paid to the registered Holder of this Warrant Certificate at the time such Warrant Certificate is exercised an amount in cash equal to the same fraction of the Current Market Value per share of Common Stock on the Business Day preceding the date this Warrant Certificate is surrendered for exercise. Warrant Certificates, when surrendered at any office or agency maintained by the Company for that purpose by the registered holder thereof in person or by a legal representative or attorney duly authorized in writing, may be exchanged for a new Warrant Certificate or new Warrant Certificates evidencing in the aggregate a like number of Warrants, in the manner and subject to the limitations provided in the Warrant Agreement, without charge except for any tax or other governmental charge imposed in connection therewith. Upon due presentment for registration of transfer of this Warrant Certificate at any office or agency maintained by the Company for that purpose, a new Warrant Certificate evidencing in the aggregate a like number of Warrants shall be issued to the transferee in exchange for this Warrant Certificate, subject to the limitations provided in the Warrant Agreement (including other restrictions upon transfer, and applicable requirements to evidence compliance therewith, set forth therein), without charge except for any tax or other governmental charge imposed in connection therewith. The Company and the Warrant Agent may deem and treat the registered Holder hereof as the absolute owner of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone) for the purpose of any exercise hereof and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary. The term "Business Day" shall mean any day on which (i) banks in Boston, Massachusetts, (ii) the principal U.S. securities exchange or market, if any, on which the Common Stock is listed or admitted to trading and (iii) the principal U.S. securities exchange or market, if any, on which the Warrants are listed or admitted to trading are open for business. The Warrants and the Shares are entitled to the benefits of a Warrant Holders' Agreement relating to the Warrants and the shares of Common Stock issuable upon exercise thereof (the "Warrant Holders' Agreement"), pursuant to which the holders representing not less than one-quarter of the Registrable Securities (as defined in the Warrant Holders' Agreement) have the right under certain circumstances to require the Company to effect one demand registration of the Registrable Securities. The Warrant Holders' Agreement also provides the holders of Registrable Securities with the right, subject to the conditions and limitations contained therein, to include the Registrable Securities in certain registration statements filed by the Company for its account or for the account of any of its securityholders. 49 A-9 The Warrant Holders' Agreement also contains provisions providing that under certain circumstances, the holders of Warrants or of the shares of Common Stock issuable upon exercise thereof shall have the right to require the purchase of such Warrants and/or shares of Common Stock from such holders by the Company. Copies of the Warrant Holders' Agreement are available from the Company upon request. 50 A-10 (FORM OF ELECTION TO EXERCISE) (To be executed upon exercise of Warrants on the Exercise Date) The undersigned hereby irrevocably elects to exercise [ ] of the Warrants represented by this Warrant Certificate and purchase the whole number of Shares issuable upon the exercise of such Warrants and herewith tenders payment for such Shares as follows: $[ ] in cash or by certified or official bank check; or by surrender of Warrants pursuant to a Cashless Exercise (as defined in the Warrant Agreement) for shares of Common Stock at the current Cashless Exercise Ratio. The undersigned requests that a certificate representing such Shares be registered in the name of _______________________________________ whose address is _______________________________________ and that such shares be delivered to ___________________________________________ whose address is ______________________________________. If only a part of a Warrant is being exercised, the undersigned re-quests that a new Warrant Certificate representing the unexercised portion thereof be registered in the name of _________________ whose address is ______________________________________. and that such Warrant Certificate be delivered to _______________________________ whose address is _____________________________________. Any cash payments to be paid in lieu of a fractional Share should be made to __________________________ whose address is _____________________________________ and the check representing payment thereof should be delivered to _______________________ whose address is _______________________. Dated _______________, ____ Name of holder of Warrant Certificate: ___________________________ (Please Print) 51 A-11 Tax Identification or Social Security Number: __________________________ Address:__________________________________________ __________________________________________ Signature:_____________________________________________________________ Note: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever and if the certificate representing the Shares or any Warrant Certificate representing Warrants not exercised is to be registered in a name other than that in which this Warrant Certificate is registered, or if any cash payment to be paid in lieu of a fractional share is to be made to a person other than the registered holder of this Warrant Certificate, the signature of the holder hereof must be guaranteed as provided in the Warrant Agreement. Dated _______________, ____ Signature: ____________________________________________________________ Note: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. 52 A-12 [FORM OF ASSIGNMENT] For value received _________________ hereby sells, assigns and transfers unto ____________ the within Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint _______________ attorney, to transfer said Warrant Certificate on the books of the within-named Company, with full power of substitution in the premises. Dated _______________, ____ Signature: ____________________________________________________________ Note: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. Signature Guaranteed: _________________________________________________ 53
A-13 SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS1/ The following exchanges of a part of this Global Warrant for Definitive Warrants have been made: - ---------------- ----------------- ----------------- ------------------ ---------------- Number of Amount of Amount of Warrants of decrease in increase in this Global Number of Number of Warrant Signature of Warrants of Warrants of following such authorized Date of This Global this Global decrease (or officer of Exchange Warrant Warrant increase) Warrant Agent - ---------------- ----------------- ----------------- ------------------- ---------------- - ---------------- ----------------- ----------------- ------------------- ----------------
_____________________________ 1/This is to be included only if the Warrant is in global form 54 B-1 EXHIBIT B FORM OF LEGEND FOR GLOBAL WARRANT Any Global Warrant authenticated and delivered hereunder shall bear a legend in substantially the following form: THIS SECURITY IS A GLOBAL WARRANT WITHIN THE MEANING OF THE WARRANT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF [THE DEPOSITORY TRUST COMPANY ("DTC")], TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF [INSERT NOMINEE NAME] OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, (AND ANY PAYMENT IS MADE TO [INSERT NOMINEE NAME] OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, [INSERT NOMINEE NAME], HAS AN INTEREST HEREIN. 55 C-1 EXHIBIT C CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF WARRANTS Re: Warrants to Purchase Common Stock (the "Warrants") of TRANSTECHNOLOGY CORPORATION This Certificate relates to _______ Warrants held in* ______ book-entry or* _______________ certificated form by ______________ (the "Transferor").2/ has requested the Warrant Agent by written order to deliver in exchange for its beneficial interest in the Global Warrant held by the Depository a Warrant or Warrants in definitive, registered form of authorized denominations and an aggregate number equal to its beneficial interest in such Global Warrant (or the portion thereof indicated above); or has requested the Warrant Agent by written order to exchange or register the transfer of a Warrant or Warrants. In connection with such request and in respect of each such Warrant, the Transferor does hereby certify that Transferor is familiar with the Warrant Agreement relating to the above captioned Warrants and the restrictions on transfers thereof as provided in Section 1.07 of such Warrant Agreement, and that the transfer of this Warrant does not require registration under the Securities Act of 1933, as amended (the "Act") because*: Such Warrant is being acquired for the Transferor's own account, without transfer (in satisfaction of Section 1.07(a)(y)(A) or Section 1.07(d)(i)(A) of the Warrant Agreement). [ ] Such Warrant is being transferred to a qualified institutional buyer (as defined in Rule 144A under the Act), in reliance on and accordance with Rule 144A. Such Warrant is being transferred to an institutional "accredited investor" (within the meaning of subparagraphs (a)(1), (2), (3) or (7) of Rule 501 under the Act) in reliance on and in accordance with Regulation D under the Act or a statutory private placement exemption. [ ] Such Warrant is being transferred in reliance on and accordance with Regulation S under the Act. _______________________ 2/Check Applicable Box. 56 C-2 Such Warrant is being transferred in reliance on and accordance with Rule 144 under the Act (and this certificate is accompanied by an opinion of counsel as required under the Warrant Agreement). Such Warrant is being transferred in reliance on and in compliance with the following exemption from the registration requirements of the Act. Exemption: _______________ In connection with any proposed transfer pursuant to Regulation S, or any other transfer where the proposed transferee is not a QIB, Non-U.S. Person or Institutional Accredited Investor, the undersigned understands that the Company may, based on the views of its counsel, instruct the Warrant Agent not to register such transfer. ___________________________ [INSERT NAME OF TRANSFEROR] By: _______________________ Date: ___________________________ 57 D-1 EXHIBIT D Form of Certificate to Be Delivered in Connection with Transfers to Institutional Accredited Investors ----------------------------------------------- In connection with our proposed purchase of Warrants (the "Warrants") to purchase Common Stock of TransTechnology Corporation (the "Company"), we confirm that: 1. We have received such information as we deem necessary in order to make our investment decision. 2. We understand that any subsequent transfer of the Warrants is subject to certain restrictions and conditions set forth in the Warrant Agreement dated as of August 31, 1999, by and between the Company and the Warrant Agent referred to therein (the "Warrant Agreement") and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Warrants except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 3. We understand that the offer and sale of the Warrants have not been registered under the Securities Act, and that the Warrants may not be o States or to, or for the account or benefit of, U.S. persons except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell any Warrants prior to (x) the date which is two years after the later of the date of original issuance of the Warrants (or such shorter period as may be prescribed by Rule 144(k) under the Securities Act or any successor provision thereto) or the last day on which the Company or any affiliate of the Company was owner of such Warrants, or any predecessor thereto, and (y) such later date, or any, as may be required by applicable laws, we will do so only (A) to the Company, (B) inside the United States in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined therein), (C) inside the United States to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the Warrant Agent a signed letter substantially in the form hereof, (D) outside the United States in accordance with Regulation S under the Securities Act, (E) pursuant to the exemption from registration provided by Rule 144 under the Securities Act, (E) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available) or (F) pursuant to an effective registration statement under the Securities Act and (G) pursuant to an other available exemption under the Securities Act, and we further agree to provide to any person purchasing Warrants form us a notice advising such purchaser that resales of the Warrants are restricted as stated herein. 4. We understand that, on any proposed resale of Warrants, we will be required to furnish to the Warrant Agent and the Company, such certification, legal opinions and other information as the Warrant Agent and the 58 D-2 Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Warrants purchased by us will bear a legend to the foregoing effect. 5. We are an institutional "accredited investor" (as defined in Rule 50 1 (a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Warrants, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be. 6. We are acquiring the Warrants purchased by us for our account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. The undersigned understands that in connection with any proposed transfer of Warrants pursuant to Regulation S, or pursuant to another exemption from registration under the Securities Act where the proposed transferee is not a QIB, Non-U.S. Person or Institutional Accredited Investor, the undersigned understands that the Company may, based upon the views of its counsel, instruct the Warrant Agent not to register such transfer. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, [Name of Transferee] By: ____________________________________ [Authorized Signatory] 59 D-3 Upon transfer the Warrants would be registered in the name of the new beneficial owner as follows: Name: _______________________________________________ Address: ____________________________________________ Taxpayer ID Number: _________________________________ 60 E-1 EXHIBIT E Form of Certificate to Be Delivered in Connection with Regulation S Transfers --------------------------- ___________________, ____ Attention: Corporate Trust Department In connection with our proposed sale of Warrants of TransTechnology Corporation (the "Company"), we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Warrants was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, as applicable; (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; (5) we have advised the transferee of the transfer restrictions applicable to the Warrants; and (6) if the circumstances set forth in Rule 904(c) under the Securities Act are applicable, we have complied with the additional conditions therein, including (if applicable) sending a confirmation or other notice stating that the Warrants may be offered and sold during the restricted period specified in Rule 903(c)(2) or (3), as applicable, in accordance with the provisions of Regulation S; pursuant to registration of the Warrants under the Securities Act; or pursuant to an available exemption from the registration requirements under the Act. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters 61 E-2 covered hereby. Defined terms used herein without definition have the respective meanings provided in Regulation S under the Securities Act. Very truly yours, [Name of Transferee] By: ____________________________ [Authorized Signatory] Upon transfer the Warrants would be registered in the name of the new beneficial owner as follows: Name: _______________________________________________ Address: ____________________________________________ Taxpayer ID Number:__________________________________ EX-10.30 6 EXHIBIT 10.30 1 - -------------------------------------------------------------------------------- WARRANT HOLDERS' AGREEMENT By and Among TRANSTECHNOLOGY CORPORATION THE PURCHASERS NAMED HEREIN and BANKBOSTON, N.A. as Administrative Agent Dated as of August 31, 1999 - -------------------------------------------------------------------------------- 2 WARRANT HOLDERS' AGREEMENT This WARRANT HOLDERS' AGREEMENT (the "AGREEMENT") is made and entered into as of August 31, 1999, by and among TRANSTECHNOLOGY CORPORATION, a Delaware corporation (hereinafter, together with its successors in title and assigns, the "COMPANY"), each of the Purchasers named on SCHEDULE 1 hereto (the "PURCHASERS") and each other person who becomes a party to this Agreement by executing an Instrument of Accession (an "INSTRUMENT OF ACCESSION") in the form of EXHIBIT A hereto, and BANKBOSTON, N.A., as Administrative Agent under the Subordinated Loan Agreement (as defined below) and as Agent for the Purchasers hereunder (the "ADMINISTRATIVE AGENT"). WHEREAS, the Company has issued Warrants (as defined below) for the purchase of 731,197 shares of its Common Stock (as defined below), pursuant to the Subordinated Loan Agreement, and subject to each of (a) a Warrant Agreement, dated as of the date hereof (the "WARRANT AGREEMENT"), by and among the Company and each of the Purchasers and (b) a Warrant Escrow Agreement, dated as of the date hereof (the "WARRANT ESCROW AGREEMENT"), by and among the Company, each of the Purchasers and State Street Bank and Trust Company as the Escrow Agent; WHEREAS, this Agreement sets forth certain rights of the holders of such Warrants; NOW THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: ARTICLE I --------- CERTAIN DEFINED TERMS --------------------- As used herein, the following terms shall have the respective meanings assigned to them in this Article I: "ADJUSTED NET WORTH" shall mean, in connection with any liquidation or sale of assets by the Company, the consolidated net worth of the Company, determined in accordance with generally accepted accounting principles (as defined below), taking into account (i) the total consideration received by the Company for such transactions, (ii) the transaction costs and (iii) any liabilities of the Company to be discharged in connection with such transaction. "AFFILIATE" shall mean, with respect to any Stockholder, any Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Stockholder and shall include (a) any Person who is a director or beneficial holder of at least 10% of the then outstanding capital stock (or partnership interests or other shares of beneficial interest) of such Stockholder and Family Members of any such Person, (b) any Person of which such Stockholder or an Affiliate (as defined 3 in clause (a) above) of such Stockholder directly or indirectly, either beneficially owns at least 10% of the then outstanding capital stock (or partnership interests or other shares of beneficial interest) or constitutes at least a 10% equity participant, (c) any Person of which an Affiliate (as defined in clause (a) above) of such Stockholder is a partner, director, officer or executive employee, and (d) in the case of a specified Person who is an individual, Family Members of such Person. "BUSINESS DAY" means any day (other than a Saturday or Sunday) on which banking institutions in Boston, Massachusetts are open for the transaction of banking business. "CAPITAL TRANSACTION" means the occurrence of any of the following: any merger, consolidation, liquidation, sale or other transfer of more than fifty percent (50%) of the assets of the Company or other similar corporate actions pursuant to which the Company or the holders of common stock or preferred stock of the Company receive cash, securities, or other property. "CERTIFICATE OF INCORPORATION" shall mean the Company's Certificate of Incorporation, as amended and in effect on the date of this Agreement. "CHANGE IN CONTROL" shall have the meaning ascribed to that term in the Subordinated Loan Agreement. "CLOSING DATE" shall have the meaning ascribed to that term in the Subordinated Loan Agreement. "CLOSING PRICE" with respect to any security on any day means (a) if such security is listed or admitted for trading on a national securities exchange, the reported last sales price regular way or, if no such reported sale occurs on such day, the average of the closing bid and asked prices regular way on such day, in each case as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such class of security is listed or admitted to trading, or (b) if such security is not listed or admitted to trading on any national securities exchange, the last quoted sales price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market on such day as reported by NASDAQ or any comparable system then in use or, if not so reported, as reported by any New York Stock Exchange member firm reasonably selected by the Company for such purpose. "COMMISSION" means the Securities and Exchange Commission. "COMMON STOCK" shall mean the Company's Common Stock, $0.01 par value per share. "COMPANY" shall have the meaning ascribed to that term in the preamble hereto. 4 "COMPANY APPRAISAL" shall have the meaning ascribed to that term in Section 7.4(b) hereof. "COMPANY APPRAISER" shall have the meaning ascribed to that term in Section 7.4(b) hereof. "CONSENSUS APPRAISER" shall have the meaning ascribed to that term in Section 7.4(b) hereof. "CONSOLIDATED EBITDA" shall have the meaning ascribed to that term in the Subordinated Loan Agreement as in effect on the date hereof. "CREDIT AGREEMENT" shall mean the Second Amended and Restated Credit Agreement, dated as of August 31, 1999, by and among the Company, BankBoston, N.A., as Administrative Agent, and the other parties referred to therein. "DEMAND REGISTRATION" has the meaning ascribed to such term in Section 6.1(a) hereof. "EVENT OF DEFAULT" shall have the meaning specified in the Subordinated Loan Agreement. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any federal statute or code which is a successor thereto. "FAIR MARKET VALUE" shall have the meaning ascribed to that term in Section 7.4(b) hereof. "FAMILY MEMBERS" shall mean, with respect to any individual, any Related Person or Family Trust of such individual. "FAMILY TRUST" shall mean, with respect to any individual, any trust created for the benefit of one or more of such individual's Related Persons and controlled by such individual. "FORM S-1", "FORM S-3" and "FORM S-8" means the forms so designated, promulgated by the Commission for registration of securities under the Securities Act, and any forms succeeding to the functions of such forms, whether or not bearing the same designation. "FORMULA VALUE" shall have the meaning ascribed to that term in Section 10.4(c) hereof. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall mean principles that are (A) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (B) consistently applied with past financial statements of the Company adopting the same principles, provided that in each case referred to in this definition of "generally 5 accepted accounting principles" a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in generally accepted accounting principles) as to financial statements in which such principles have been properly applied. "HOLDER APPRAISER" shall have the meaning ascribed to that term in Section 7.4(b) hereof. "HOLDER CONSENT" means, at any particular date, the consent, approval or vote of the Majority Holders. "HOLDER SHARES" means, in relation to any Holder at any particular date, (i) all shares of Common Stock held of record by such Holder on such date, and (ii) all shares of Common Stock issuable by the Company to such Holder upon conversion of or in exchange for or upon exercise of rights under all other capital stock or other securities (including the Warrants and any other warrants and options) of the Company held of record by such Holder on such date. In this Agreement, in any calculation of the number of Holder Shares held by any Holder, in addition to any shares of Common Stock held of record by such Holder, such Holder shall be deemed to hold of record on any particular date the total number of shares of Common Stock issuable by the Company upon conversion of or in exchange for or upon exercise of rights under all capital stock or other securities (including the Warrants and any other warrants or options) of the Company then held of record by such Holder. "HOLDERS" means, collectively, (i) the Purchasers so long as any of the Purchasers shall continue to own and hold of record any of the Securities and (ii) each Permitted Transferee of a Purchaser so long as such Permitted Transferee shall continue to own and hold of record any of the Securities, and provided such Permitted Transferee has executed an Instrument of Accession. "INDEMNIFIED PARTY" shall have the meaning ascribed to that term in Section 6.7(c) hereof. "INDEMNIFYING PARTY" shall have the meaning ascribed to that term in Section 6.7(c) hereof. "INSTRUMENT OF ACCESSION" shall have the meaning ascribed thereto in the preamble hereto. "MAJORITY HOLDERS" means, in relation to the Holders at any particular date, Holders holding of record or deemed to be holding of record, at such date, at least fifty-one percent (51%) of the total number of all Holder Shares then held or deemed held of record by all Holders on such date. "MARKET PRICE" with respect to any security on any day means the average of the daily Closing Prices of a share or unit of such security for the 20 consecutive Business Days ending on the most recent Business Day for which a Closing Price is 6 available; provided, however, that in the event that, in the case of Common Stock, the Market Price is determined during a period following the announcement by the Company of (A) a dividend or distribution of Common Stock, or (B) any subdivision, combination or reclassification of Common Stock and prior to the expiration of 20 Business Days after the ex-dividend date for such dividend or distribution, or the record date for such subdivision, combination or reclassification, then, and in each such case, the Market Price shall be appropriately adjusted to reflect the current Market Price per share equivalent of Common Stock. "NASDAQ" means the National Association of Securities Dealers automated quotation system. "NEGOTIATION PERIOD" shall have the meaning ascribed to that term in Section 10.4(b) hereof. "PERMITTED TRANSFEREE" means, in relation to any particular Holder, a transferee of such Holder's interest in any Warrants pursuant to the Warrant Agreement, and any Person who shall acquire any other Securities from such Holder or from any Permitted Transferee thereof in a transaction not in violation or in contravention of any applicable law or regulation. "PERSON" means an individual, corporation, partnership, joint venture, trust, or unincorporated organization, or a government or any agency or political subdivision thereof. "PERSONAL REPRESENTATIVE" shall mean the successor or legal representative (including, without limitation, a guardian, executor, administrator or conservator) of a dead or incompetent Stockholder. "PIGGYBACK REGISTRATION" shall have the meaning ascribed to that term in Section 6.2(a) hereof. "PROSPECTUS" means the prospectus included in any Registration Statement, as amended or supplemented by any Prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and all other amendments and supplements to the prospectus, including post-effective amendments, and all material incorporated by reference in such prospectus. "PUBLIC SALE" shall mean any sale of Common Stock to the public pursuant to a public offering registered under the Securities Act of 1933, as amended, or to the public through a broker or market-maker pursuant to the provisions of Rule 144 (or any successor rule) adopted under the Securities Act of 1933, as amended. "PURCHASERS" shall have the meaning ascribed to that term in the preamble hereto. 7 "PUT CLOSING DATE" shall have the meaning ascribed to that term in Section 7.2 hereof. "PUT NOTICE" shall have the meaning ascribed to that term in Section 7.1 hereof. "REGISTER", "REGISTERED" and "REGISTRATION" refers to a registration effected by preparing and filing a Registration Statement in compliance with the Securities Act and the declaration or ordering by the Commission of effectiveness of such Registration Statement. "REGISTRABLE SECURITIES" shall mean (a) the Warrants and the shares of Common Stock issued or issuable upon exercise of the Warrants in accordance with their terms, (b) all shares of Common Stock issued or issuable upon conversion of such shares of Common Stock, and (c) all shares of the Company's capital stock issued with respect to such shares by way of stock dividend or stock split or in connection with any merger, consolidation, recapitalization or other reorganization affecting the Company's capital stock. Registrable Securities will continue to be Registrable Securities in the hands of any holder and each transferee thereof will succeed to the rights and obligations of a holder of Registrable Securities hereunder, provided that shares of Purchaser Securities will cease to be Registrable Securities when transferred (i) to the Company or (ii) pursuant to a Public Sale. "REGISTRATION EXPENSES" shall have the meaning ascribed to that term in Section 6.6(a) hereof. "REGISTRATION STATEMENT" means any Registration Statement of the Company which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such Registration Statement. "RELATED PERSONS" shall mean, with respect to any individual, such individual's parents, spouse, children and grandchildren. "REPURCHASE PRICE" shall have the meaning ascribed to that term in Section 7.4(a) hereof. "RULE 144" means Rule 144 issued by the Commission under the Securities Act, or any subsequent rule pertaining to the disposition of securities without registration. "SECURITIES" means, collectively, the Warrants and the Warrant Shares. "SECURITIES ACT" means the Securities Act of 1933, as amended, or any federal statute or code which is a successor thereto. "STOCK OPTION PLAN" means, collectively, the Company's Amended and Restated 1992 Long Term Incentive Plan and 1998 Non-Employee Directors' Stock 8 Option Plan or plans created after the date hereof pursuant to which capital stock, options and warrants may be issued to employees and directors of the Company. "SUBORDINATED LOAN AGREEMENT" shall have the meaning ascribed to that term in Section 2.4 hereof. "SUBSIDIARY" shall mean any corporation, association, trust, or other business entity, of which the designated parent shall at any time own or control directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding shares of capital stock (or other shares of beneficial interest) entitled ordinarily to vote for the election of such business entity's directors (or in the case of a business entity that is not a corporation, for those Persons exercising functions similar to directors of a corporation). "TENDERING HOLDER" shall have the meaning ascribed to that term in Section 7.1 hereof. "THIRD APPRAISER" shall have the meaning ascribed to that term in Section 7.4(b) hereof. "UNDERWRITERS' MAXIMUM NUMBER" shall have the meaning ascribed to that term in Section 6.1(e) hereof. "UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" refers to any registration in which securities of the Company are sold or to be sold pursuant to a firm commitment underwriting. "UNREPURCHASED SECURITIES" shall have the meaning ascribed to that term in Section 10.3 hereof. "VOTING SECURITIES" shall mean the Common Stock. "WARRANT AGREEMENT" shall have the meaning ascribed to that term in the preamble hereof. "WARRANT ESCROW AGREEMENT" shall have the meaning ascribed to that term in the preamble hereof. "WARRANT SHARES" means the shares of Common Stock issued pursuant to or issuable upon exercise of the Warrants. "WARRANTS" shall have the meaning ascribed to that term in the Warrant Agreement. 9 ARTICLE II ---------- REPRESENTATIONS --------------- The Company represents and warrants to the Holders as follows: Section 2.1. CAPITALIZATION OF COMPANY. (a) SCHEDULE 2 lists and describes the authorized capital stock of the Company on and as of the Closing Date, the issued and outstanding capital stock of the Company on and as of the Closing Date, and all issued and outstanding options, warrants, convertible securities or other rights to acquire any capital stock of the Company on and as of the Closing Date. (b) As of the Closing Date, the Company has not granted or issued any options, warrants, convertible securities or other rights to acquire any shares of capital stock of the Company, except as described on SCHEDULE 2. (c) If the Warrants were exercisable as of the Closing Date, the Warrants would be exercisable in full for 10.0% of the issued and outstanding Common Stock of the Company on a fully-diluted basis, after giving effect to the issuance of such Warrants and all other warrants, options, or other convertible securities exercisable for or convertible into shares of Common Stock of the Company outstanding as of the Closing Date. Section 2.2. AUTHORIZATION OF WARRANTS. (a) The Company has duly and properly authorized (i) the issuance to the Purchasers of the Warrants and (ii) the issuance by the Company of shares of Common Stock upon exercise of the Warrants in accordance with the terms thereof. (b) The Warrants shall become exercisable as provided in the Warrants and the Warrant Escrow Agreement. Section 2.3. BINDING EFFECT OF DOCUMENTS, ETC. Each of this Agreement, the Warrants, the Warrant Escrow Agreement and the Warrant Agreement (collectively, the "WARRANT DOCUMENTS"), upon the execution and delivery thereof by the Company, has been duly and validly executed and delivered by the Company. The execution, delivery and performance by the Company of each Warrant Document on the Closing Date has been duly authorized by proper corporate proceedings by the Company, and each Warrant Document constitutes, on and as of the Closing Date, the legal valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and (ii) general principles of equity including without limitation concepts of materiality, reasonableness, good faith and fair dealing, and the possible unavailability of specific performance or injunctive relief (regardless of whether considered in a proceeding in equity or at law); and the execution, delivery 10 and performance of this Agreement by the Company does not and will not violate any applicable law or regulation. Section 2.4. SENIOR SUBORDINATED LOAN AGREEMENT. The Company hereby further represents and warrants to the Purchasers that all of the representations and warranties set forth in the Senior Subordinated Loan Agreement, dated as of August 31, 1999, by and among the Company, the Purchasers and the other parties thereto (as modified, amended or amended and restated from time to time, the "SUBORDINATED LOAN AGREEMENT"), are true and correct on and as of the Closing Date. ARTICLE III ----------- WARRANT DOCUMENTS ----------------- By its acceptance of a Warrant, the Holder of such Warrant acknowledges and agrees that (a) each of the Warrants is subject to the terms and provisions of each of the Warrant Agreement and the Warrant Escrow Agreement, and (b) each of the Warrants is entitled to all of the benefits set forth in this Agreement on the terms and subject to the conditions hereof, of the Warrant Agreement, and of the Warrant Escrow Agreement. ARTICLE IV ---------- REPRESENTATIONS OF THE HOLDERS ------------------------------ Each of the Holders represents and warrants to the Company that: (a) Such Holder is purchasing or acquiring its interest in the Securities from the Company or another Holder, as the case may be, in accordance with the terms hereof for such Holder's own account without a view to any distribution thereof in violation of the Securities Act, but, SUBJECT, NEVERTHELESS, to any requirement of law that the disposition of such Holder's property shall at all times be within such Holder's control. Such Holder has been informed and understands that the Securities have not been registered pursuant to the provisions of Section 5 of the Securities Act and must be held indefinitely unless such Securities are subsequently registered under the provisions of the Securities Act or an exemption from such registration is available. (b) Such Holder represents that it is an "accredited investor" within the meaning of Rule 501(a) promulgated under the Securities Act. 11 ARTICLE V --------- COVENANTS OF COMPANY -------------------- The Company hereby covenants with each of the Holders that, except as otherwise expressly permitted or provided, in any particular instance, by a written Holder Consent: Section 5.1. RECORDS AND ACCOUNTS. The Company will (i) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries will be made in accordance with generally accepted accounting principles and (ii) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, contingencies, and other reserves. Section 5.2. FINANCIAL INFORMATION. The Company will deliver to each of the Holders contemporaneously with the filing or mailing thereof, copies of all periodic or special reports filed with the Securities and Exchange Commission, and copies of all materials sent to the stockholders of the Company. So long as the Subordinated Loan Agreement remain in effect, the Company may satisfy its obligations under this Section 5.2 by delivering to each Holder the information which it is required to deliver to the Holders under the corresponding covenants contained in the Subordinated Loan Agreement at the times required by the Subordinated Loan Agreement. ARTICLE VI ---------- REGISTRATION RIGHTS ------------------- The Company hereby grants to the Holders certain rights to require the Company to register Common Stock of the Company in compliance with the Securities Act and certain rights to participate with the Company in any registration by the Company of Common Stock under the Securities Act. The provisions governing such registration rights are set out in this Article VI. The Company and the Holders hereby absolutely and unconditionally agree to be bound and governed by, and specifically make and adopt, all of the terms and provisions contained in this Article VI. A Holder shall, for all purposes of this Article VI, unless the context shall otherwise require, be deemed to hold, at any particular time, all shares of Common Stock issuable upon conversion of or in exchange for or upon exercise of rights under all capital stock or other securities (including, without limitation, options and warrants) of the Company held of record by such Holder at such time. Section 6.1. DEMAND REGISTRATIONS. (a) REQUESTS FOR DEMAND REGISTRATION. 12 (i) Subject to the limitations contained in the following paragraphs of this Section 6.1, the Holders of not less than twenty-five percent (25%) of the Registrable Securities may at any time and from time to time after the first anniversary of the Closing Date give to the Company, pursuant to this clause (i), a written request for the registration by the Company under the Securities Act of all or any part of the Registrable Securities of such Holders having an aggregate offering price of at least $250,000 (such registration being herein called a "DEMAND REGISTRATION") on Form S-3 or any successor form adopted by the Commission, PROVIDED, HOWEVER, that if in accordance with applicable law, including applicable rules and regulations promulgated by the Commission, the Company is not eligible to register securities on Form S-3 (or any comparable short-form registration adopted by the Commission), then the Holders shall have the right to require completion of one Demand Registration pursuant to this subparagraph (i) on Form S-1 or any successor form adopted by the Commission. Within ten (10) days after the receipt by the Company of any such written request, the Company will give written notice of such registration request to all Holders of Registrable Securities. (ii) Subject to the limitations contained in the following paragraphs of this Section 6.1, after the receipt of each such written request for a Demand Registration, (A) the Company will be obligated and required to include in such Demand Registration all Registrable Securities with respect to which the Company shall receive from Holders of Registrable Securities, within thirty (30) days after the date on which the Company shall have given to all Holders a written notice of registration request pursuant to Section 6.1(a)(i) hereof, the written requests of such Holders for inclusion in such Demand Registration, and (B) the Company will use its best efforts in good faith to effect promptly the registration of all such Registrable Securities. The Holders of Registrable Securities shall be permitted to withdraw all or any part of the Registrable Securities of such Holders from any Demand Registration at any time prior to the effective date of such Demand Registration PROVIDED, that if such Demand Registration is on Form S-1 or any successor form adopted by the Commission and such withdrawal would reduce the amount of Registrable Securities to be registered in such Demand Registration to less than the amount required to initiate a Demand Registration pursuant to clause (i) above, then the Company may elect not to proceed with such Demand Registration. All written requests made by Holders of Registrable Securities pursuant to this clause (ii) will specify the number of shares of Registrable Securities to be registered and will also specify the intended method of disposition thereof. Such method of disposition shall, in any case, be an underwritten offering if an underwritten offering is requested by Holders of a majority of Registrable Securities to be included in such Demand Registration. 13 (b) LIMITATIONS ON DEMAND REGISTRATION. (i) Except in the circumstances contemplated in paragraph (a)(i) above, the Holders of Registrable Securities will not be entitled to require the Company to effect any registrations on Form S-1 (or other comparable form adopted by the Commission). At such time as all of any Holder's Registrable Securities shall be freely tradable under paragraph (k) of Rule 144, such Holder shall not be entitled to require the Company to effect, and shall not be entitled to participate pursuant to this Section 6.1 in, any further Demand Registrations. (ii) The Company shall not be obligated or required to effect any Demand Registration of any Registrable Securities pursuant to Section 6.1(a) hereof during the period commencing on the date falling sixty (60) days prior to the Company's estimated date of filing of, and ending on the date ninety (90) days following the effective date of, any Registration Statement pertaining to any underwritten registration initiated by the Company, for the account of the Company. The foregoing limitation on the Company's obligation to effect a Demand Registration shall only be applicable if the written request of Holders for such Demand Registration shall have been received by the Company both (A) after the first anniversary of the Closing Date and (B) after the Company shall have given to all Holders of Registrable Securities a written notice stating that the Company is commencing an underwritten registration initiated by the Company. Notwithstanding any limitation on the Company's obligations described in this paragraph (b)(ii), the Company will use its best efforts in good faith to cause any such Registration Statement for a Demand Registration requested by the Holders to be filed and to become effective as expeditiously as shall be reasonably possible. (c) EFFECTIVE REGISTRATION - EXPENSES. In any registration initiated by the Holders as a Demand Registration pursuant to Section 6.1(a) hereof, the Company will pay all Registration Expenses of each such registration regardless of whether such registration constitutes a Demand Registration for purposes of this Section 6.1. (d) LIMITATION ON RIGHTS TO PIGGYBACK ON DEMAND REGISTRATIONS. (i) Neither the Company nor any of its securityholders (other than Holders of Registrable Securities in their capacity as Holders) shall have the right or otherwise be entitled to include any of the Company's securities in any registration initiated by Holders of Registrable Securities as a Demand Registration pursuant to Section 6.1(a) hereof, unless (A) such securities are of the same class as the Registrable Securities to be included in such Demand Registration, and (B) if such Demand Registration is an underwritten offering, the Company or (as the case may be) such securityholders shall have duly and properly agreed in writing to sell their securities on the same terms and conditions as shall apply to the Registrable Securities to be included in such Demand Registration. 14 (ii) The Company will not grant or agree to grant to any Persons any registration rights which will conflict or be inconsistent in any respect with any of the provisions of clause (i) of this Section 6.1(d). In the event of any such conflict or inconsistency, the provisions of such clause (i) shall in any case prevail and be controlling. (e) PRIORITY ON DEMAND REGISTRATIONS. If any Demand Registration is an underwritten offering, and the managing underwriters shall give written advice to the Company and the Holders of Registrable Securities to be included in such registration that, in the reasonable opinion of such managing underwriters, marketing factors require a limitation on the total number of securities to be underwritten (the "UNDERWRITERS' MAXIMUM NUMBER"), then: (i) the Company will be obligated and required to include in such registration that number of Registrable Securities requested by the Holders thereof to be included in such registration which does not exceed the Underwriters' Maximum Number, and such number of Registrable Securities shall be allocated PRO RATA among the Holders of such Registrable Securities on the basis of the number of Registrable Securities requested to be included therein by each such Holder; (ii) if the Underwriters' Maximum Number exceeds the number of Registrable Securities requested by the Holders thereof to be included in such registration, then the Company will be entitled to include in such registration that number of securities which shall have been requested by the Company to be included in such registration for the account of the Company and which shall not be greater than such excess; and (iii) if the Underwriters' Maximum Number exceeds the sum of the number of Registrable Securities which the Company shall be required to include in such Demand Registration and the number of securities which the Company proposes to offer and sell for its own account in such registration, then the Company may include in such registration that number of other securities which Persons (other than the Holders as such) shall have requested be included in such registration and which shall not be greater than such excess. (f) SELECTION OF UNDERWRITERS. If any Demand Registration is an underwritten offering, or a best efforts underwritten offering, the investment bankers and managing underwriters in such registration will be selected by the Company subject to the approval of the Holders of a majority of Registrable Securities to be included in such registration. Section 6.2. PIGGYBACK REGISTRATIONS. (a) RIGHTS TO PIGGYBACK. (i) If (and on each occasion that) the Company proposes to register any of its securities under the Securities Act (other than pursuant to a Demand Registration), either for the Company's own account or for the account of any of its securityholders (other than the Holders of Registrable Securities in their capacity as Holders) (each such registration being herein called a "PIGGYBACK REGISTRATION"), the Company will give written notice to all Holders of Registrable Securities of the Company's intention to effect such 15 Piggyback Registration not later than the earlier to occur of (A) the tenth day following the receipt by the Company of notice of exercise of any registration rights by any Persons (other than the Holders of Registrable Securities in their capacities as Holders), and (B) thirty (30) days prior to the anticipated filing date of such Piggyback Registration. (ii) Subject to the provisions contained in paragraphs (c) and (d) of this Section 6.2 and in the last sentence of this clause (ii), (A) the Company will be obligated and required to include in each Piggyback Registration all Registrable Securities with respect to which the Company shall receive from Holders of Registrable Securities, within thirty (30) days after the date on which the Company shall have given written notice of such Piggyback Registration to all Holders of Registrable Securities pursuant to Section 6.2(a)(i) hereof, the written requests of such Holders for inclusion in such Piggyback Registration, and (B) the Company will use its best efforts in good faith to effect promptly the registration of all such Registrable Securities. The Holders of Registrable Securities shall be permitted to withdraw all or any part of the Registrable Securities of such Holders from any Piggyback Registration at any time prior to the effective date of such Piggyback Registration. Any registration of Registrable Securities pursuant to this Section 6.2 shall not be counted as a Demand Registration pursuant to Section 6.1 hereof. The Company will not be obligated or required to include any Registrable Securities in any registration effected solely to implement an employee benefit plan or a transaction to which Rule 145 of the Commission is applicable. (b) PIGGYBACK REGISTRATION EXPENSES. The Company will pay all Registration Expenses of each Piggyback Registration attributable to Registrable Securities or otherwise incurred or sustained in connection with or arising out of the inclusion in each such Piggyback Registration of Registrable Securities. (c) PRIORITY ON PIGGYBACK REGISTRATIONS. If a Piggyback Registration is an underwritten registration, and the managing underwriters shall give written advice to the Company of an Underwriters' Maximum Number, then: (i) the Company shall be entitled to include in such registration that number of securities which the Company proposes to offer and sell for its own account in such registration and which does not exceed the Underwriters' Maximum Number; (ii) if the Underwriters' Maximum Number exceeds the number of securities which the Company proposes to offer and sell for its own account in such registration, then the Company will be obligated and required to include in such registration that number of Registrable Securities requested by the Holders thereof to be included in such registration and which does not exceed such excess and such Registrable Securities shall be allocated PRO RATA among the Holders thereof on the basis of the number of Registrable Securities requested to be included therein by each such Holder; and (iii) if the Underwriters' Maximum Number exceeds the sum of the number of Registrable Securities which the Company shall be required to include in such registration pursuant to clause (ii) and the number of securities which the Company proposes to offer and sell for its own account in such registration, then the Company 16 may include in such registration that number of other securities which persons shall have requested be included in such registration and which shall not be greater than such excess. (d) SELECTION OF UNDERWRITERS. If any Piggyback Registration is an underwritten offering, or a best-efforts underwritten offering, the investment bankers and managing underwriters in such registration will be selected by the Company subject to the approval of the Holders of a majority of the Registrable Securities to be included in such registration, which approval will not be unreasonably withheld or delayed. Section 6.3. LOCKUP AGREEMENTS. (a) RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTRABLE SECURITIES. Each Holder of Registrable Securities, any of whose Registrable Securities are included in any underwritten registration of the Company's securities, if the Company or the managing underwriters so request in connection with such registration, will not, without the prior written consent of the Company or such underwriters, effect any public sale or other distribution of any equity securities of the Company, including any sale pursuant to Rule 144, during the seven (7) days prior to, and during the one hundred twenty (120) day period commencing on, the effective date of such underwritten registration, except in connection with such underwritten registration, except, in each case, to the extent such Holder is prohibited by applicable law or exercise of fiduciary duties from agreeing to withhold Registrable Securities from sale or is acting in its capacity as a fiduciary or investment adviser; provided that each officer and director of the Company and each holder of more than two percent (2%) of the issued and outstanding shares of Common Stock shall enter into similar agreements of at least equal duration. Without limiting the scope of the term "fiduciary", a Holder shall be deemed to be acting as a fiduciary or an investment adviser if its actions or the Registrable Securities to be sold are subject to the Employee Retirement Income Security Act of 1974, as amended, or the Investment Company Act of 1940, as amended, or if such Registrable Securities are held in a separate account under applicable insurance law or regulation. (b) RESTRICTIONS ON PUBLIC SALE BY COMPANY. If the managing underwriters request, the Company agrees not to effect any public sale or other distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such equity securities, during the period commencing on the seventh (7th) day prior to, and ending on the one hundred and twentieth (120th) day following, the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration, except in connection with any such underwritten registration and except for any offering or distribution pursuant to an employee benefit plan and registered on Form S-8. Section 6.4. REGISTRATION PROCEDURES. Whenever the Holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of 17 disposition thereof, and pursuant thereto the Company will as expeditiously as possible: (a) prepare and file with the Commission a Registration Statement with respect to such Registrable Securities and use its best efforts to cause such Registration Statement to become effective (PROVIDED, that before filing a Registration Statement or Prospectus or any amendments or supplements thereto, the Company will furnish to counsel selected by the Holders of Registrable Securities covered by such Registration Statement, copies of all such documents proposed to be filed, which documents will be subject to the timely review of such counsel and the Company will not file any Registration Statement or amendment thereto or any Prospectus or any supplement thereto, including documents incorporated by reference, to which the Holders of a majority of the Registrable Securities covered by such Registration Statement shall reasonably object); (b) prepare and file with the Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective for not more than one (1) year and, comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during such effective period in accordance with the intended methods of disposition by the sellers thereof set forth in such Registration Statement and cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; (c) upon request, furnish to each seller of Registrable Securities such number of copies of such Registration Statement, each amendment and supplement thereto, the Prospectus included in such Registration Statement (including each preliminary Prospectus and each Prospectus filed under Rule 424 of the Securities Act) and such other documents as each such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by each such seller (it being understood that the Company consents to the use of the Prospectus and any amendment or supplement thereto by such seller in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto); (d) use its best efforts to register or qualify such Registrable Securities under such other securities or Blue Sky laws of such jurisdictions as any seller reasonably requests, use its best efforts to keep each such registration or qualification effective, including through new filings, amendments or renewals, during the period such Registration Statement is required to be kept effective, and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller; PROVIDED that the Company will not be required (i) to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph (d), (ii) to subject itself to taxation in any such jurisdiction or (iii) to consent to general service of process in any such jurisdiction; 18 (e) notify each seller of such Registrable Securities, at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus included in such Registration Statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company will promptly prepare (and, when completed, give notice to each seller of Registrable Securities) a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such Prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; provided that upon such notification by the Company, each seller of such Registrable Securities will not offer or sell such Registrable Securities until the Company has notified such seller that it has prepared a supplement or amendment to such Prospectus and delivered copies of such supplement or amendment to such seller; (f) cause all such Registrable Securities to be listed, prior to the date of the first sale of such Registrable Securities pursuant to such registration, on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed, to be listed with NASDAQ; (g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such Registration Statement; (h) enter into all such customary agreements (including underwriting agreements in customary form) as the Holders of a majority of Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; (i) make available for inspection on a confidential basis by any seller, any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney, accountant or other agent retained by any such seller or underwriter (in each case after reasonable prior notice), all reasonably requested financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply on a confidential basis all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such Registration Statement; (j) permit any Holder of Registrable Securities which Holder, in its sole and exclusive judgment, might be deemed to be an underwriter or a controlling person of the Company within the meaning of Section 15 of the Securities Act, to participate in the preparation of such registration or comparable statement and to permit the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such Holder and its counsel should be included, provided that such material shall be furnished under such circumstances as shall cause it to be subject to the indemnification provisions provided pursuant to Section 6.7(b) hereof; 19 (k) in the event of the issuance of any stop order suspending the effectiveness of a Registration Statement, or of any order suspending or preventing the use of any related Prospectus or suspending the qualification of any Registrable Securities included in such Registration Statement for sale in any jurisdiction, the Company will use its best efforts promptly to obtain the withdrawal of such order; (l) if requested by the managing underwriter or underwriters or any holder of Registrable Securities in connection with any sale pursuant to a Registration Statement, promptly incorporate in a Prospectus supplement or post-effective amendment such information relating to such underwriting as the managing underwriter or underwriters or such Holder reasonably requests to be included therein, and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after being notified of the matters incorporated in such Prospectus supplement or post-effective amendment; (m) cooperate with the Holders of Registrable Securities and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legends) representing Registrable Securities to be sold under such registration, and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or such Holders may request; (n) use its best efforts to cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities within the United States and having jurisdiction over the Company as may reasonably be necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Securities; (o) use its best efforts to obtain, at the time of effectiveness of each Piggyback Registration and at the time of any sale pursuant to each Demand Registration, an opinion or opinions, favorable in form and scope to the Holders of a Majority of Registrable Securities covered by such registration, from counsel to the Company in customary form; and (p) otherwise comply with all applicable rules and regulations of the Commission, and make generally available to its securityholders (as contemplated by Section 11(a) under the Securities Act) an earnings statement satisfying the provisions of Rule 158 under the Securities Act no later than ninety (90) days after the end of the twelve month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover said twelve month period. Section 6.5. COOPERATION BY PROSPECTIVE SELLERS, ETC. (a) INFORMATION REQUESTS. Each prospective seller of Registrable Securities will furnish to the Company in writing such information as the Company 20 may reasonably require from such seller in connection with any Registration Statement with respect to such Registrable Securities. (b) FAILURE TO COOPERATE. The failure of any prospective seller of Registrable Securities to furnish any information or documents in accordance with any provision contained in this Article VI shall not affect the obligations of the Company under this Article VI to any remaining sellers who furnish such information and documents unless, in the reasonable opinion of counsel to the Company or the underwriters, such failure impairs or may impair the viability of the offering or the legality of the Registration Statement or the underlying offering. (c) SUSPENSION OF SALES. The Holders of Registrable Securities included in any Registration Statement will not (until further notice) effect sales thereof after receipt of telegraphic or written notice from the Company to suspend sales to permit the Company to correct or update such Registration Statement or Prospectus; but the obligations of the Company with respect to maintaining any Registration Statement current and effective shall be extended by a period of days equal to the period such suspension is in effect. (d) REMOVAL OF SHARES FROM REGISTRATION. At the end of any period during which the Company is obligated to keep any Registration Statement current and effective as provided by Section 6.4 hereof (and any extensions thereof required by the preceding paragraph (c) of this Section 6.5), the Holders of Registrable Securities included in such Registration Statement shall discontinue sales of shares pursuant to such Registration Statement upon receipt of notice from the Company of its intention to remove from registration the shares covered by such Registration Statement which remain unsold, and such Holders shall notify the Company of the number of shares registered which remain unsold promptly after receipt of such notice from the Company. (e) WARRANTS OR OPTIONS. Notwithstanding any other provision herein to the contrary, no Holder of Registrable Securities which constitute warrants or options shall be required to exercise such warrants or options in connection with any registration until the actual sale of the shares of Common Stock issuable upon exercise of such warrants or options. The Company shall enter into such agreements and shall otherwise cooperate with the Holders of Registrable Securities in order to ensure that such Holders are not required to exercise any warrants or options prior to the date of the actual sale of the shares of Common Stock issuable upon exercise of such warrants or options, but the Company shall not be required to extend the exercise date thereof for such purposes. Section 6.6. REGISTRATION EXPENSES. (a) EXPENSES BORNE BY THE COMPANY. All costs and expenses incurred or sustained in connection with or arising out of each registration pursuant to Section 6.1 or Section 6.2 hereof, including, without limitation, all registration and filing fees, fees and expenses of compliance with securities or Blue Sky laws (including reasonable fees and disbursements of counsel for the underwriters in connection with the Blue Sky 21 qualification of Registrable Securities), printing expenses, messenger, telephone and delivery expenses, fees and disbursements of counsel for the Company and of counsel for the sellers of Registrable Securities (subject to the limitations contained in paragraph (b) of this Section 6.6), fees and disbursements of all independent certified public accountants (including the expenses relating to the preparation and delivery of any special audit or "cold comfort" letters required by or incident to such registration), and fees and disbursements of underwriters (excluding discounts and commissions), the reasonable fees and expenses of any special experts retained by the Company of its own initiative or at the reasonable request of the managing underwriters in connection with such registration, and fees and expenses of all (if any) other Persons retained by the Company (all such costs and expenses being herein called, collectively, the "REGISTRATION EXPENSES"), will be borne and paid by the Company. The Company will, in any case, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the expense of liability insurance referred to above, and the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which similar securities of the Company are then listed. (b) ATTORNEYS' FEES; TAXES. In connection with each registration of Registrable Securities pursuant to this Article VI, the Company will reimburse the Holders of Registrable Securities being registered in such registration for the reasonable fees and disbursements of one law firm which acts as counsel chosen by the Holders of a majority of Registrable Securities being registered in such registration. The Company will not bear the cost of nor pay for any stock transfer taxes imposed in respect of the transfer of any Registrable Securities to any purchaser thereof by any Holder of Registrable Securities in connection with any registration of Registrable Securities pursuant to this Article VI. (c) PAYMENT BY HOLDER. To the extent that Registration Expenses incident to any registration are, under the terms of this Article VI, not required to be paid by the Company, each Holder of Registrable Securities included in such registration will pay all Registration Expenses which are clearly solely attributable to the registration of such Holder's Registrable Securities so included in such registration, and all other Registration Expenses not so attributable to one Holder will be borne and paid by all sellers of securities included in such registration in proportion to the number of securities so included by each such seller. Section 6.7. INDEMNIFICATION. (a) INDEMNIFICATION BY COMPANY. The Company will indemnify each Holder requesting or joining in a registration and each underwriter of the securities so registered, the officers, directors and partners of each such Person and each Person who controls any thereof (within the meaning of the Securities Act), against any and all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of any material fact contained in any Prospectus, offering circular or other document incident to any registration, qualification or compliance (or in any related 22 Registration Statement, notification or the like) or any omission (or alleged omission) to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of any rule or regulation promulgated under the Securities Act applicable to the Company and relating to any action or inaction required of the Company in connection with any such registration, qualification or compliance, and the Company will reimburse each such Holder, officer, director, partner, controlling Person, and underwriter for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action; PROVIDED, HOWEVER, that the Company will not be liable in any such case to the extent that any such claim, loss, damage or liability arises out of or is based on any untrue statement or omission based upon written information furnished to the Company in an instrument duly executed by any Holder, officer, director, partner, controlling Person, or underwriter and stated to be exclusively and specifically for use therein. (b) INDEMNIFICATION BY EACH HOLDER. Subject to the limitations set forth below, each Holder requesting or joining in a registration will indemnify each underwriter of the securities so registered, the Company and its officers and directors and each Person, if any, who controls any thereof (within the meaning of the Securities Act) and their respective successors in title and assigns against any and all claims, losses, damages and liabilities (or actions in respect thereof) arising out of or based on any untrue statement (or alleged untrue statement) of any material fact contained in any Prospectus, offering circular or other document incident to any registration, qualification or compliance, or any omission (or alleged omission) to state therein any material fact required to be stated therein or necessary to make the statement therein not misleading, and such Holder will reimburse each underwriter, the Company and each other Person indemnified pursuant to this paragraph (b) for any legal and any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action; PROVIDED, HOWEVER, that this paragraph (b) shall apply only if (and only to the extent that) such statement or omission was made in reliance upon information furnished to the Company in an instrument duly executed by such Holder and stated to be specifically for use in such Prospectus, offering circular or other document or any amendment or supplement thereto. The maximum liability under this paragraph (b) of each Holder joining in any registration shall be limited to the aggregate amount of all sales proceeds actually received by such Holder upon the sale of such Holder's Registrable Securities in connection with such registration. (c) INDEMNIFICATION PROCEEDINGS. Each party entitled to indemnification pursuant to this Section 6.7 (the "INDEMNIFIED PARTY") shall give notice to the party required to provide indemnification pursuant to this Section 6.7 (the "INDEMNIFYING PARTY") promptly after such Indemnified Party acquires actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party (at its expense) to assume the defense of any claim or any litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be acceptable to the Indemnified Party, and the Indemnified Party may participate in such defense at such party's expense; and 23 PROVIDED, FURTHER, that if any Indemnified Party shall have reasonably concluded that there may be one or more legal defenses available to such Indemnified Party which are different from or additional to and are inconsistent with those available to the Indemnifying Party, or that such claim or litigation involves or could have a material adverse effect upon matters beyond the scope of the indemnity agreement provided in this Section 6.7, the Indemnifying Party shall not have the right to assume the defense of such action on behalf such Indemnified Party and such Indemnifying Party shall reimburse such Indemnified Party and any Person controlling such Indemnified Party for that portion of the fees and expenses of any counsel retained by the Indemnified Party which are reasonably related to the matters covered by the indemnity agreement provided in this Section 6.7; and PROVIDED, FURTHER, that the failure by any Indemnified Party to give notice as provided in this paragraph (c) shall not relieve the Indemnifying Party of its obligations under this Section 6.7 except to the extent that the failure results in a failure of actual notice to the Indemnifying Party and such Indemnifying Party is damaged (or the indemnification liability of such Indemnifying Party hereunder would be increased) solely as a result of the failure to give notice. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. The reimbursement required by this Section 6.7 shall be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred. (d) CONTRIBUTION IN LIEU OF INDEMNIFICATION. If the indemnification provided for in this Section 6.7 from the Indemnifying Party is unavailable to an Indemnified Party hereunder in respect of any losses, claims, damages, liabilities or expense (or actions in respect thereof) referred to therein, then the Indemnifying Party in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such indemnifying and indemnified parties shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action; PROVIDED, HOWEVER, that in no event shall the liability of any Holder hereunder be greater in amount than the difference between the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such contribution obligation and all amounts previously contributed by such Holder with respect to such losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. 24 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 6.7(d) were determined by PRO RATA allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. Section 6.8. RULE 144 REQUIREMENTS; FORM S-3. The Company will make every effort in good faith to take all steps necessary to ensure that the Company will be eligible to register securities on Form S-3 (or any comparable form adopted by the Commission) at all times, and to make publicly available and available to the Holders of Registrable Securities, pursuant to Rule 144 or Rule 144A of the Commission under the Securities Act, such information as shall be necessary to enable the Holders of Registrable Securities to make sales of Registrable Securities pursuant to such Rules. The Company will furnish to any Holder of Registrable Securities, upon request made by such Holder at any time after the undertaking of the Company in the preceding sentence shall have first become effective, a written statement signed by the Company, addressed to such Holder, describing briefly the action the Company has taken or proposes to take to comply with the current public information requirements of Rule 144 or Rule 144A. The Company will, at the request of any Holder of Registrable Securities, upon receipt from such Holder of a certificate certifying (i) that such Holder has held such Registrable Securities for a period of not less than two (2) consecutive years, and (ii) that such Holder has not been an affiliate (as defined in Rule 144) of the Company for more than the ninety (90) preceding days, remove from the stock certificates representing such Registrable Securities that portion of any restrictive legend which relates to the registration provisions of the Securities Act. Section 6.9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate in any underwritten registration pursuant to this Article VI unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled, under the provisions contained in this Article VI, to approve such arrangements, and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required by the terms of such underwriting arrangements, PROVIDED, HOWEVER, that no such indemnities or underwriting agreements shall provide for indemnification or contribution obligations of any Holder to a greater extent than the obligations of such Holder set forth in Section 6.7(b) hereof. Subject to the provisions of this Agreement, any Holder of Registrable Securities to be included in any underwritten registration shall be entitled at any time to withdraw such Registrable Securities from such registration in the event that such Holder shall disapprove of any of the terms of the related underwriting agreement. Section 6.10. NO INCONSISTENT AGREEMENTS. The Company will not, at any time after the effective date of this Agreement, enter into any agreement or contract (whether written or oral) with respect to any of its securities which is inconsistent in 25 any respect with the registration rights granted by the Company to Holders pursuant to Article VI of this Agreement or otherwise conflicts with the provisions hereof. Section 6.11. REGISTRABLE SECURITIES HELD BY THE COMPANY. Whenever the consent or approval of Holders of Registrable Securities is required pursuant to this Article VI, Registrable Securities held by the Company shall not be counted in determining whether such consent or approval was duly and properly given by such Holders pursuant to and in compliance with any of the terms of Article VI of this Agreement. Section 6.12. TERM. The agreements of the Company contained in this Article VI shall continue in full force and effect so long as any Holder holds any Registrable Securities. ARTICLE VII ----------- PUT OPTION ---------- Section 7.1. RIGHT TO PUT SECURITIES. At any time (a) after the occurrence and during the continuance of an Event of Default under and as defined in the Subordinated Loan Agreement, and (b) after the seventh (7th) anniversary of the Closing Date, each Holder (a "TENDERING HOLDER") may, by notice to the Company (a "PUT NOTICE"), require the Company to repurchase from such Tendering Holder, at the Repurchase Price specified in Section 7.4 hereof, such number of Securities held by such Tendering Holder as are specified in the Put Notice. Promptly upon its receipt of a Put Notice, the Company shall give written notice of the particulars thereof to each other Holder (other than to the Tendering Holder) and, if any of such Holders delivers a Put Notice to the Company within ten (10) days after its receipt of such notice from the Company, the holders of all of such Securities shall be entitled to close their put of such Securities on but not before the date scheduled pursuant to Section 7.2 for the closing of the put referred to in the Company's notice to them pursuant to this Section 7.1. Except to the extent prohibited by applicable law, and in any event subject to customary confidentiality and non-transfer agreement, within five (5) business days of its receipt of any Put Notice, the Company shall deliver to each of the Tendering Holders a certificate signed by an authorized officer of the Company outlining in reasonable detail the particulars of any potential transactions which the Company is considering at such time and that may be material to the exercise of such Tendering Holder's rights under this Section 7, including any plans or proposals for any mergers, sales of assets, acquisitions and substantial sales of stock by its stockholders and each such Tendering Holder shall have five (5) business days after its receipt of such certificate to rescind its Put Notice. The Company acknowledges that the disclosure contained in any certificate delivered to such Tendering Holder pursuant to the immediately preceding sentence shall be relied on by such Tendering Holder in its determination of whether to put at such time. 26 Section 7.2. PUT CLOSING. The closing, except as otherwise provided in Section 7.6, shall take place at the offices of the Company at 10:00 a.m. local time on a date (a) not more than ninety (90) days after the date a Put Notice is received by the Company as the Company shall specify by notice to the Tendering Holders, or at such later time as Fair Market Value shall have been determined under Section 7.4(b) hereof, or (b) at such other time and place as the Tendering Holders and the Company may agree upon (a "PUT CLOSING DATE"). At the closing such holders will deliver to the Company a certificate or certificates evidencing all of the Warrant Shares and Warrants being put which are held by the Tendering Holders (properly endorsed or accompanied by stock powers or, in the case of any Warrants, assignments, with signature(s) guaranteed or similar appropriate documentation of authority to transfer) against payment of the Repurchase Price to such Tendering Holder in the manner specified in Section 7.3 hereof. Except to the extent prohibited by applicable law and in any event subject to customary confidentiality and non-transfer agreements, prior to the Put Closing Date, the Company will provide such Tendering Holder with all available information that may be material to the exercise of such Tendering Holder's rights under this Section 7, including any plans or proposals for any mergers, sales of assets, acquisitions and substantial sales of stock by its stockholders. Section 7.3. PAYMENT. The Company shall pay the Repurchase Price at any closing under Section 7.2 hereof out of funds legally available therefor in cash or immediately available funds. In the event that any portion of the aggregate Repurchase Price is not paid as a result of any insufficiency of legally available funds or as a result of any limitations on the repurchase of shares of the Company's Common Stock under the Subordinated Loan Agreement or the Credit Agreement or otherwise, either (A) the Tendering Holders may rescind their Put Notice or (B) the Company shall pay to the Tendering Holders that portion of the aggregate Repurchase Price which the Company is able to pay PRO RATA to each such Tendering Holder based on the ratio of the Repurchase Price payable to such Tendering Holder to the aggregate Repurchase Price payable to all such Tendering Holders and such Tendering Holders shall retain a contract claim for the unpaid balance of the Repurchase Price and shall retain all their respective rights hereunder and under and in connection with such Securities, as to that number of such Warrant Shares or portion of such Warrants exercisable for that number of shares as such unpaid portion represents (the "UNREPURCHASED SECURITIES"), until such time as the unpaid portion of the Repurchase Price shall be paid to such Tendering Holders in full. In the event of any failure of the Company to pay in full the Repurchase Price of any Warrants and Warrant Shares which are put to the Company on the scheduled Put Closing Date, all references in this ss.7 to such Put Closing Date (including without limitation any such references used in determining the Repurchase Price for such Securities to the extent they constitute Unrepurchased Securities) shall, but only with respect to such Unrepurchased Securities, be deemed to refer to the date on which payment in full therefor is actually made. The unpaid portion of the Repurchase Price allocable to the Unrepurchased Securities shall remain an obligation of the Company, shall bear interest at the rate of eighteen percent (18%) PER ANNUM, and shall become due and payable (including interest accrued in respect thereof), in cash or immediately available funds, as soon as there are funds legally available therefor. 27 Section 7.4. REPURCHASE PRICE FOR SECURITIES. (a) REPURCHASE PRICE. The repurchase price (the "REPURCHASE PRICE") shall, except as otherwise provided in ss.7.6, be an amount equal to (i) in the case of each portion of any Warrants exercisable for one Warrant Share, the difference between the repurchase price per share of the Warrant Shares as determined under clause (ii) below of this ss.7.4 and the exercise price per share specified therein, and (ii) in the case of each Warrant Share, the quotient obtained by dividing (A) the SUM of the GREATER of either the Fair Market Value of the Company's common stock equity (as determined pursuant to Section 7.4(b) hereof) or the Formula Value of the Company's common stock equity (as determined pursuant to Section 7.4(c) hereof) PLUS the aggregate consideration to be paid to the Company upon the exercise of all then outstanding Warrants, by (B) the sum of the number of shares of Common Stock then outstanding on a fully diluted basis, including the number of shares of Common Stock then issuable upon exercise of the Warrants. (b) FAIR MARKET VALUE. The fair market value of the Company's common stock equity (the "FAIR MARKET VALUE") shall be determined as follows: (i) if at any date of determination of the Repurchase Price the Common Stock of any class shall then be publicly traded, the Fair Market Value of the Company on such date shall be the Market Price on such date multiplied by the number of shares of Common Stock then outstanding on a fully diluted basis; and (ii) if at any date of determination of the Repurchase Price the Common Stock of any class shall not then be publicly traded, for a period of ten (10) days after the date of any Put Notice (the "NEGOTIATION PERIOD"), each party hereto agrees to negotiate in good faith to reach agreement upon the Fair Market Value. In the event that the Company and the Holders are unable to agree upon the Fair Market Value by the end of the Negotiation Period, for a period of ten (10) days after the end of the Negotiation Period, the Company and the Holders shall endeavor to agree on an independent appraiser (the "CONSENSUS APPRAISER") who shall be jointly appointed by the Company and the Holders to make a binding determination of the Fair Market Value of the Company's common stock equity. In the event that the Company and the Holders are unable to agree on a Consensus Appraiser by the end of such period, the Fair Market Value of the Company's common stock equity shall be determined for purposes of this Section 7.5(b) initially by an independent appraiser selected by the Company (the "COMPANY APPRAISER") and whose appraisal (the "COMPANY APPRAISAL") shall be furnished to each of the Holders to which such put relates within thirty (30) days after the end of the Negotiation Period. If the Holders do not object to such determination within fifteen (15) days after receipt of such Appraisal, the fair market value determined by Company Appraiser shall be the Fair Market Value. If any of the Holders object to the Fair Market Value determined by the Company Appraiser, such objecting Holders may select an appraiser (the "HOLDER APPRAISER") who shall review the determination of the Company Appraiser 28 and issue a report thereon (the "HOLDER APPRAISAL"), within thirty (30) days after delivery to each of the Holders to which such put relates of the Company Appraisal. Within ten (10) days after delivery to the Holders of the Holder Appraisal, the Holders will either accept the Company Appraisal or deliver the Holder Appraisal to the Company. If the Holders decide to deliver the Holder Appraisal to the Company, the Company Appraiser and the Holder Appraiser shall meet within ten (10) days after such delivery in order to resolve any questions or differences with respect to the Fair Market Value. If the Company Appraiser and the Holder Appraiser agree on a Fair Market Value of the Company's common stock equity, such Fair Market Value shall be the Fair Market Value. If no agreement is reached, the Company Appraiser and the Holder Appraiser shall jointly select an appraiser (the "THIRD APPRAISER") within five (5) days after such meeting. Fair Market Value shall then be determined by the Third Appraiser within thirty (30) days after delivery to the Company of the Holder Appraisal, and the determination of the Third Appraiser (which determination shall not be less than the determination of the Company Appraiser or greater than the determination of the Holder Appraiser) shall be conclusive and binding upon the Company and each of the Holders to which such put relates. Fair Market Value shall in all cases be calculated by determining the Fair Market Value of the entire common stock equity interest of the Company taken as a whole, without premium for control or discounts for minority interests or restrictions on transfer but taking into consideration any plans or proposals (to the extent they are reasonably likely to occur) for any mergers, sales of assets, acquisitions or substantial sales of stock by the Company or its stockholders relating to the Company. All expenses of the Consensus Appraiser and of the Company Appraiser shall be borne by the Company; all expenses of the Holder Appraiser shall be borne by the Holder or Holders to which such put relates on a PRO RATA basis based on the number of shares for which such Warrants held by each of such Holders are exercisable and the number of such Warrant Shares held by each of such Holders; and all expenses of the Third Appraiser shall be borne 50% by the Company and 50% by the Holders to which such put relates in the same proportions as in the case of the Holder Appraisal. (c) FORMULA VALUE. The "FORMULA VALUE" of the Company's common stock equity at any particular date of determination shall be an amount calculated by multiplying Consolidated EBITDA for the period of 4 full fiscal quarters most recently ended prior to such date by the number 6.25. Section 7.5. ADDITIONAL PAYMENTS UPON MERGER, ETC. If at any time within twelve months after any Put Closing Date with respect to the repurchase or exchange of any Warrants and/or Warrant Shares, the Company shall have entered into any agreement or letter of intent with respect to any Capital Transaction, the Company shall, simultaneously with the consummation of such Capital Transaction or at such later time as any payment is received by the Company or any of their stockholders in respect of such Capital Transaction, make an additional payment to each former holder of such Warrant or Warrant Shares in an amount equal to the 29 excess of the amount such Holder would have received (or the Company would have received and in which such holder would have had a beneficial interest as a stockholder) in respect of such Warrant and/or Warrant Shares had such Warrants and/or Warrant Shares not been previously repurchased pursuant to Sections 7.2 or 7.3 hereof, but instead had been purchased pursuant to Section 7.6 hereof over the payment received by such holder pursuant to Sections 7.2 or 7.3 hereof. Each payment to such Holder pursuant to this Section 7.5 shall be made either in cash or in the form of the securities and other property received by the holders of common equity of the Company. Section 7.6. REPURCHASE UPON CHANGE OF CONTROL. The Company will give each Holder of Securities at least thirty (30) days' prior written notice of any Change of control following the first anniversary of the Closing Date. At the time of the consummation of such Change of control following the first anniversary of the Closing Date, the Holders of Securities may, at their option, sell and the Company shall be required to repurchase all of the Securities then outstanding and the Repurchase Price, for purposes of this Section 7.6, shall be equal to (a) in the case of each portion of any Warrant exercisable for one Warrant Share, the Repurchase Price per Warrant Share as determined pursuant to clause (b) below LESS the exercise price for such share and (b) in the case of each Warrant Share, (i) in the case of a merger, public offering, dissolution or liquidation the Company or of the Parent, or any other stock transaction, the highest price per share received by any holder of Common Stock in connection with such transaction and (ii) in the case of any liquidation or sale of assets, the quotient of (A) the Adjusted Net Worth of the Company immediately prior to such liquidation or immediately after such sale, DIVIDED BY (B) the sum of the number of shares of Common Stock then outstanding PLUS the number of shares of Common Stock then issuable upon the exercise of then outstanding warrants, options or convertible securities, in each case to the extent then exercisable. ARTICLE VIII ------------ SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION, ETC. -------------------------------------------------- Section 8.1. SURVIVAL OF REPRESENTATIONS. The representations and warranties of the Company and of the Purchasers and the Holders contained in this Agreement or any agreement, instrument or document delivered pursuant to any of the provisions of this Agreement shall survive the execution and delivery of this Agreement, any examination or investigation conducted by or on behalf of the Company or the Holders, and the Closing hereunder. Section 8.2. INDEMNIFICATION FOR MISREPRESENTATIONS. The Company agrees to indemnify and hold the Holders harmless from and against, and to pay to the Holders, on demand by the Holders from time to time, the full amount of any loss, claim, damage, liability, cost or expense (including reasonable attorneys' fees) resulting to the Holders from any false, incorrect or misleading representation or warrants of the Company contained in this Agreement or any agreement, 30 instrument or document delivered by the Company to the Holders pursuant to any of the provisions hereof or thereof. Section 8.3. EXPENSES. Whether or not all or any of the arrangements or transactions contemplated by this Agreement or by any of the Warrants shall be consummated, the Company agrees to pay to the Holders, on demand by the Holders at any time and as often as the occasion therefor may require: (a) all of the reasonable legal fees, PLUS all reasonable out-of-pocket expenses and disbursements, of Bingham Dana LLP, special counsel for the Holders, which have been or shall be incurred or sustained at any time in connection with the preparation, negotiation, execution or delivery of this Agreement, any of the Warrants or any other agreements, instruments or documents relating thereto; and (b) all reasonable out-of-pocket costs and expenses which shall be incurred or sustained by any Holder at any time in connection with any modifications or amendments to or consents, approvals or waivers under this Agreement or any of the Warrants, or in connection with any action or proceeding taken by any Holder to protect or preserve all or any of the rights, remedies, powers or privileges of such Holder under any of such documents or to enforce any of the covenants, agreements or obligations of the Company under any of such documents (including, without limitation, all of the reasonable fees and disbursements of legal counsel for each Holder). ARTICLE IX ---------- MISCELLANEOUS ------------- Section 9.1. NOTICES. (a) All notices and other communications pursuant to this Agreement shall be in writing, either delivered in hand, mailed by United States registered or certified first-class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy, facsimile or telex and confirmed by delivery via courier or postal service, addressed as follows: (i) if to the Company, at TransTechnology Corporation, 150 Allen Road, Liberty Corner, New Jersey 07938, Attention: General Counsel, or at such other address as shall have been furnished to each of the Holders in writing by the Company, and a copy thereof shall in any event be simultaneously transmitted to Hahn Loeser & Parks LLP, 3300 BP America Building, 200 Public Square, Cleveland, Ohio, Attention: F. Ronald O'Keefe, Esq.; or (ii) if to any Holder, at such addresses (in each case) as shall have been furnished to the Company and to the other Holders by such Holder in writing, and copies thereof shall in any event be simultaneously transmitted to (A) the Administrative Agent at BankBoston, N.A., 100 Federal Street, Boston, Massachusetts 02110, Attention: Maura C. Wadlinger and (B) Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts 02110, Attention: T. Malcolm Sandilands, Esq. 31 (b) Any notice or other communication pursuant to this Agreement shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of receipt thereof by such officer or the sending of such facsimile or (ii) if sent by registered or certified first-class mail, postage prepaid, on the third business day following the mailing thereof. Section 9.2. GOVERNING LAW. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. Section 9.3. AMENDMENTS AND WAIVERS. (a) Except as otherwise provided by paragraph (b) of this Section 9.3, and except as otherwise expresslY required by any other provisions of this Agreement, none of the terms or provisions contained in this Agreement, and none of the agreements, obligations or covenants of the Company contained in this Agreement, may be amended, modified, supplemented, waived or terminated unless (i) the Company shall execute an instrument in writing agreeing or consenting to such amendment, modification, supplement, waiver or termination, and (ii) the Company shall receive a prior written Holder Consent therefor. (b) Each of the terms and provisions contained in this Section 9.3 or in the definitions of PERMITTED TRANSFEREE, HOLDER CONSENT or MAJORITY HOLDERS contained in Article I hereof may be amended, modified, supplemented, waived or terminated only by a written instrument or consent signed by the Company and by each of the Holders holding of record any Securities at the effective date thereof. (c) In connection with any action taken or to be taken pursuant to paragraph (a) of this Section 9.3, there shall be no obligation or requirement on the part of the Company, any of the Holders or any other Persons (i) to solicit or to attempt to solicit from all of the Holders the consent or approval of all of the Holders for such action, or (ii) to submit any notices of any kind to all of the Holders in advance of any action proposed to be taken pursuant to paragraph (a) of this Section 9.3. However, copies of all written consents or approvals given by Holders in connection with any action taken or to be taken pursuant to and in compliance with paragraph (a) of this Section 9.3 shall be sent by the Company, promptly after the receipt thereof by the Company, to each Holder who shall have failed or refused to give a written consent or approval for such action. (d) Any action taken pursuant to and in compliance with paragraph (a) of this Section 9.3 shall be binding upon the Company and upon all of the Holders, including all of the Holders who shall have failed or refused to give a written consent or approval for such action. 32 Section 9.4. PROPORTIONAL ADJUSTMENTS. There are references in this Agreement to a specific price per share of the Company's Common Stock or to a specific number of shares in the capital of the Company. The specific price per share and the specific number of shares so stated are effective as of the Closing Date. The specific price per share and the specific number of shares so stated shall (in each case) be proportionally adjusted from time to time if (and on each occasion that) there shall be effected by the Company any stock dividend, stock split, subdivision of shares, combination of shares, reclassification, recapitalization or other similar corporate reorganization affecting the capital structure of the Company. The exact amount and the effective date of each adjustment effected pursuant to this ss.9.4 shall be determined in good faith and on a reasonable basis by the Board of Directors of the Company. The Company shall promptly notify each Holder in writing of each such adjustment. Section 9.5. INTEGRATION. Annexed to this Agreement are SCHEDULE 1, SCHEDULE 2 and EXHIBIT A. Such SCHEDULES and EXHIBIT are an integral part of this Agreement and are hereby incorporated by reference. Section 9.6. RIGHTS AND OBLIGATIONS SEVERAL. The rights and obligations of each of the parties hereto shall be several (and not joint), except as otherwise expressly provided by this Agreement. Section 9.7. NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 9.8. ENTIRE AGREEMENT. This Agreement, including the SCHEDULES and EXHIBITS hereto, the Warrants, the Warrant Agreement, the Warrant Escrow Agreement, the Subordinated Loan Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any prior understandings or agreements concerning the subject matter hereof. Section 9.9. SEVERABILITY. The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision. Section 9.10. BINDING EFFECT. All of the covenants and agreements of the Company contained in, and all of the rights granted by the Company pursuant to, this Agreement, shall inure to the benefit of each Holder, including each of the Permitted Transferees of such Holder. None of such covenants, agreements or rights shall be assignable or transferable by any Holder to any Person except to a Person who is a Permitted Transferee of such Holder. Section 9.11. COUNTERPARTS. This Agreement may be executed simultaneously in several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. In making proof of this 33 Agreement, it shall not be necessary to produce or account for more than one such counterpart signed by each of the parties hereto. 34 IN WITNESS WHEREOF, the parties have caused this Warrant Holders' Agreement to be duly executed as of the date first written above. THE COMPANY: TRANSTECHNOLOGY CORPORATION By:/s/ Joseph F. Spanier --------------------------- Name:Joseph F. Spanier Title: Vice President & CFO THE PURCHASERS: --- ----------- BANKBOSTON, N.A. By:/s/ Robert W. MacElhiney --------------------------- Name: Robert W. MacElhiney Title: Vice President ABN AMRO BANK N.V. By:/s/ Lisa Megeaski --------------------------- Name: LISA MEGEASKI Title: VICE PRESIDENT By:/s/ Edward D. Puckhaber --------------------------- Name: Edward D. Puckhaber Title: Assistant Vice President FIRST CHICAGO CAPITAL CORPORATION By:/s/ Kevin J. Rooney ---------------------------- Name: Kevin Rooney Title: Director 35 THE ADMINISTRATIVE AGENT: ------------------------- BANKBOSTON, N.A., as Administrative Agent By:/s/ Robert W. MacElhiney ---------------------------- Name: Robert W. MacElhiney Title: Vice President 36 EXHIBIT A --------- TO WARRANT HOLDERS' AGREEMENT Instrument of Accession ----------------------- The undersigned, ____________________, in order to become the owner or holder of ________ shares of Common Stock, $0.01 par value per share (the "SHARES"), of TRANSTECHNOLOGY CORPORATION, a Delaware corporation, hereby agrees to become a Holder party to that certain Warrant Holders' Agreement, dated as of August 31, 1999 (the "WARRANT HOLDERS' AGREEMENT"), a copy of which is attached hereto. This Instrument of Accession shall become a part of such Warrant Holders' Agreement. Executed as of the date set forth below under the laws of the State of Delaware. Signature: ___________________________ Address: ___________________________ ___________________________ ___________________________ Date: ___________________________ Accepted: TRANSTECHNOLOGY CORPORATION By:__________________________________ Title:_______________________________ Date:________________________________ EX-10.31 7 EXHIBIT 10.31 1 ------------------------------------------------------------------------ REGISTRATION RIGHTS AGREEMENT Dated as of August 31, 1999 by and among TransTechnology Corporation, the Guarantors named herein, and BankBoston, N.A., as Administrative Agent ------------------------------------------------------------------------ 2 This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of August 31, 1999, by and among TransTechnology Corporation, a Delaware corporation (the "Company"), the Guarantors listed on the signature pages hereto as such (together with any future subsidiary of the Company that executes a guarantee in accordance with the provisions of the Purchase Agreement referred to below, the "Guarantors"), and BankBoston, N.A., in its capacity as administrative agent for the initial purchasers (the "Initial Purchasers"), of the Company's Bridge Notes in the original principal amount of $75,000,000 (the "Bridge Notes") under and pursuant to that certain Senior Subordinated Note Purchase Agreement, dated as of August 31, 1999 (the "Purchase Agreement"), by and among the Company, the Administrative Agent, BancBoston Robertson Stephens Inc., as the arranger (in such capacity, the "Arranger") and the Initial Purchasers. This Agreement is made pursuant to the Purchase Agreement. In order to induce the Initial Purchasers to purchase the Bridge Notes, the Company and the Guarantors (collectively, the "Issuers") have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 2 of the Purchase Agreement. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: ACT: The Securities Act of 1933, as amended. ADMINISTRATIVE AGENT: As defined in the preamble hereto. AFFILIATE: With respect to any specified Person, any Person directly or indirectly controlling or controlled by such specified Person, or any Person under direct or common control with such specified Person. BRIDGE NOTES: As defined in the preamble hereto. BUSINESS DAY: Any day other than a Saturday, a Sunday or a day on which banking institutions in Boston, Massachusetts, or at any other place of payment hereunder are authorized by law, regulation or executive order to remain closed. BROKER-DEALER: Any broker or dealer registered as such under the Exchange Act. CLOSING DATE: The date of this Agreement. COMMISSION: The Securities and Exchange Commission. 3 -2- CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (i) the filing and effectiveness under the Act of the Exchange Offer Registration Statement relating to the Series B Notes to be issued in the Exchange Offer, (ii) the maintenance of such Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the minimum period required pursuant to Section 3(b) hereof, and (iii) the delivery by the Issuers to the Registrar under the Indenture of Series B Notes in the same aggregate principal amount as the aggregate principal amount of Series A Notes that were tendered by Holders thereof pursuant to the Exchange Offer. DAMAGES PAYMENT DATE: With respect to the Notes, each Interest Payment Date. EFFECTIVENESS TARGET DATE: As defined in Section 5 hereof. EXCHANGE ESCROW AGREEMENT: As defined in the Purchase Agreement. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended. EXCHANGE OFFER: The registration by the issuers under the Act of the Series B Notes pursuant to a Registration Statement pursuant to which the Issuers offer the Holders of all outstanding Transfer Restricted Securities the opportunity to exchange all such outstanding Transfer Restricted Securities held by such Holders for Series B Notes in an aggregate principal amount equal to the aggregate principal amount of the Transfer Restricted Securities tendered in such exchange offer by such Holders. EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating to the Exchange Offer, including the related Prospectus. GUARANTORS: As defined in the preamble hereto. HOLDERS: As defined in Section 2(b) hereof. INDEMNIFIED HOLDER: As defined in Section 8(a) hereof. INDENTURE: The Indenture, dated as of the date hereof, among the Issuers and State Street Bank and Trust Company, as trustee (the "Trustee"), pursuant to which the Notes are to be issued, as such Indenture is amended or supplemented from time to time in accordance with the terms thereof. INITIAL MATURITY DATE: August 31, 2000. INITIAL PURCHASERS: As defined in the preamble hereto. INTEREST PAYMENT DATE: As defined in the Notes. LIQUIDATED DAMAGES: As defined in Section 5 hereof. 4 -3- NASD: National Association of Securities Dealers, Inc. NOTES: The Series A Notes and the Series B Notes. PERSON: An individual, partnership, corporation, limited liability company, limited liability partnership, trust or unincorporated organization, or a government or agency or political subdivision thereof. PROSPECTUS: The prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. PURCHASE AGREEMENT: As defined in the preamble hereto. RECORD HOLDER: With respect to any Damages Payment Date relating to the Notes, each Person who is a Holder of Notes on the record date with respect to the Interest Payment Date on which such Damages Payment Date shall occur. REGISTRATION DEFAULT: As defined in Section 5 hereof. REGISTRATION STATEMENT: Any registration statement of the Issuers relating to (a) an offering of Series B Notes pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, which is filed pursuant to the provisions of this Agreement, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. SERIES A NOTES: The Company's Series A Senior Subordinated Notes due 2009 to be issued under the Indenture in exchange for Term Notes pursuant to Section 5 of the Purchase Agreement, together with the guarantee thereof by any Guarantor. SERIES B NOTES: The Company's Series B Senior Subordinated Notes due 2009 to be issued pursuant to the Indenture in the Exchange Offer, together with the guarantee thereof by any Guarantor. SHELF FILING DEADLINE: As defined in Section 4 hereof. SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof. TERM NOTE: As defined in the Purchase Agreement. TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Indenture. 5 -4- TRANSFER RESTRICTED SECURITIES: Each Note, until the earliest to occur of (a) the date on which such Note is exchanged in the Exchange Offer and the Note for which it is exchanged is entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Act, (b) the date on which such Note has been effectively registered under the Act and disposed of in accordance with a Shelf Registration Statement or (c) the date on which such Note is permitted to be distributed to the public pursuant to Rule 144 under the Act or by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including delivery of the Prospectus contained therein). UNDERWRITTEN REGISTRATION or UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. WARRANT HOLDERS' AGREEMENT: As defined in the Purchase Agreement. SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT (a) TRANSFER RESTRICTED SECURITIES. The securities entitled to the benefits of this Agreement are the Transfer Restricted Securities. (b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. A Holder is deemed a "selling Holder" whenever such Holder notifies the Company of such Holder's intent to sell Transfer Restricted Securities pursuant to a Shelf Registration Statement. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permissible under applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with), the Issuers shall (i) cause to be filed with the Commission as soon as practicable after the Initial Maturity Date, but in no event later than 60 days after the Initial Maturity Date, an Exchange Offer Registration Statement, (ii) use commercially reasonable efforts to cause such Registration Statement to become effective at the earliest possible time, but in no event later than 120 days after the Initial Maturity Date, (iii) in connection with the foregoing, file (A) all pre-effective amendments to such Registration Statement as may be necessary in order to cause such Registration Statement to become effective, (B) if applicable, a post-effective amendment to such Registration Statement pursuant to Rule 430A under the Act, and (C) cause all necessary filings in connection with the registration and qualification of the Series B Notes to be made under the Blue Sky laws of such jurisdictions as are necessary to permit the Exchange Offer to be Consummated, and (iv) upon the effectiveness of such Registration Statement, commence the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting registration of the Series B Notes to be offered in exchange for the Transfer Restricted 6 -5- Securities and to permit resales of Notes held by Broker-Dealers as contemplated by Section 3(c) below. (b) The Company shall use commercially reasonable efforts to cause the Exchange Offer Registration Statement to be effective continuously and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 Business Days. The Company shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Series B Notes shall be included in the Exchange Offer Registration Statement. The Company shall use commercially reasonable efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 30 Business Days thereafter. (c) The Company shall indicate in a "Plan of Distribution" section contained in the Prospectus contained in the Exchange Offer Registration Statement that any Broker-Dealer who holds Series A Notes that are Transfer Restricted Securities and that were acquired for its own account as a result of market-making activities or other trading activities (other than Transfer Restricted Securities acquired directly from the Company), may exchange such Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act and must, therefore, deliver a prospectus meeting the requirements of the Act in connection with any resales of the Series B Notes received by such Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may be satisfied by the delivery by such Broker-Dealer of the Prospectus contained in the Exchange Offer Registration Statement. Such "Plan of Distribution" section shall also contain all other information with respect to such resales by Broker-Dealers that the Commission may require in order to permit such resales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Notes held by any such Broker-Dealer except to the extent required by the Commission as a result of a change in policy after the date of this Agreement. Subject to Section 4(c), the Issuers shall use commercially reasonable efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented and amended as required by the provisions of Section 6(c) below to the extent necessary to ensure that it is available for resales of Notes acquired by Broker-Dealers for their own accounts as a result of market-making activities or other trading activities, and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of 180 days from the date on which the Exchange Offer Registration Statement is declared effective. The Issuers shall provide sufficient copies of the latest version of such Prospectus to Broker-Dealers promptly upon request at any time during such 180 day period in order to facilitate such resales. 7 -6- SECTION 4. SHELF REGISTRATION (a) SHELF REGISTRATION. If (i) the Issuers are not required to file an Exchange Offer Registration Statement or to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy (after the procedures set forth in Section 6(a) below have been complied with) or (ii) if any Holder of Transfer Restricted Securities shall notify the Company within 20 Days after the Exchange Offer shall have been Consummated (A) that such Holder is prohibited by applicable law or Commission policy from participating in the Exchange Offer, or (B) that such Holder may not resell the Series B Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and that the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder, or (C) that such Holder is a Broker-Dealer and holds Series A Notes acquired directly from the Company or one of its Affiliates, then the Issuers shall: (x) use commercially reasonable efforts to file a shelf registration statement pursuant to Rule 415 under the Act, which may be an amendment to the Exchange Offer Registration Statement (in either event, the "Shelf Registration Statement") on or prior to the earliest to occur of (1) the 60th day after the date on which the Company determines that it is not required to file the Exchange Offer Registration Statement or (2) the 60th day after the date on which the Company receives notice from a Holder of Transfer Restricted Securities as contemplated by clause (ii) above (such earliest date being the "Shelf Filing Deadline"), which Shelf Registration Statement shall provide for resales of all Transfer Restricted Securities the Holders of which shall have provided the information required pursuant to Section 4(b) hereof; and (y) use commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective by the Commission on or before the 120th day after the obligation to file the Shelf Registration Statement arises. Subject to Section 4(c), the Issuers shall use commercially reasonable efforts to keep such Shelf Registration Statement continuously effective, supplemented and amended as required by the provisions of Sections 6(b) and (c) hereof to the extent necessary to ensure that it is available for resales of Notes by the Holders of Transfer Restricted Securities entitled to the benefit of this Section 4(a), and to ensure that it conforms with the requirements of this Agreement, the Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years following the Closing Date. (b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 15 Business Days after receipt of a request therefor, such information as the Company may 8 -7- reasonably request for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to Liquidated Damages (as defined) pursuant to Section 5 hereof unless and until such Holder shall have used its best efforts to provide all such reasonably requested information. Each Holder as to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. (c) The Company shall be entitled to suspend the effectiveness of any Shelf Registration Statement and the duration of such suspension shall be excluded from the calculation of the two-year period referred to in Section 4(a). Such suspension shall be effected only if the Board of Directors of the Company determines reasonably and in good faith that the effectiveness of the Shelf Registration Statement would materially impede, delay or interfere with any financing, offer or sale of securities, acquisition, corporate reorganization or other significant transaction involving the Company or any of its Affiliates or require disclosure of material information which the Company has a lawful and bona fide business purpose for preserving as confidential, which financing, offer or sale of securities, acquisition, corporate reorganization or other significant transaction is under active consideration by the Company at the time of such suspension described above; PROVIDED, HOWEVER, that the Company shall not be entitled to more than one suspension, which suspension shall be no longer than six weeks in duration. If the Company shall so suspend the effectiveness of a Shelf Registration Statement it shall, as promptly as possible, deliver a certificate signed by the President, Chief Executive Officer or Chief Financial Officer of the Company to the Initial Purchasers and Holders of Transfer Restricted Securities as to such determination, and such Initial Purchasers and Holders shall receive an extension of the applicable registration period equal to the number of days of the suspension. SECTION 5. LIQUIDATED DAMAGES If (i) any of the Registration Statements required by this Agreement is not filed with the Commission on or prior to the date specified for such filing in this Agreement, (ii) any of such Registration Statements has not been declared effective by the Commission on or prior to the date specified for such effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated within 30 Business Days after the Effectiveness Target Date with respect to the Exchange Offer Registration Statement or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose (except pursuant to Section 4(c)) prior to the expiration of the time period specified by this Agreement without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself immediately declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default", and each period during which a Registration Default has occurred and is continuing, a "Registration Default Period"), the Issuers hereby jointly and severally agree that liquidated damages ("Liquidated Damages"), in 9 -8- addition to the base interest that would otherwise accrue on the Transfer Restricted Securities, shall accrue at a per annum rate of 0.25% of the aggregate principal amount of such Transfer Restricted Securities outstanding for the first 90 days of the Registration Default Period, at a per annum rate of 0.50% of the aggregate principal amount of such Transfer Restricted Securities for the second 90 days of the Registration Default Period, at a per annum rate of 0.75% of the aggregate principal amount of such Transfer Restricted Securities for the third 90 days of the Registration Default Period and at a per annum rate of 1.0% of the aggregate principal amount of such Transfer Restricted Securities outstanding thereafter for the remaining portion of the Registration Default Period. All accrued liquidated damages shall be paid to Record Holders by the Company by wire transfer of immediately available funds or by federal funds check on each Damages Payment Date. Following the cure of all Registration Defaults relating to any particular Transfer Restricted Securities, the accrual of Liquidated Damages with respect to such Transfer Restricted Securities will cease immediately. All obligations of the Issuers set forth in the preceding paragraph that are outstanding with respect to any Transfer Restricted Security at the time such security ceases to be a Transfer Restricted Security shall survive until such time as all such obligations with respect to such Security shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the Exchange Offer, the Issuers shall comply with all of the provisions of Section 6(c) below, shall use commercially reasonable efforts to effect such exchange and shall comply with all of the following provisions: (i) If in the reasonable opinion of counsel to the Company there is a question as to whether the Exchange Offer is permitted by applicable law, the Issuers hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Issuers to Consummate an Exchange Offer for such Series A Notes. The Issuers hereby agree to pursue the issuance of such a decision to the Commission staff level but shall not be required to take commercially unreasonable action to effect a change of Commission policy. The Issuers hereby agree, however, to (A) participate in telephonic conferences with the Commission, (B) deliver to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted, and (C) diligently pursue a resolution (which need not be favorable) by the Commission staff of such submission. (ii) As a condition to its participation in the Exchange Offer pursuant to the terms of this Agreement, each Holder of Transfer Restricted Securities shall furnish, upon the request of the Company, prior to the time that it is Consummated, a written representation to the Company (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration 10 -9- Statement) to the effect that (A) it is not an affiliate of the Issuers, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to participate in, a distribution of the Series B Notes to be issued in the Exchange Offer, (C) it is acquiring the Series B Notes in its ordinary course of business. In addition, all such Holders of Transfer Restricted Securities shall otherwise cooperate in the Issuers' preparations for the Exchange Offer and (D) such other customary representations as the Issuers may reasonably request. Each Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Exchange Offer to participate in a distribution of the securities to be acquired in the Exchange Offer (1) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission enunciated in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Act in connection with a secondary resale transaction and that such a secondary resale transaction should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K if the resales are of Series B Notes obtained by such Holder in exchange for Series A Notes acquired by such Holder directly from the Company or an Affiliate thereof. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Issuers shall provide a supplemental letter to the Commission (A) stating that the Issuers are registering the Exchange Offer in reliance on the position of the Commission enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC. (available June 5, 1991) and, if applicable, any no-action letter obtained pursuant to clause (i) above, and (B) including a representation that neither the Company nor any Guarantor has entered into any arrangement or understanding with any Person to distribute the Series B Notes to be received in the Exchange Offer and that, to the best of the Company's information and belief, each Holder participating in the Exchange Offer is acquiring the Series B Notes in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Series B Notes received in the Exchange Offer. (b) SHELF REGISTRATION STATEMENT. In connection with any Shelf Registration Statement, the Issuers shall comply with all the provisions of Section 6(c) below and shall use their commercially reasonable efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Issuers will as expeditiously as possible prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended and lawful method or methods of distribution thereof. 11 -10- (c) GENERAL PROVISIONS. Subject to Section 4(c), in connection with any Registration Statement and any Prospectus required by this Agreement to permit the sale or resale of Transfer Restricted Securities (including, without limitation, any Registration Statement and the related Prospectus required to permit resales of Notes by Broker-Dealers), the Issuers shall: (i) use commercially reasonable efforts to keep such Registration Statement continuously effective and provide all requisite financial statements (including, if required by the Act or any regulation thereunder, financial statements of the Guarantors) for the period specified in Section 3 or 4 of this Agreement, as applicable; upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Transfer Restricted Securities during the period required by this Agreement, the Issuers shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its commercially reasonable efforts to cause such amendment to be declared effective and such Registration Statement and the related Prospectus to become usable for their intended purpose(s) as soon as practicable thereafter; (ii) prepare and file with the Commission such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Section 3 or 4 hereof, as applicable, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been exchanged or cease to be Transfer Restricted Securities; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Act, and to comply fully with the applicable provisions of Rules 424 and 430A under the Act in a timely manner; and comply with the provisions of the Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise the underwriter(s), if any, and selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Act or of the suspension by any state 12 -11- securities commission of the qualification of the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Upon receipt of written notice of any stop order described in the preceding clause (C), selling Holders shall refrain from delivering any Prospectus or Prospectus Supplement in the jurisdiction issuing such stop order until notification by the Issuers that such stop order has been lifted or withdrawn. Upon the receipt of written notice of any fact or event described in the preceding clause (D), selling Holders shall refrain from delivering any Prospectus or Prospectus Supplement requiring amendment or supplement as described therein. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Transfer Restricted Securities under state securities or Blue Sky laws, the Issuers shall use commercially reasonable efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) furnish to each of the selling Holders and each of the underwriter(s), if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review of such Holders and underwriter(s), if any, for a period of at least three Business Days, and the Issuers will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which a selling Holder of Transfer Restricted Securities covered by such Registration Statement or the underwriter(s), if any, shall reasonably object within three Business Days after the receipt thereof; (v) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to the selling Holders and to the underwriter(s), if any, make the Issuers representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such selling Holders or underwriter(s), if any, reasonably may request, provided that the Company may require any such Person to enter into a customary confidentiality agreement; (vi) subject to the receipt of confidentiality agreements as provided above, make available at reasonable times for inspection by the selling Holders, 13 -12- any underwriter participating in any disposition pursuant to such Registration Statement, and any attorney or accountant retained by such selling Holders or any of the underwriter(s), all financial and other records, pertinent corporate documents and properties of the Issuers and cause the Issuers' officers, directors and employees to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement subsequent to the filing thereof and prior to its effectiveness; (vii) if requested by any selling Holders or the underwriter(s), if any, promptly incorporate in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities, information with respect to the principal amount of Transfer Restricted Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Transfer Restricted Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Issuers are notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (viii) cause the Transfer Restricted Securities covered by the Registration Statement to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Notes covered thereby or the underwriter(s), if any; (ix) furnish to each selling Holder and each of the underwriter(s), if any, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (x) deliver to each selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Issuers hereby consent to the use of the Prospectus and any amendment or supplement thereto in accordance with this Agreement by each of the selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (xi) enter into such agreements (including an underwriting agreement), and make such reasonable and customary representations and warranties, and take all such other actions in connection therewith as reasonably necessary in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any Registration Statement contemplated by this Agreement, all to 14 -13- such extent as may be reasonably requested by any Initial Purchaser or by any Holder of Transfer Restricted Securities or underwriter in connection with any sale or resale pursuant to any Registration Statement contemplated by this Agreement; and whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, the Issuers shall: (A) furnish to the selling Holders and each underwriter, if any, in the event of a Shelf Registration Statement, and furnish to any Holder tendering Notes in an Exchange Offer, if any, in the event of an Exchange Offer, in each case, in such substance and scope as they may reasonably request and as are customarily made by issuers to underwriters in primary underwritten offerings, upon the date of the Consummation of the Exchange Offer and, if applicable, the effectiveness of the Shelf Registration Statement: (1) a certificate, dated the date the Exchange Offer is Consummated or the date of effectiveness of the Shelf Registration Statement, as the case may be, signed by (y) the President or any Vice President and (z) a principal financial or accounting officer of the Company confirming, as of the date thereof, the matters set forth in Sections 8.1 - 8.5 of the Purchase Agreement and such other matters as such parties may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Issuers, covering the matters customarily opined to in connection with the registration of securities as contemplated by Sections 3 and 4 of this Agreement and such other matter as such parties may reasonably request, and in any event including a statement to the effect that such counsel has participated in conferences with officers and other representatives of the Company and the Guarantors, representatives of the independent public accountants for the Company and the Guarantors, representatives of the Holders and their counsel in connection with the preparation of the Registration Statement and related Prospectus and have considered the matters required to be stated therein and the statements contained therein and, although they have not independently verified and are not passing upon and assume no responsibility for the accuracy, completeness or fairness of such statements, on the basis of the foregoing, they hereby confirm that no facts came to their attention that caused them to believe that the Registration Statement and related Prospectus, as of their date, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which 15 -14- they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel expresses no belief or opinion with respect to, assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of exhibits, the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated as of the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, from the Issuers' independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters by underwriters in connection with primary underwritten offerings; (B) set forth in full or incorporate by reference in the underwriting agreement, if any, the indemnification provisions and procedures of Section 8 hereof with respect to all parties to be indemnified pursuant to said Section; and (C) deliver such other documents and certificates as may be reasonably requested by such parties to evidence compliance with clause (A) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Issuers pursuant to this clause (xi), if any. If at any time during which a Registration Statement is required to be effective under this Agreement the Issuers become aware that the representations and warranties of the Issuers contemplated in clause (A)(1) above cease to be true and correct, the Issuers shall so advise the Initial Purchaser and the underwriter(s), if any, and each selling Holder promptly and, if requested by such Persons, shall confirm such advice in writing; (xii) prior to any public offering of Transfer Restricted Securities, cooperate with the selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Transfer Restricted Securities under the securities or Blue Sky laws of such jurisdictions (within the United States, Canada or, with respect to sales to institutions, the United Kingdom) as the selling Holders or underwriter(s) may reasonably request and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Transfer Restricted Securities covered by the Shelf Registration Statement; provided, however, that neither the Company nor any Guarantor shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; 16 -15- (xiii) to the extent lawful, issue, upon the request of any Holder of Series A Notes covered by the Shelf Registration Statement, Series B Notes, having an aggregate principal amount equal to the aggregate principal amount of Series A Notes surrendered to the Company by such Holder in exchange therefor or being sold by such Holder; such Series B Notes to be registered in the name of such Holder or in the name of the purchaser(s) of such Notes, as the case may be; in return, the Series A Notes held by such Holder shall be surrendered to the Company for cancellation; (xiv) cooperate with the selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and enable such Transfer Restricted Securities to be in such denominations and registered in such names as the Holders or the underwriter(s), if any, may request at least two Business Days prior to any sale of Transfer Restricted Securities made by such underwriter(s); (xv) use commercially reasonable efforts to cause the Transfer Restricted Securities covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities within the United States, as may be reasonably necessary to enable the seller or sellers thereof or the underwriter(s), if any, to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (xii) above; (xvi) subject to Section 6(c)(i), if any fact or event contemplated by clause (c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material- fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; (xvii) provide a CUSIP number for all Transfer Restricted Securities not later than the effective date of the Registration Statement and provide the Trustee under the Indenture with printed certificates for the Transfer Restricted Securities that are in a form eligible for deposit with The Depository Trust Company; (xviii) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD, and use commercially reasonable efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities (within the United States, Canada or the United Kingdom) as may be necessary to enable the 17 -16- Holders selling Transfer Restricted Securities to consummate the disposition of such Transfer Restricted Securities; (xix) otherwise commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 (which need not be audited) for the twelve-month period (A) commencing at the end of any fiscal quarter in which Transfer Restricted Securities are sold to underwriters in a firm or best efforts Underwritten Offering or (B) if not sold to underwriters in such an offering, beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement; (xx) if so required under the TIA, cause the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement, and, in connection therewith, cooperate with the Trustee and the Holders of Notes to effect such changes to the Indenture as may be required for such Indenture to be so qualified in accordance with the terms of the TIA; and execute and use commercially reasonable efforts to cause the Trustee to execute, all documents that may be required to effect such changes and all other forms and documents required to be filed with the Commission to enable such Indenture to be so qualified in a timely manner; (xxi) provide promptly to each Holder upon request each document filed by the Company with the Commission pursuant to the requirements of Section 13 and Section 15 of the Exchange Act. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of any notice from the Company of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus. If so directed by the Company, each Holder will deliver to the Company (at the Issuers' expense) all copies, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of such notice. In the event the Company shall give any such notice, the time period regarding the effectiveness of such Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including the date when each selling Holder covered by such Registration Statement shall have received the copies of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or shall have received the Advice. 18 -17- SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Issuers' performance of or compliance with this Agreement will be borne by the Company or the respective Guarantor, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses (including filings made by any Initial Purchaser or Holder with the NASD (and, if applicable, the reasonable fees and expenses of any "qualified independent underwriter" and its counsel that may be required by the rules and regulations of the NASD)); (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Series B Notes to be issued in the Exchange Offer and printing of Prospectuses), messenger and delivery services and telephone incurred by the Company the Guarantors and their agents; (iv) all fees and disbursements of counsel for the Company and, subject to Section 7(b) below, the Holders of Transfer Restricted Securities, (v) all application and filing fees in connection with listing Notes on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Issuers (including the expenses of any special audit and comfort letters required by or incident to such performance). The Issuers will bear their internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by any issuer. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Issuers will reimburse the Initial Purchaser and the Holders of Transfer Restricted Securities being tendered in the Exchange Offer and/or resold pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or registered pursuant to the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Company and the Guarantors will, jointly and severally, indemnify and hold harmless each Holder against any losses, claims, damages or liabilities, joint or several, to which such Holder may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, and will 19 -18- reimburse each Holder for any legal or other expenses reasonably incurred by such Holder in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company and the Guarantors shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Registration Statement or Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Holder expressly for use therein. (b) Each Holder will, severally and not jointly, indemnify and hold harmless the Company and the Guarantors against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Registration Statement or Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Holder expressly for use therein; and will reimburse the Company and the Guarantors for any legal or other expenses reasonably incurred by the Company and the Guarantors in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or 20 -19- claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to, or an admission of, fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors on the one hand and the Holders on the other from the sale by the Company of the Series A Notes. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Guarantors on the one hand and the Holders on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Guarantors on the one hand and the Holders on the other shall be deemed to be in the same proportion as the total net proceeds from the offering of the Notes (before deducting expenses) received by the Company and the Guarantors bear to the total proceeds received by such holder upon the sale of the Notes giving rise to such indemnification obligations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors on the one hand or the Holders on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Guarantors agree, and the Holders shall be deemed to have agreed, that it would not be just and equitable if contribution pursuant to this subsection (d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Holder shall be required to contribute any amount in excess of the amount by which the total net proceeds received by such Holder with respect to the Notes exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent 21 -20- misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the respective principal amount of Series A Notes held by each of the Holders hereunder and not joint. (e) The obligations of the Company and the Guarantors under this Section 8 shall be in addition to any liability which the Company and the Guarantors may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Holder within the meaning of the Act; and the obligations of the Holders under this Section 8 shall be in addition to any liability which the respective Holders may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and the Guarantors and to each person, if any, who controls the Company within the meaning of the Act the amount by which the total net proceeds received by such Holder with respect to the Notes exceeds the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of misrepresentation within the meaning of Section 11(a) of the Act shall be entitled to contribution from any person who was not guilty of such misrepresentation. (f) Notwithstanding anything to the contrary in this Section 8, the Company and the Guarantors shall not be required to indemnify and hold harmless any party with respect to any loss, liability, claim, damage or expense to the extent arising out of (x) the use of a Prospectus relating to a Shelf Registration Statement during any period when its use has been suspended pursuant to Section 4(c) after the Issuers have provided (and such party has actually received) written notice of such suspension pursuant to Section 12(e); PROVIDED that the Company shall have established beyond a reasonable doubt in a court of competent jurisdiction that such Holder actually received such written notice on a timely basis and that such loss, liability, claim, damage or expense would have been completely avoided had such notice been complied with or (y) the use of an outdated Prospectus relating to a Shelf Registration Statement following the delivery of an updated Prospectus correcting the untrue statement or omission giving rise to the loss, liability, claim, damage or expense to any Holder; provided, that the Company shall have established beyond a reasonable doubt in a court of competent jurisdiction that (i) any such untrue statement or omission was fully corrected in such updated Prospectus, (ii) that the delivery of such updated Prospectus by such Holder would not have given rise to such loss, liability, claim, damage or expense and (iii) such Holder was provided with sufficient quantities of such updated Prospectus and written notice of suspension of the prior Prospectus, each on a timely basis. Any amounts paid by the Issuers to a Holder pursuant to this Agreement as a result of such losses, liabilities, claims, damages or expenses shall be returned to the Issuer, if it shall be finally determined by a court of competent jurisdiction that such Holder was not entitled to indemnification by the Issuers by virtue of this Section 8(f). SECTION 9. RULE 144A The Issuers hereby agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding, to make available to any Holder or beneficial owner of 22 -21- Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities from such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A. SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS No Holder may participate in any Underwritten Registration with respect to any Notes hereunder unless such Holder (a) agrees to sell such Holder's Transfer Restricted Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements, and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up letters and other documents required under the terms of such underwriting arrangements. SECTION 11. SELECTION OF UNDERWRITERS The Holders of Transfer Restricted Securities covered by the Shelf Registration Statement who desire to do so may sell such Transfer Restricted Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by the Holders of a majority in aggregate principal amount of the Transfer Restricted Securities included in such offering; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. SECTION 12. MISCELLANEOUS (a) REMEDIES. The Issuers agree that monetary damages (including the Liquidated Damages contemplated hereby) would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) NO INCONSISTENT AGREEMENTS. The Issuers will not, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Neither the Company nor any of the Guarantors have previously entered into any agreement granting any registration rights with respect to its securities to any Person, other than the Warrant Holders' Agreement. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to any of the holders of the Issuers' securities under any agreement in effect on the date hereof. (c) ADJUSTMENTS AFFECTING THE NOTES. The Issuers will not take any action, or permit any change to occur, with respect to the terms of the Notes that would materially and adversely affect the ability of the Holders to Consummate any Exchange Offer. 23 -22- (d) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Issuers have obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose securities are being tendered pursuant to the Exchange Offer and that does not affect directly or indirectly the rights of other Holders whose securities are not being tendered pursuant to such Exchange Offer may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities being tendered or registered. (e) NOTICES. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery: (i) if to a Holder, at the address set forth on the records of the Registrar under the Indenture, with a copy to the Registrar under the Indenture; and (ii) if to the Issuers: TransTechnology Corporation 150 Allen Road Liberty Corner, New Jersey 07938 Telecopier No.: (908) 903-1616 Attention: Chief Financial Officer with a copy to F. Ronald O'Keefe, Esq. Hahn Loeser & Parks LLP 3300 BP America Building 200 Public Square Cleveland, Ohio 44114 Telecopier No.: (216) 241-2824 All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. 24 -23- Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders of Transfer Restricted Securities; provided, however, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign acquired Transfer Restricted Securities from such Holder. (g) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (I) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) SEVERABILITY. In the event that anyone or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (k) ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement, the Indenture, the Notes and the Exchange Escrow Agreement, is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Issuers with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. [Signature page follows] 25 IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first set forth above. THE COMPANY: TRANSTECHNOLOGY CORPORATION By:/s/Joseph F. Spanier --------------------------- Name: Joseph F. Spanier Title: Vice President & CFO THE GUARANTORS: TRANSTECHNOLOGY ACQUISITION CORPORATION By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary PALNUT FASTENERS, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary INDUSTRIAL RETAINING RING COMPANY By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary RETAINERS, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 26 RANCHO TRANSTECHNOLOGY CORPORATION By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY SYSTEMS & SERVICES, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary ELECTRONIC CONNECTIONS AND ASSEMBLIES, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INDUSTRIES By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary SSP INTERNATIONAL SALES, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY SEEGER, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 27 SEEGER INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TCR CORPORATION By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary NORCO, INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary AEROSPACE RIVET MANUFACTURERS CORPORATION By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary ELLISON RING & WASHER INC. By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary TRANSTECHNOLOGY ENGINEERED COMPONENTS, LLC By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary 28 TRANSTECHNOLOGY CANADA CORPORATION By:/s/Gerald C. Harvey --------------------------- Name: Gerald C. Harvey Title: Vice President & Secretary THE ADMINISTRATIVE AGENT: BANKBOSTON, N.A., as Administrative Agent on behalf of the Initial Purchasers and Holders By:/s/ Robert W. MacElhiney ---------------------------- Name: Robert W. MacElhiney Title: Vice President EX-10.32 8 EXHIBIT 10.32 1 WARRANT ESCROW AGREEMENT ------------------------ This WARRANT ESCROW AGREEMENT (this "AGREEMENT"), dated as of August 31, 1999, among TransTechnology Corporation, a Delaware corporation or another Surviving Person in accordance with Section 5.01 of the Warrant Agreement (the "COMPANY"), State Street Bank and Trust Company, as warrant agent (in such capacity, the "WARRANT AGENT") and as escrow agent (in such capacity, the "ESCROW AGENT"), BankBoston, N.A. ("BANKBOSTON") as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT"), for the ratable benefit of the Holders (as defined below) from time to time. RECITALS: --------- WHEREAS, the Company has entered into a Senior Subordinated Note Purchase Agreement (the "LOAN AGREEMENT"), dated as of the date hereof, among the Company, the Lenders party thereto and the Administrative Agent; WHEREAS, the Company and the Warrant Agent have entered into a Warrant Agreement dated as of the date hereof (the "WARRANT AGREEMENT") pursuant to which the Company has agreed to issue on the date hereof the Warrants to be held by the Escrow Agent and released subject to the terms hereof; and WHEREAS, the Company and the Administrative Agent desire to appoint the Escrow Agent as escrow agent for the purpose of receiving, holding and distributing the Escrowed Property, and the Escrow Agent is willing to serve as escrow agent, subject to and in accordance with the terms and provisions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. DEFINITIONS; APPOINTMENT; DEPOSIT, REPRESENTATIONS AND COVENANTS; RELEASE. 1.1. DEFINITIONS. Capitalized terms used herein and not defined shall have the meanings assigned to them in the Loan Agreement. "CONTESTING PARTY": see Section 2.7. "ESCROW ACCOUNT": see Section 1.3(a). "ESCROWED PROPERTY" shall mean, with respect to any date, (i) the Warrants as represented by the Warrant Certificates and (ii) the Warrant Proceeds, if any, in each case, held in the Escrow Account on such date. 2 -2- "HOLDERS" means any Holder of a Note under the Loan Agreement or the Indenture referred to therein. "INITIAL RELEASE DATE": see Section 1.5(a). "LOAN AGREEMENT": see the recitals to this Agreement. "RELEASE DATE": see Section 1.5(b). "SHARES" shall have the meaning ascribed to such term in the Warrant Agreement. "WARRANT AGREEMENT": see the recitals to this Agreement. "WARRANT CERTIFICATES" shall mean the certificates evidencing the Warrants executed by the Company and issued pursuant to the Warrant Agreement. "WARRANT PROCEEDS" shall mean all Distributions and Distribution Rights (as such terms are defined in Section 5.03 of the Warrant Agreement) in respect of the Warrants in the Escrow Account. "WARRANTS" shall have the meaning ascribed to such term in the Warrant Agreement. 1.2. APPOINTMENT OF THE ESCROW AGENT. The Company appoints the Escrow Agent as escrow agent in accordance with the terms and conditions set forth herein and the Escrow Agent hereby accepts such appointment. 1.3. ESCROW ACCOUNT; ESCROW DEPOSIT. (a) Prior to the execution hereof, the Company shall have caused the Escrow Agent to have opened an account for the deposit of the Warrant Certificates (the "ESCROW ACCOUNT") at its offices in Boston, Massachusetts (Account No. [ ]), in the name of and under the sole dominion and control of the Escrow Agent and subject to the terms of this Agreement. Simultaneously with the execution hereof, the Company has caused to be delivered to the Escrow Agent, and the Escrow Agent hereby acknowledges receipt of, for deposit in the Escrow Account, Warrant Certificates representing the right to purchase, in the aggregate, 10.0% of the issued and outstanding Common Stock of the Company on a fully diluted basis as of the Closing Date (after giving effect to the issuance of such Warrants and all other warrants, options, or other convertible securities exercisable for or convertible such shares of Common Stock of the Company outstanding as of the Closing Date). (b) The Company shall cause to be delivered to the Escrow Agent, from time to time, for deposit in the Escrow Account, all Warrant Proceeds, to the extent such Warrant Proceeds relate to the Warrants in the Escrow Account, on the date of 3 -3- the granting or distribution, as applicable, of such Warrant Proceeds, in accordance with Section 5.03 of the Warrant Agreement. (c) In the event that the Company takes any action at any time during the term of this Agreement which would require an adjustment in respect of the Warrants under Section 5.01 of the Warrant Agreement, then the Warrant Certificates in the Escrow Account shall be deemed to be so adjusted as provided in the Warrant Agreement. (d) The Escrow Agent shall provide to the Administrative Agent and the Company monthly statements identifying transactions, transfers or holdings of the Escrowed Property and in the absence of manifest error, each such statement shall be deemed to be correct and final upon receipt thereof by the Administrative Agent and the Company unless and except to the extent the Escrow Agent is notified in writing to the contrary within thirty (30) Business Days of the date of such statement. 1.4. REPRESENTATION, WARRANTIES AND COVENANTS OF THE COMPANY. The Company hereby represents, warrants, covenants and agrees that: (a) This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company, and is enforceable against the Company in accordance with its terms, except as enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and (ii) general principles of equity including without limitation concepts of materiality, reasonableness, good faith and fair dealing, and the possible unavailability of specific performance or injunctive relief (regardless of whether considered in a proceeding in equity or at law); and the execution, delivery and performance of this Agreement by the Company does not and will not violate any applicable law or regulation. (b) The Company shall not create, incur, or assume any lien on or security interest in the Escrowed Property, and the Company hereby represents and warrants that the Warrants and the Shares have been duly authorized and the Warrants have been duly issued and delivered to the Escrow Agent (as evidenced by the Warrant Certificates, respectively) on the date hereof and that the Shares, if and when issued, will be fully paid and nonassessable and free and clear of any Lien, encumbrance, charge, security interest or other claim of others created by the Company. (c) In the event that the Company takes any action at any time during the term of this Agreement which would result in an adjustment to the number of Shares, the Company shall provide to the Escrow Agent a copy of the notice and certificate provided pursuant to Section 5.01 of the Warrant Agreement at the same time as such documents are provided thereunder. 1.5. RELEASE OF THE ESCROWED PROPERTY 4 -4- (a) Subject to the terms and conditions set forth herein, the Escrow Agent shall release the Escrowed Property in installments to the Administrative Agent, for the account of each of the Holders (as certified to the Escrow Agent by the Administrative Agent) in accordance with this Section 1.5. Subject to Section 1.5(b) below, on the one year anniversary of the Closing Date (the "Initial Release Date"), and at the end of each three-month period following the Initial Release Date as set forth in Column A below (or at such later date following written notice from the Administrative Agent pursuant to Section 1.5(c) below) (each such date, a "Release Date"), if any Notes are outstanding and have not been paid in full or otherwise repurchased or redeemed by the Company prior to such Release Date (as certified to the Escrow Agent by the Administrative Agent), the Escrow Agent shall release a percentage of the Warrants (and a percentage of the Warrant Proceeds, if any) then remaining in the Escrow Account hereunder to the Administrative Agent for the account of each of the Holders, in an amount in the case of each such Holder (as certified to the Escrow Agent by the Administrative Agent), equal to the product of (i) the percentage of the Warrants and any related Warrant Proceeds then held by the Escrow Agent as is set forth in Column B below opposite the applicable Release Date and (ii) the ratio of (x) the aggregate principal amount of Notes, without regard to accrued interest, held by such Holder at such time, as certified by the Administrative Agent pursuant to Section 1.5(c)(ii) below, to (y) the aggregate principal amount of all outstanding Notes at such time, as certified by the Administrative Agent pursuant to Section 1.5(c)(ii) below, without regard to accrued interest (such Warrants only to be earned on each Release Date and not for any interim period ending prior to the next Release Date): A B ------------------------------ -------------------------------- Initial Release Date 20% 90th day following Initial 25% Release Date 180th day following Initial 33 1/3% Release Date 270th day following Initial 50% Release Date 360th day following Initial 100% Release Date No Warrants or related Warrant Proceeds (except those previously earned in and not yet released to a Holder) will be delivered by the Administrative Agent to a Holder after the date upon which all Notes held by such Holder are completely repaid (including by repurchase or redemption) or such Holder has ceased to hold any Notes. 5 -5- (b) Two (2) Business Days following its receipt of written notice from the Administrative Agent of the repayment of all Notes held by the Holders as of the Initial Release Date (including by repurchase or redemption) or any subsequent Release Date, the Escrow Agent shall release to the Company all Escrowed Property remaining in the Escrow Account and the Escrow Agent shall be discharged from all obligations under this Agreement and shall have no further duties or responsibilities in connection herewith and the Holders shall have no further right to earn or have released from escrow any Escrowed Property. (c) The Administrative Agent shall (i) notify the Escrow Agent promptly in writing of the repayment of all of the Notes as described in Section 1.5(b), and (ii) certify to the Escrow Agent no more than five (5) Business Days prior to each scheduled Release Date and at least two (2) Business Days prior to each actual Release Date that, as of the date of such certification, there are then Notes outstanding which have not been paid in full or otherwise repurchased or redeemed by the Company, together with a statement of (i) the principal amounts of such Notes then outstanding, (ii) the Holders thereof, and (iii) the Administrative Agent's calculation of the ratios described in Section 1.5(a)(ii) above. The Escrow Agent shall not be required to release any of the Escrowed Property on any scheduled Release Date unless it shall first have received from the Administrative Agent the certification described in the foregoing clause (ii) with respect to such Release Date, and upon receipt of such certification, the Escrow Agent shall comply with Section 1.5(a) no earlier than the first to occur of (A) applicable Release Date or (B) the second (2nd) Business Day following such receipt, and the date of such compliance shall be deemed to be the Release Date for purposes hereof. Any such certification by the Administrative Agent shall include registration and delivery instructions, in the case of Warrants then held in escrow hereunder in the form of definitive Warrants, and participant account or other necessary information in the case of Warrants held in escrow hereunder in the form of Global Warrants, and payment (and/or delivery) instructions in the case of Warrant Proceeds, as the case may be, as the Escrow Agent may deem necessary to carry out such release. Any notices or instructions provided by the Administrative Agent to the Escrow Agent may be reasonably relied upon in good faith by the Escrow Agent for any purpose hereunder, including without limitation for the purposes of Section 1.5(a) above, and shall be conclusive notwithstanding any instructions to the contrary provided by the Company. (d) Upon release of any Escrowed Property pursuant to Section 1.5(a) above to the Administrative Agent for the benefit of the Holders, each Holder shall be entitled as between itself, the Administrative Agent and other Holders (but not with respect to the Company) to all the rights and privileges with respect to its pro rata share, in accordance with the respective unpaid principal amounts of the Notes without regard to accrued interest), held by the Holders as of the applicable Release Date, of such Escrowed Property, of the Warrants underlying the released Warrant Certificate (together with the related Warrant Proceeds, if any) as if such Holder possessed a Warrant Certificate and Warrant Proceeds corresponding to such PRO RATA share. 6 -6- (e) The Company agrees that upon presentment by the Administrative Agent of any properly released Warrant Certificate (together with the released Warrant Proceeds, if any, attributable to the Warrants underlying such released Warrant Certificate), that it shall issue new Warrant Certificates (in accordance with the provisions of the Warrant Agreement), as applicable, together with applicable Warrant Proceeds, as applicable, registered in the names of the Holders on a PRO RATA basis, in accordance with the respective unpaid outstanding principal amount of the Notes held by the Holders, as applicable, as of the applicable Release Date for the presented Warrant Certificate, and will deliver such Warrant Certificates to the Administrative Agent for delivery to the Holders; PROVIDED that the Company shall not be held liable with respect to such issuances if the Company acted in good faith based upon instructions from the Administrative Agent. (f) Notwithstanding anything to the contrary stated herein, the Escrow Agent shall not be obligated to carry out any release pursuant to this Section 1.5 sooner than the third Business Day after it has received the requisite documents and passage of the required date for release, as applicable. 2. EXCULPATION AND INDEMNIFICATION OF THE ESCROW AGENT. 2.1. The Escrow Agent shall have no duties or responsibilities other than those expressly set forth herein and no duties, responsibilities or obligations shall be inferred or implied. The Escrow Agent shall not be subject to, nor required to comply with, any other agreement between or among the Company and the Holders to which the Company or the Holders are a party, even though reference thereto may be made herein, or to comply with any direction or instruction (other than those contained herein or delivered in accordance with this Agreement). The Escrow Agent shall not be required to, and shall not, expend or risk any of its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder. The Escrow Agent shall have no duty to enforce any obligation of any other person to make any payment or delivery, or to direct or cause any payment or delivery to be made by any other person, or to enforce any obligation of any other person to perform any other act. In no event shall the Escrow Agent be held to a higher degree of care toward the Escrowed Property under this Agreement than it exercises toward its own similar property. The Escrow Agent shall be under no liability to the other parties hereto or to the Holders or to anyone else by reason of any failure on the part of any party hereto or any maker, guarantor, endorser or other signatory of any document or any other person to perform such person's obligations under any such document. 2.2. The Escrow Agent shall not be liable to the other parties hereto or to the Holders or to anyone else for any action taken or omitted by it, or any action suffered by it to be taken or omitted, in good faith and in the exercise of its own reasonable judgment and the absence of gross negligence or willful misconduct. The Escrow Agent shall not incur any liability for not performing any act or fulfilling any duty, obligation or responsibility hereunder by reason of any occurrence beyond the control of it (including but not limited to any act or provision of any present or future law or regulation, or governmental authority, any act of God or war, or the 7 -7- unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility). The Escrow Agent may (in the absence of bad faith) rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel (including counsel chosen by it), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions but also as to the truth and acceptability of any information therein contained) which is reasonably believed by it to be genuine and to be signed or presented by the proper person or persons. The Escrow Agent shall not be bound by any notice or demand, or any waiver, modification, termination or rescission of this Agreement or any of the terms hereof, unless evidenced by a writing delivered to it signed by the proper party or parties and, if its duties or rights are affected, unless it shall deliver its written consent thereto. In no event shall the Escrow Agent be liable (i) for (in the absence of bad faith) acting in accordance with or relying upon any instruction, notice, demand, certificate or document from any party or any entity acting on behalf of any party, (ii) for any consequential, punitive or special damages, (iii) for the acts or omissions of its nominees, correspondents, designees, subagents or subcustodians or (iv) for an amount in excess of the value of the Escrowed Property. 2.3. The Escrow Agent shall (in the absence of bad faith) not be responsible for the sufficiency or accuracy of the form of, or the execution, validity, value or genuineness of, any document or property received, held or delivered by it hereunder, or of any signature or endorsement thereon, or for any lack of endorsement thereon, or for any description therein, nor shall the Escrow Agent be responsible or liable to the other parties hereto or to anyone else in any respect on account of the identity, authority or rights of the persons executing or delivering or purporting to execute or deliver any document or property or this Agreement. The Escrow Agent shall have no responsibility with respect to the use or application of any funds or other property paid or delivered by the Escrow Agent pursuant to the provisions hereof. 2.4. The Escrow Agent shall be indemnified and held harmless by the Company from and against any and all claims, losses, liabilities, costs, damages or expenses, including reasonable counsel fees and disbursements, incurred by the Escrow Agent in connection with or related to this Escrow Agreement or its being Escrow Agent hereunder, including, but not limited to all claims, losses, liabilities, costs, damages or expenses, including reasonable counsel fees and disbursements, incurred by the Escrow Agent in connection with any action, suit or other proceeding involving any claim, or in connection with any claim or demand, which in any way, directly or indirectly, arises out of or relates to this Agreement, the services of the Escrow Agent hereunder, the monies or other property held by it hereunder, except to the extent such liability, expense or claim is attributable to the bad faith, gross negligence or willful misconduct of the Escrow Agent. Promptly after the receipt by the Escrow Agent of notice of any such demand or claim or the commencement of any such action, suit or proceeding, the Escrow Agent shall, if a claim in respect thereof is to be made against any of the other parties hereto, notify such other parties thereof in writing, and such other party may by written notice to the Escrow Agent accepting its obligation to indemnify the Escrow Agent hereunder with 8 -8- respect thereto assume the defense of such claim; but the failure by the Escrow Agent to give such notice shall not relieve the Company from any liability which the Company may have to the Escrow Agent hereunder except to the extent the Company is actually prejudiced thereby. For the purposes hereof, the term "claims, losses, liabilities, costs, damages or expenses" shall include all amounts paid or payable to satisfy any claim, demand or liability, or in settlement of any claim, demand, action, suit or proceeding settled with the express written consent of the Company, and all costs and expenses, including, but not limited to, reasonable counsel fees and disbursements paid or incurred in investigating or defending against any such claim, demand, action, suit or proceeding. 2.5. The Escrow Agent makes no representation as to the validity, value, genuineness or collectibility of any security or other document or instrument held by or delivered to it. The Escrow Agent does not make any representation as to the validity or sufficiency of this Agreement, except for the due execution and delivery of this Agreement by the Escrow Agent, as to which it hereby so represents and warrants. 2.6. The Escrow Agent shall not be called upon to advise any party as to selling or retaining, or taking or refraining from taking any action with respect to, any securities or other property deposited hereunder. 2.7. If at any time the Escrow Agent is served with any judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process which in any way affects the Escrowed Property (including, but not limited to, orders of attachment or garnishment or other forms of levies or injunctions or stays relating to the transfer of Escrowed Property), the Escrow Agent shall give prompt written notice thereof to the Agents and the Company. Unless the Administrative Agent or the Company or both of them shall, within ten Business Days after receipt of such notice by the last of the addressees thereof to receive it, advise the Escrow Agent in writing of the intention of the Administrative Agent, the Company or both of them (the "CONTESTING PARTY") to contest diligently and in good faith such order, judgment, decree, writ or other form of process at the sole cost and expense of such contesting party, the Escrow Agent is authorized to comply therewith in any manner as it or its legal counsel of its own choosing deems appropriate; and if the Escrow Agent complies with any such judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process, the Escrow Agent shall (in the absence of bad faith) not be liable to any of the parties hereto or to any other person or entity even though such order, judgment, decree, writ or process may be subsequently modified or vacated or otherwise determined to have been without legal force or effect. If at any time the Escrow Agent is served with any final judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process which is not subject to appeal and which in any way affects the Escrowed Property (including but not limited to orders of attachment or garnishment or other forms of levies or injunctions or stays relating to the transfer of the Escrowed Property), the Escrow Agent is authorized (in the absence of bad faith) to comply therewith in any manner as it or its legal counsel of its own choosing deems appropriate. 9 -9- 2.8. The Escrow Agent is authorized (in the absence of bad faith) to comply with and rely upon any notices, instructions or other communications reasonably believed by it to have been sent or given by the Administrative Agent or by a person or persons authorized by the Administrative Agent. Whenever under the terms hereof the time for giving a notice or performing an act falls upon a day that is not a Business Day, such time shall be extended to the next succeeding Business Day. 2.9. This Agreement is for the exclusive benefit of the parties hereto and their respective successors hereunder, and shall not be deemed to give, either express or implied, any legal or equitable right, remedy, or claim to any other entity or person whatsoever. 2.10 The Escrow Agent shall not be under any obligation to invest (or otherwise pay interest on) any funds it may receive from time to time hereunder as part of any Warrant Proceeds. 3. COMPENSATION OF THE ESCROW AGENT. The Escrow Agent shall be entitled to payment from the Company for all services rendered subsequent to the date hereof, in the amounts and at the times set forth on SCHEDULE 1 hereto or as shall be agreed upon between the Company and the Escrow Agent from time to time, and reimbursement from the Company, upon demand, for all expenses, payments and advances paid or incurred by it in the administration of its duties hereunder, including, but not limited to, all reasonable counsel and agents' fees and disbursements and all taxes or other governmental charges. The Escrow Agent shall be paid any compensation or reimbursement of expenses owed to it by the Company, and the Escrow Agent shall have no interest in the Escrowed Property with respect to such amounts. 4. FURTHER ASSURANCES. From time to time on and after the date hereof, the other parties hereto shall deliver or cause to be delivered to the Escrow Agent such further documents and instruments and shall do and cause to be done such further acts as the Escrow Agent shall reasonably request (it being understood that the Escrow Agent shall have no obligation to make any such request) to carry out more effectively the provisions and is Agreement. 5. TERMINATION OF AGREEMENT OF THE ESCROW AGENT. (a) The Escrow Agent may at any time resign as such by delivering written notice of such resignation in duplicate, one copy to the Administrative Agent and one copy to the Company. The resignation of the Escrow Agent will take effect on the appointment of a successor designated by the Administrative Agent and reasonably acceptable to the Company. If a successor Escrow Agent has not accepted its appointment within thirty calendar days after the Escrow Agent gives notice to the Administrative Agent and the Company of its intention to resign, the Escrow Agent may apply to a court of competent jurisdiction for the appointment of a successor, and the costs and expenses (including reasonable counsel fees and disbursements) incurred by the Escrow Agent in connection with such proceeding 10 -10- shall be paid by the Company. Upon the appointment of a successor Escrow Agent, the resigning Escrow Agent shall deliver the Escrowed Property to the successor Escrow Agent, whereupon the resigning Escrow Agent shall be discharged of and from any and all further obligations arising in connection with this Agreement. This Agreement shall terminate on the final disposition of the Escrowed Property in accordance with the terms of this Agreement, PROVIDED, HOWEVER, that upon any termination, Sections 2, 3, 6 and 8.4 shall survive the termination hereof. (b) The Administrative Agent may, at any time and for any reason, and shall, upon any event set forth in the next succeeding sentence, remove the Escrow Agent and appoint a successor Escrow Agent by written instrument in duplicate, specifying such removal and the date on which it is intended to become effective, signed on behalf of the Administrative Agent, one copy of which shall be delivered to the Escrow Agent being removed and one copy to the successor Escrow Agent. The Escrow Agent shall be removed as aforesaid if it shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Escrow Agent or of its property shall be appointed, or any public officer shall take charge or control of it or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. Any removal of the Escrow Agent and any appointment of a successor Escrow Agent shall become effective upon acceptance of appointment by the successor Escrow Agent. As soon as practicable after appointment of the successor Escrow Agent, the Administrative Agent shall cause written notice of the change in the Escrow Agent to be given to the Company and to each Holder. 6. CONSENT TO SERVICE OF PROCESS. Each of the parties hereto hereby irrevocably consents to the jurisdiction of the courts of the Commonwealth of Massachusetts and of any federal court located in the City of Boston in connection with any action, suit or other proceeding arising out of or relating to this Agreement or any action taken or omitted hereunder, and waives personal service of any summons, complaint or other process and agrees that the service thereof may be made by certified or registered mail directed to such person at such person's address for purposes of notices hereunder. Should the person so served fail to appear or answer within the time prescribed by law, that person shall be deemed in default and judgment may be entered against that person for the amount or other relief as demanded in any summons, complaint or other process so served. 7. NOTICES. All notices, requests, demands and other communications provided for herein shall be writing, shall be delivered by hand, by first-class mail or by facsimile transmission, shall be deemed given or sent when received, and shall be addressed to the parties hereto at their respective addresses and, if applicable, facsimile numbers listed below or to such other persons or addresses or facsimile numbers as the relevant party shall designate as to itself from time to time in writing delivered in like manner: If to the Company, to: TransTechnology Corporation 150 Allen Road 11 -11- Liberty Corner, New Jersey 07930 Facsimile No.: (908) 903-1616 Attention: Chief Financial Officer With a separate copy delivered to: Hahn Loeser & Parks LLP 3300 BP America Building 200 Public Square Cleveland, Ohio 44114 Facsimile No.: (216) 241-2824 Attention: F. Ronald O'Keefe, Esq. if to the Administrative Agents, to: BankBoston, N.A. 100 Federal Street Boston, Massachusetts 02110 Facsimile No.: (617) 434-6685 Attention: Maura C. Wadlinger with a copy to: Bingham Dana LLP 150 Federal Street Boston, Massachusetts 02110 Facsimile No.: (617) 951-8736 Attention: T. Malcolm Sandilands, Esq. if to the Escrow Agent, to: State Street Bank and Trust Company 2 Avenue de Lafayette Boston, Massachusetts 02111-1724 Facsimile No.: (617) 662-1465 Attention: Corporate Trust Department Attention: TransTechnology Corporation Warrant Escrow Agreement 8. MISCELLANEOUS. 8.1. All amounts referred to herein are expressed in Dollars and all payments by or to the Escrow Agent shall made in Dollars. 8.2. This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing such instrument to be drafted. The terms "HEREBY", "HEREIN", "HEREOF", "HERETO", "HEREUNDER" and any similar terms, as used in this Agreement, refer to this Agreement in its entirety and 12 -12- not only to the particular portion of this Agreement where the term is used. The word "person" shall mean any natural person, partnership, corporation, government and any other form of business or legal entity. All words or terms used in this Agreement, regardless of the number or gender in which they are used, shall be deemed to include any other number and any other number as the context may require. 8.3. This Agreement and the rights and obligations hereunder of the Company may be assigned by it only to a successor to its entire business. The succession, resignation or replacement of the Administrative Agent shall be in accordance with and subject to the provisions of the Loan Agreement. Any corporation into which the Escrow Agent may be merged or converted, or any corporation resulting from any consolidation to which the Escrow Agent or any of its respective successors shall be a party, and any corporation which acquires substantially all of the corporate trust business of the Escrow Agent or any of its respective successors, shall be a successor Escrow Agent, as the case may be, without any further act. Any such successor Escrow Agent shall promptly cause written notice of its succession as Escrow Agent to be delivered to the Company and the Administrative Agent. This Agreement shall be binding upon and inure to the benefit of each party's respective successors, heirs and permitted assigns. No other person shall acquire or have any rights under or by virtue of this Agreement. This Agreement may not be changed orally or modified, amended or supplemented without an express written agreement executed by the Escrow Agent and the other parties hereto. This Agreement is intended to be for the sole benefit of the parties hereto and their respective successors, heirs and assigns and none of the provisions of this Agreement are intended to be, nor shall they be construed to be, for the benefit of any other person. 8.4. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. 8.5. This Agreement may be executed in any number of counterparts, and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. One or more counterparts of this Escrow Agreement may be delivered via telecopier, with the intention that they shall have the same effect as an original counterpart hereof. 8.6. The headings contained in this Agreement are for convenience of reference only and shall have no effect on the interpretation or operation thereof. 8.7. This Agreement shall constitute the entire agreement of the parties with respect to the subject matter and supersedes all prior oral or written agreements in regard thereto. Except as otherwise permitted herein, this Escrow Agreement may be modified only by a written amendment signed by all the parties hereto, and no waiver of any provision hereof shall be effective unless expressed in a writing signed by the party to be charged. 13 -13- [SIGNATURE PAGE FOLLOWS] 14 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. TRANSTECHNOLOGY CORPORATION By: /s/ Joseph F. Spanier --------------------------------- Name: Joseph F. Spanier Title: Vice President & CFO BANKBOSTON, N.A., as Administrative Agent By: /s/ Robert W. MacElhiney --------------------------------- Name: Robert W. MacElhiney Title: Vice President STATE STREET BANK AND TRUST COMPANY, as Warrant Agent and Escrow Agent By: /s/ Jill Olson --------------------------------- Name: Jill Olson Title: Vice President EX-10.33 9 EXHIBIT 10.33 1 EXCHANGE ESCROW AGREEMENT This EXCHANGE ESCROW AGREEMENT (this "AGREEMENT"), dated as of August 31, 1999, among TransTechnology Corporation, a Delaware corporation or any successor thereof (the "COMPANY"), State Street Bank and Trust Company, as Trustee under the Indenture (as defined below) (in such capacity, the "TRUSTEE") and as escrow agent hereunder (in such capacity, the "ESCROW AGENT"), and BankBoston, N.A. ("BANKBOSTON") as Administrative Agent (in such capacity, the "ADMINISTRATIVE AGENT"), for the ratable benefit of the Holders (as defined below) from time to time. RECITALS: WHEREAS, the Company has entered into a Senior Subordinated Note Purchase Agreement (the "LOAN AGREEMENT"), dated as of the date hereof, among the Company, the Lenders party thereto and the Administrative Agent; WHEREAS, pursuant to the Loan Agreement, the Company has executed and delivered to the Escrow Agent (i) an Indenture among the Company, the Guarantors named therein (collectively, the "GUARANTORS"), and State Street Bank and Trust Company, as Trustee (the "INDENTURE"), and (ii) a Series A Senior Subordinated Note in global form made by the Company and guaranteed by the Guarantors, in an aggregate principal amount equal to $75,000,000 (the "GLOBAL EXCHANGE NOTE"; together with the Indenture, the "ESCROWED PROPERTY"); and WHEREAS, the Company and the Administrative Agent desire to appoint the Escrow Agent as escrow agent for the purpose of receiving and holding the Escrowed Property, and the Escrow Agent is willing to serve as escrow agent, subject to and in accordance with the terms and provisions hereinafter set forth; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows: 1. DEFINITIONS; APPOINTMENT; DEPOSIT, REPRESENTATIONS AND COVENANTS; RELEASE. 1.1. DEFINITIONS. Capitalized terms used herein and not defined shall have the meanings assigned to them in the Loan Agreement. "CONTESTING PARTY": see Section 2.7. "ESCROW ACCOUNT": see Section 1.3(a). "ESCROWED PROPERTY": see the recitals to this Agreement. "EXCHANGE NOTICE" See Section 1.5(a). 2 -2- "GLOBAL EXCHANGE NOTE": see the recitals to this Agreement. "GUARANTORS": see the recitals to this Agreement. "HOLDERS" means any Holder of a Note under the Loan Agreement or the Indenture referred to therein. "INDENTURE": see the recitals to this Agreement. "INITIAL RELEASE DATE": see Section 1.5(a). "LOAN AGREEMENT": see the recitals to this Agreement. 1.2. APPOINTMENT OF THE ESCROW AGENT. The Company appoints the Escrow Agent as escrow agent in accordance with the terms and conditions set forth herein and the Escrow Agent hereby accepts such appointment. 1.3. ESCROW ACCOUNT; ESCROW DEPOSIT. Prior to the execution hereof, the Company shall have caused the Escrow Agent to have opened an account for the deposit of the Escrowed Property (the "ESCROW ACCOUNT") at its offices in Boston, Massachusetts (Account No. [ ]), in the name of and under the sole dominion and control of the Escrow Agent and subject to the terms of this Agreement. Simultaneously with the execution hereof, the Company has caused to be delivered to the Escrow Agent, (i) and the Escrow Agent hereby acknowledges receipt of, for deposit in the Escrow Account, each of the Global Exchange Note, executed by the Company and each of the Guarantors, and (ii) four originals of the Indenture, each executed by the Company and each of the Guarantors. 1.4. REPRESENTATION, WARRANTIES AND COVENANTS OF THE COMPANY. The Company hereby represents, warrants, covenants and agrees that: (a) This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company, and is enforceable against the Company in accordance with its terms, except as enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and (ii) general principles of equity including without limitation concepts of materiality, reasonableness, good faith and fair dealing, and the possible unavailability of specific performance or injunctive relief (regardless of whether considered in a proceeding in equity or at law); and the execution, delivery and performance of this Agreement by the Company does not and will not violate any applicable law or regulation. (b) The Company shall not create, incur, or assume any lien on or security interest in the Escrowed Property, and the Company hereby represents and warrants that each of the Escrowed Documents have been duly authorized and the 3 -3- Global Exchange Note has been duly issued and delivered to the Escrow Agent on the date hereof. 1.5. RELEASE OF THE ESCROWED PROPERTY (a) Subject to the terms and conditions set forth herein, the Escrow Agent shall release the Escrowed Property to the Trustee under the Indenture in accordance with this Section 1.5. Subject to Section 1.5(b) below, at any time following the one year anniversary of the Closing Date, if any Notes are then outstanding and have not been paid in full or otherwise repurchased or redeemed by the Company (as certified to the Escrow Agent by the Administrative Agent) the Escrow Agent shall upon the written direction of the Administrative Agent (an "EXCHANGE NOTICE") certifying that such release and delivery has been requested by a Holder or Holders of Term Notes pursuant to and in accordance with Section 5 of the Loan Agreement (such Holder(s), the "REQUESTING HOLDER(S)"), release and deliver (i) to the Company, two of the originals of the Indenture executed by the Company and the Guarantors, (ii) to the Trustee two of the originals of the Indenture executed by the Company and the Guarantors, and (iii) to the Trustee, the Global Exchange Note executed by the Company and the Guarantors, to be held by the Trustee as Custodian therefor pursuant to the Indenture, PROVIDED that at the time of such release the aggregate principal amount of the Global Exchange Note shall be endorsed by the Trustee in accordance with Section 2.01(b) of the Indenture on the date of such release in an amount equal to the principal amount of the Notes or Notes then held by such Requesting Holder or Holders (as certified to the Escrow Agent and the Trustee by the Administrative Agent and the Company in the Exchange Notice), and such Global Exchange Note shall thereupon constitute the initial Global Note under and as defined in the Indenture, and shall be subject to subsequent adjustment in accordance with the provisions thereof. (b) Two (2) Business Days following its receipt of written notice from the Administrative Agent of the repayment of all Notes (including by repurchase or redemption), the Escrow Agent shall release to the Company all Escrowed Property remaining in the Escrow Account and the Escrow Agent shall be discharged from all obligations under this Agreement and shall have no further duties or responsibilities in connection herewith. The Administrative Agent agrees that it shall notify the Escrow Agent promptly in writing of the repayment of all of the Notes. (c) The Escrow Agent shall not be required to release any of the Escrowed Property unless it shall first have received from the Administrative Agent the Exchange Notice containing the certifications described in the foregoing clause (a), and upon receipt of such Exchange Notice, the Escrow Agent shall comply with Section 1.5(a) no earlier than the second (2nd) Business Day following such receipt. Any such Exchange Notice shall include such participant account or other necessary information with respect to the Global Exchange Note as the Escrow Agent and/or the Trustee may deem necessary to carry out such release. Any notices or instructions provided or certified to the Escrow Agent and/or the Trustee by the Administrative Agent in or pursuant to any Exchange Notice or otherwise may be reasonably relied upon in good faith by the Escrow Agent and the Trustee for any 4 -4- purpose hereunder or under the Indenture, including without limitation for the purposes of Section 1.5(a) above and Sections 2.01(b) and 2.06 of the Indenture. (d) Notwithstanding anything to the contrary stated herein, the Escrow Agent shall not be obligated to carry out any release pursuant to this Section 1.5 sooner than the third Business Day after it has received the requisite documents specified in this Section 1.5 and passage of the required date for release, as applicable. 2. EXCULPATION AND INDEMNIFICATION OF THE ESCROW AGENT. 2.1. The Escrow Agent shall have no duties or responsibilities other than those expressly set forth herein and no duties, responsibilities or obligations shall be inferred or implied. The Escrow Agent shall not be subject to, nor required to comply with, any other agreement between or among the Company and the Holders to which the Company or the Holders are a party, even though reference thereto may be made herein, or to comply with any direction or instruction (other than those contained herein or delivered in accordance with this Agreement). The Escrow Agent shall not be required to, and shall not, expend or risk any of its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder. The Escrow Agent shall have no duty to enforce any obligation of any other person to make any payment or delivery, or to direct or cause any payment or delivery to be made by any other person, or to enforce any obligation of any other person to perform any other act. In no event shall the Escrow Agent be held to a higher degree of care toward the Escrowed Property under this Agreement than it exercises toward its own similar property. The Escrow Agent shall be under no liability to the other parties hereto or to the Holders or to anyone else by reason of any failure on the part of any party hereto or any maker, guarantor, endorser or other signatory of any document or any other person to perform such person's obligations under any such document. 2.2. The Escrow Agent shall not be liable to the other parties hereto or to the Holders or to anyone else for any action taken or omitted by it, or any action suffered by it to be taken or omitted, in good faith and in the exercise of its own reasonable judgment and the absence of gross negligence or willful misconduct. The Escrow Agent shall not incur any liability for not performing any act or fulfilling any duty, obligation or responsibility hereunder by reason of any occurrence beyond the control of it (including but not limited to any act or provision of any present or future law or regulation, or governmental authority, any act of God or war, or the unavailability of the Federal Reserve Bank wire or telex or other wire or communication facility). The Escrow Agent may (in the absence of bad faith) rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion or advice of counsel (including counsel chosen by it), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its provisions but also as to the truth and acceptability of any information therein contained) which is reasonably believed by it to be genuine and to be signed or presented by the proper person or persons. The Escrow Agent shall not be bound by any notice or demand, or any waiver, 5 -5- modification, termination or rescission of this Agreement or any of the terms hereof, unless evidenced by a writing delivered to it signed by the proper party or parties and, if its duties or rights are affected, unless it shall deliver its written consent thereto. In no event shall the Escrow Agent be liable (i) for (in the absence of bad faith) acting in accordance with or relying upon any instruction, notice, demand, certificate or document from any party or any entity acting on behalf of any party, (ii) for any consequential, punitive or special damages, (iii) for the acts or omissions of its nominees, correspondents, designees, subagents or subcustodians or (iv) for an amount in excess of the value of the Escrowed Property. 2.3. The Escrow Agent shall (in the absence of bad faith) not be responsible for the sufficiency or accuracy of the form of, or the execution, validity, value or genuineness of, any document or property received, held or delivered by it hereunder, or of any signature or endorsement thereon, or for any lack of endorsement thereon, or for any description therein, nor shall the Escrow Agent be responsible or liable to the other parties hereto or to anyone else in any respect on account of the identity, authority or rights of the persons executing or delivering or purporting to execute or deliver any document or property or this Agreement. The Escrow Agent shall have no responsibility with respect to the use or application of any funds or other property paid or delivered by the Escrow Agent pursuant to the provisions hereof. 2.4. The Escrow Agent shall be indemnified and held harmless by the Company from and against any and all claims, losses, liabilities, costs, damages or expenses, including reasonable counsel fees and disbursements, incurred by the Escrow Agent in connection with or related to this Escrow Agreement or its being Escrow Agent hereunder, including, but not limited to all claims, losses, liabilities, costs, damages or expenses, including reasonable counsel fees and disbursements, incurred by the Escrow Agent in connection with any action, suit or other proceeding involving any claim, or in connection with any claim or demand, which in any way, directly or indirectly, arises out of or relates to this Agreement, the services of the Escrow Agent hereunder, the monies or other property held by it hereunder, except to the extent such liability, expense or claim is attributable to the bad faith, gross negligence or willful misconduct of the Escrow Agent. Promptly after the receipt by the Escrow Agent of notice of any demand or claim or the commencement of any action, suit or proceeding, the Escrow Agent shall, if a claim in respect thereof is to be made against any of the other parties hereto, notify such other parties thereof in writing and such other party may, by written notice to the Escrow Agent accepting its obligation to indemnify the Escrow Agent hereunder with respect to such claim, assume the defense of such claim; but the failure by the Escrow Agent to give such notice shall not relieve the Company from any liability which the Company may have to the Escrow Agent hereunder except to the extent the Company is actually prejudiced thereby. For the purposes hereof, the term "claims, losses, liabilities, costs, damages or expenses" shall include all amounts paid or payable to satisfy any claim, demand or liability, or in settlement of any claim, demand, action, suit or proceeding settled with the express written consent of the Company, and all costs and expenses, including, but not limited to, reasonable counsel fees and 6 -6- disbursements paid or incurred in investigating or defending against any such claim, demand, action, suit or proceeding. 2.5. The Escrow Agent makes no representation as to the validity, value, genuineness or collectibility of any security or other document or instrument held by or delivered to it. The Escrow Agent does not make any representation as to the validity or sufficiency of this Agreement, except for the due execution and delivery of this Agreement by the Escrow Agent, as to which it hereby so represents and warrants. 2.6. The Escrow Agent shall not be called upon to advise any party as to selling or retaining, or taking or refraining from taking any action with respect to, any securities or other property deposited hereunder. 2.7. If at any time the Escrow Agent is served with any judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process which in any way affects the Escrowed Property (including, but not limited to, orders of attachment or garnishment or other forms of levies or injunctions or stays relating to the transfer of Escrowed Property), the Escrow Agent shall give prompt written notice thereof to the Administrative Agent and the Company. Unless the Administrative Agent or the Company or both of them shall, within ten Business Days after receipt of such notice by the last of the addressees thereof to receive it, advise the Escrow Agent in writing of the intention of the Administrative Agent, the Company or both of them (the "CONTESTING PARTY") to contest diligently and in good faith such order, judgment, decree, writ or other form of process at the sole cost and expense of such contesting party, the Escrow Agent is authorized to comply therewith in any manner as it or its legal counsel of its own choosing deems appropriate; and if the Escrow Agent complies with any such judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process, the Escrow Agent shall (in the absence of bad faith) not be liable to any of the parties hereto or to any other person or entity even though such order, judgment, decree, writ or process may be subsequently modified or vacated or otherwise determined to have been without legal force or effect. If at any time the Escrow Agent is served with any final judicial or administrative order, judgment, decree, writ or other form of judicial or administrative process which is not subject to appeal and which in any way affects the Escrowed Property (including but not limited to orders of attachment or garnishment or other forms of levies or injunctions or stays relating to the transfer of the Escrowed Property), the Escrow Agent is authorized (in the absence of bad faith) to comply therewith in any manner as it or its legal counsel of its own choosing deems appropriate. 2.8. The Escrow Agent is authorized (in the absence of bad faith) to comply with and rely upon any notices, instructions or other communications reasonably believed by it to have been sent or given by the Administrative Agent or by a person or persons authorized by the Administrative Agent. Whenever under the terms hereof the time for giving a notice or performing an act falls upon a day that is not a Business Day, such time shall be extended to the next succeeding Business Day. 7 -7- 2.9. This Agreement is for the exclusive benefit of the parties hereto and their respective successors hereunder, and shall not be deemed to give, either express or implied, any legal or equitable right, remedy, or claim to any other entity or person whatsoever. 2.10 The Escrow Agent shall not be required to receive or hold any payments of interest upon or any other payment with respect to the Global Exchange Note, and may return any such payment to the Company or transfer any such payment to the Administrative Agent without liability to any other party hereto. 3. COMPENSATION OF THE ESCROW AGENT. The Escrow Agent shall be entitled to payment from the Company for all services rendered subsequent to the date hereof, in the amounts and at the times set forth on SCHEDULE 1 hereto or as shall be agreed upon between the Company and the Escrow Agent from time to time, and reimbursement from the Company, upon demand, for all expenses, payments and advances paid or incurred by it in the administration of its duties hereunder, including, but not limited to, all reasonable counsel and agents' fees and disbursements and all taxes or other governmental charges. The Escrow Agent shall be paid any compensation or reimbursement of expenses owed to it by the Company, and the Escrow Agent shall have no interest in the Escrowed Property with respect to such amounts. 4. FURTHER ASSURANCES. From time to time on and after the date hereof, the other parties hereto shall deliver or cause to be delivered to the Escrow Agent such further documents and instruments and shall do and cause to be done such further acts as the Escrow Agent shall reasonably request (it being understood that the Escrow Agent shall have no obligation to make any such request) to carry out more effectively the provisions and is Agreement. 5. TERMINATION OF AGREEMENT OF THE ESCROW AGENT. (a) The Escrow Agent may at any time resign as such by delivering written notice of such resignation in duplicate, one copy to the Administrative Agent and one copy to the Company. The resignation of the Escrow Agent will take effect on the appointment of a successor designated by the Administrative Agent and reasonably acceptable to the Company. If a successor Escrow Agent has not accepted its appointment within thirty calendar days after the Escrow Agent gives notice to the Administrative Agent and the Company of its intention to resign, the Escrow Agent may apply to a court of competent jurisdiction for the appointment of a successor, and the costs and expenses (including reasonable counsel fees and disbursements) incurred by the Escrow Agent in connection with such proceeding shall be paid by the Company. Upon the appointment of a successor Escrow Agent, the resigning Escrow Agent shall deliver the Escrowed Property to the successor Escrow Agent, whereupon the resigning Escrow Agent shall be discharged of and from any and all further obligations arising in connection with this Agreement. This Agreement shall terminate on the final disposition of the Escrowed Property in 8 -8- accordance with the terms of this Agreement, PROVIDED, HOWEVER, that upon any termination, Sections 2, 3, 6 and 8.4 shall survive the termination hereof. (b) The Administrative Agent may, at any time and for any reason, and shall, upon any event set forth in the next succeeding sentence, remove the Escrow Agent and appoint a successor Escrow Agent by written instrument in duplicate, specifying such removal and the date on which it is intended to become effective, signed on behalf of the Administrative Agent, one copy of which shall be delivered to the Escrow Agent being removed and one copy to the successor Escrow Agent. The Escrow Agent shall be removed as aforesaid if it shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a receiver of the Escrow Agent or of its property shall be appointed, or any public officer shall take charge or control of it or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. Any removal of the Escrow Agent and any appointment of a successor Escrow Agent shall become effective upon acceptance of appointment by the successor Escrow Agent. As soon as practicable after appointment of the successor Escrow Agent, the Administrative Agent shall cause written notice of the change in the Escrow Agent to be given to the Company and to each Holder. 6. CONSENT TO SERVICE OF PROCESS. Each of the parties hereto hereby irrevocably consents to the jurisdiction of the courts of the Commonwealth of Massachusetts and of any federal court located in the City of Boston in connection with any action, suit or other proceeding arising out of or relating to this Agreement or any action taken or omitted hereunder, and waives personal service of any summons, complaint or other process and agrees that the service thereof may be made by certified or registered mail directed to such person at such person's address for purposes of notices hereunder. Should the person so served fail to appear or answer within the time prescribed by law, that person shall be deemed in default and judgment may be entered against that person for the amount or other relief as demanded in any summons, complaint or other process so served. 7. NOTICES. All notices, requests, demands and other communications provided for herein shall be writing, shall be delivered by hand, by first-class mail or by facsimile transmission, shall be deemed given or sent when received, and shall be addressed to the parties hereto at their respective addresses and, if applicable, facsimile numbers listed below or to such other persons or addresses or facsimile numbers as the relevant party shall designate as to itself from time to time in writing delivered in like manner: If to the Company, to: TransTechnology Corporation 150 Allen Road Liberty Corner, New Jersey 07930 Facsimile No.: (908) 903-1616 Attention: Chief Financial Officer 9 -9- With a separate copy delivered to: Hahn Loeser & Parks LLP 3300 BP America Building 200 Public Square Cleveland, Ohio 44114 Facsimile No.: (216) 241-2824 Attention: F. Ronald O'Keefe, Esq. if to the Administrative Agents, to: BankBoston, N.A. 100 Federal Street Boston, Massachusetts 02110 Facsimile No.: (617) 434-6685 Attention: Maura C. Wadlinger with a copy to: Bingham Dana LLP 150 Federal Street Boston, Massachusetts 02110 Facsimile No.: (617) 951-8736 Attention: T. Malcolm Sandilands, Esq. if to the Escrow Agent, to: State Street Bank and Trust Company 2 Avenue de Lafayette Boston, Massachusetts 02111-1724 Facsimile No.: (617) 662-__________ Attention: Corporate Trust Department Attention: TransTechnology Corporation Warrant Escrow Agreement 8. MISCELLANEOUS. 8.1. All amounts referred to herein are expressed in Dollars and all payments by or to the Escrow Agent shall made in Dollars. 8.2. This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing such instrument to be drafted. The terms "HEREBY", "HEREIN", "HEREOF", "HERETO", "HEREUNDER" and any similar terms, as used in this Agreement, refer to this Agreement in its entirety and not only to the particular portion of this Agreement where the term is used. The word "person" shall mean any natural person, partnership, corporation, government and any other form of business or legal entity. All words or terms used in this Agreement, regardless of the number or gender in which they are used, shall be 10 -10- deemed to include any other number and any other number as the context may require. 8.3. This Agreement and the rights and obligations hereunder of the Company may be assigned by it only to a successor to its entire business. The succession, resignation or replacement of the Administrative Agent shall be in accordance with and subject to the provisions of the Loan Agreement. Any corporation into which the Escrow Agent may be merged or converted, or any corporation resulting from any consolidation to which the Escrow Agent or any of its respective successors shall be a party, and any corporation which acquires substantially all of the corporate trust business of the Escrow Agent or any of its respective successors, shall be a successor Escrow Agent, as the case may be, without any further act. Any such successor Escrow Agent shall promptly cause written notice of its succession as Escrow Agent to be delivered to the Company and the Administrative Agent. This Agreement shall be binding upon and inure to the benefit of each party's respective successors, heirs and permitted assigns. No other person shall acquire or have any rights under or by virtue of this Agreement. This Agreement may not be changed orally or modified, amended or supplemented without an express written agreement executed by the Escrow Agent and the other parties hereto. This Agreement is intended to be for the sole benefit of the parties hereto and their respective successors, heirs and assigns and none of the provisions of this Agreement are intended to be, nor shall they be construed to be, for the benefit of any other person. 8.4. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. 8.5. This Agreement may be executed in any number of counterparts, and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. One or more counterparts of this Escrow Agreement may be delivered via telecopier, with the intention that they shall have the same effect as an original counterpart hereof. 8.6. The headings contained in this Agreement are for convenience of reference only and shall have no effect on the interpretation or operation thereof. 8.7. This Agreement shall constitute the entire agreement of the parties with respect to the subject matter and supersedes all prior oral or written agreements in regard thereto. Except as otherwise permitted herein, this Escrow Agreement may be modified only by a written amendment signed by all the parties hereto, and no waiver of any provision hereof shall be effective unless expressed in a writing signed by the party to be charged. [SIGNATURE PAGE FOLLOWS] 11 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. TRANSTECHNOLOGY CORPORATION By:/s/Joseph F. Spanier --------------------------- Name: Joseph F. Spanier Title: Vice President & CFO BANKBOSTON, N.A., as Administrative Agent By:/s/Robert W. MacElhiney --------------------------- Name: Robert W. MacElhiney Title: Vice President STATE STREET BANK AND TRUST COMPANY, as Trustee and Escrow Agent By:/s/Jill Olson --------------------------- Name: JILL OLSON Title: VICE PRESIDENT 12 [STATE STREET LOGO] SCHEDULE OF FEES TRUSTEE, WARRANT AGENT AND ESCROW AGENT SERVICES TRANSTECHNOLOGY CORPORATION EXCHANGE NOTES AND WARRANTS ACCEPTANCE FEE (ONE TIME) - ------------------------- Covers the complete study and consideration of the Indenture, the Warrant Agreement and the Escrow Agreement and/or other instruments together with all supporting documents up to and including the closing: $4,500.00 ANNUAL EXCHANGE NOTES ADMINISTRATION FEE - ---------------------------------------- Compensate the Trustee for regular administrative services which include, but are not limited to the following: Maintenance of documents, periodic monitoring of the Trustee's eligibility, reports to bondholders, furnishings periodic reports for issuer use, furnishing information to issuer auditors and responding to correspondence and telephone inquiries, registration of bonds, transfer of bonds, disbursing principal and interest, IRS bondholder reporting, address changes, certificate replacement, normal correspondence, etc.: $5,000.00 PER ANNUM $ 6.00 PER BONDHOLDER PER ANNUM, SUBJECT TO A $1,000.00 MINIMUM ANNUAL CHARGE (WAIVED IF THE ENTIRE ISSUE IS REPRESENTED BY A GLOBAL CERTIFICATE) $ 20.00 PER WIRE TRANSFER MISCELLANEOUS FEES - ------------------ WARRANT AGENT FEE, FOR SO LONG $2,500.00 PER ANNUM AS WARRANTS REMAIN UNEXERCISED ESCROW AGENT FEE $3,500.00 13 [STATE STREET LOGO] EXTRAORDINARY ADMINISTRATION EXPENSES - ------------------------------------- Fees for services not specifically set forth in this schedule will be determined by appraisal. Such services may include, but are not limited to, additional responsibilities and services incurred in connection with solicitation of consents to amend the Indenture, tender offers for the Exchange Notes and/or Warrants, or in case of litigation, restructuring or default. OUT-OF-POCKET EXPENSES - ---------------------- Any out-of-pocket expenses incurred by us will be billed at cost. These items will include, but not be limited to, legal fees, travel expenses, courier charges, etc. COUNSEL - ------- State Street's Counsel legal fees and disbursements will be billed at cost. State Street will engage Peabody & Arnold as Counsel. BILLING AND PAYMENTS - -------------------- The one-time Acceptance Fee, the Escrow Agent Fee and Counsel's costs will be payable at the closing. Thereafter, Annual Fees for the Exchange Notes and Warrants will be billed annually in advance, retroactive to their original issuance, only if they are released from escrow to the lenders. Other fees and charges will be billed as incurred. AUGUST 11, 1999 -----END PRIVACY-ENHANCED MESSAGE-----