UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: September 25, 2006
(Date of earliest event reported)
The Eastern Company
(Exact name of Registrant as specified in its charter)
Connecticut 0-599 06-0330020
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) identification No.)
112 Bridge Street, Naugatuck, Connecticut 06770
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(Address of principal executive offices) (Zip Code)
(203) 729-2255
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(Registrant's telephone number, including area code)
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(Former name or former address, if changed
since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2)
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4( c) under the
Exchange Act (17 CFR 240.13e-4( c))
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
ITEM 1.01 - Entry into a Material Definitive Agreement
On September 25, 2006, pursuant to an Asset Purchase Agreement
dated September 25, 2006 between the Registrant and Royal Lock
Corporation, an Illinois corporation (the "Seller") and
Lawrence L. Freck, the sole shareholder of Seller (the
"Shareholder"), the Registrant acquired certain assets of the
Seller. See Item 2.01 for a brief description of the terms and
conditions of the agreement.
SECTION 2 - FINANCIAL INFORMATION
ITEM 2.01 - Completion of Acquisition or Disposition of Assets
On September 25, 2006, pursuant to an Asset Purchase Agreement
between the Registrant and Royal Lock Corporation, an Illinois
corporation (the "Seller") and Lawrence L. Freck, the sole
shareholder of Seller (the "Shareholder"), the Registrant
acquired certain assets of the Seller.
The purchase price for the assets acquired was $7,000,000,
plus the assumption of certain liabilities. At the closing
$7,000,000 was paid to the Seller. The purchase price is
subject to a dollar for dollar adjustment, upward or downward,
based upon an increase or decrease in the final closing net
book value of assets acquired as compared to the opening
balance sheet net book value. The adjustment in the purchase
price is scheduled to occur approximately 30 days from the
closing date.
The assets acquired from the Seller included accounts
receivable, prepaid expenses and deposits, inventories,
furniture, fixtures and equipment, intellectual property
rights and rights existing under all sales and purchase
agreements.
ITEM 2.03 - Creation of a Direct Financial Obligation
On September 22, 2006, the Company amended the unsecured loan
agreement ("Loan Agreement"), which includes a term portion
and a revolving credit portion, with its lender, Bank of
America, N.A. The amendment restructures and increases the
balance of the term portion of the loan into a new seven (7)
year loan in the amount of $20,000,000. The restructured term
portion is payable in quarterly payments of $714,286 beginning
January 2, 2007. The proceeds were used to repay in full the
outstanding balance of its existing term loan ($12,625,000)
and for the acquisition of Royal Lock.
In addition, the Company increased the maximum amount
available under the revolving credit portion from $7,500,000
to $12,000,000 and renewed and extended the maturity to
September 22, 2009. The revolving credit portion has a
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variable quarterly commitment fee ranging from 0.10% to 0.25%
based on operating results. As of September 22, 2006, the
quarterly fee is 0.15% on the unused portion.
The interest rates on the term and the revolving credit
portions of the Loan Agreement may vary. The interest rates
may vary based on the LIBOR rate plus a margin spread of 1.0%
to 1.65% for the term portion and 1.0% to 1.6% for the
revolving credit portion. The margin rate spread is based on
operating results calculated on a rolling-four-quarter basis.
On September 22, 2006, the margin spread on both the term
portion and the revolving credit portion of the Loan Agreement
was 1.25%.
SECTION 7 - REGULATION FD
ITEM 7.01 - Regulation FD Disclosure
On September 25, 2006, pursuant to an Asset Purchase Agreement
dated September 25, 2006 between the Registrant and Royal Lock
Corporation, an Illinois corporation (the "Seller") and
Lawrence L. Freck, the sole shareholder of Seller (the
"Shareholder"), the Registrant acquired certain assets of the
Seller.
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 - (d) Exhibits
(10) Loan Agreement, Term Note, Revolving Credit Note, and
related documents between the Registrant and Bank of America
dated as of September 22, 2006.
(99) Press Release dated September 25, 2006 announcing the
purchase of certain assets and the assumption of certain
liabilities of Royal Lock Corporation ("Royal Lock") of
Wauconda, Illinois is attached hereto.
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.
The Eastern Company
Date: September 25, 2006 By: /s/Leonard F. Leganza
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Leonard F. Leganza
President & CEO
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