-----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, R5cCQ/ADB5d5pQloX0Ph0ixGhFSpE9GezM5iPRcFMYtdCC7gRmDFX/0MY6aKz+MW eBwzsv3yWONaRO3u4g1FWA== 0000912057-99-002715.txt : 19991101 0000912057-99-002715.hdr.sgml : 19991101 ACCESSION NUMBER: 0000912057-99-002715 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991027 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19991029 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACORN PRODUCTS INC CENTRAL INDEX KEY: 0001036713 STANDARD INDUSTRIAL CLASSIFICATION: CUTLERY, HANDTOOLS & GENERAL HARDWARE [3420] IRS NUMBER: 223265462 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-22717 FILM NUMBER: 99736863 BUSINESS ADDRESS: STREET 1: 500 DUBLIN AVENUE CITY: COLUMBUS STATE: OH ZIP: 43216-1930 BUSINESS PHONE: 6142224400 MAIL ADDRESS: STREET 1: 500 DUBLIN AVENUE CITY: COLUMBUS STATE: OH ZIP: 43216-1930 8-K 1 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT: OCTOBER 27, 1999 ACORN PRODUCTS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 0-22717 22-3265462 - ----------------- --------------------- ---------------------- (STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER JURISDICTION OF IDENTIFICATION NUMBER) INCORPORATION OR ORGANIZATION) 390 Dublin Avenue Columbus, Ohio 43215 (614) 222-4400 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER INCLUDING AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) 500 Dublin Avenue Columbus, Ohio 43215 (FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT) ITEM 5. OTHER EVENTS. On October 28, 1999, UnionTools, Inc. ("UnionTools"), the operating subsidiary of Acorn Products, Inc. (the "Company"), entered into a Sixth Amendment (the "Amendment") to the Amended and Restated Credit Agreement dated as of May 29, 1997 (as amended, the "Credit Agreement"), by and among UnionTools, the Company, H.B. Sherman Manufacturing Company, UnionTools Irrigation, Inc., Heller Financial, Inc., in its capacity as Agent and as a Lender, and the lending institutions from time to time signatory thereto. In addition to amending certain terms of the Credit Agreement, the Amendment expands the existing credit facility to include an additional $6 million subordinated term loan funded by investment funds managed by Oaktree Capital Management LLC and Trust Company of the West, which collectively constitute the majority stockholder of the Company. A copy of the Company's press release announcing the foregoing, as well as conformed copies of the transaction documents underlying the same, are set forth as Exhibits 99.1 through 99.4 hereto. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits:
EXHIBIT NO. DESCRIPTION 99.1 Press release issued by the Company on October 28, 1999. 99.2 Sixth Amendment to Amended and Restated Credit Agreement dated as of October 28, 1999, by and among UnionTools, the Company, H.B. Sherman Manufacturing Company, UnionTools Irrigation, Inc., Heller Financial, Inc., in its capacity as Agent and Lender, and the lending institutions signatory thereto. 99.3 Term Loan Note dated October 28, 1999, issued by UnionTools in favor of Heller Financial, Inc. pursuant to the Sixth Amendment to Amended and Restated Credit Agreement. 99.4 Subordinated Participation Agreement dated as of October 28, 1999, by and between Heller Financial, Inc., in its individual capacity and as Agent, and OCM Principal Opportunities Fund, L.P. and TCW Special Credits, as general partner and/or investment manager of the funds and accounts set forth on Schedule I-A thereto.
2 ITEM 8. CHANGE IN FISCAL YEAR On October 27, 1999, the Board of Directors of the Company approved a change in the Company's fiscal year end from the Friday closest to July 31 to December 31. Pursuant to Rule 13a-10 of the Securities and Exchange Act of 1934, the Company will file with the Commission a transition report on Form 10-Q covering the transition period. 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. ACORN PRODUCTS, INC. Date: October 27, 1999 By: /s/ John G. Jacob -------------------------------------- John G. Jacob, Chief Financial Officer 3 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION 99.1 Press release issued by the Company on October 28, 1999. 99.2 Sixth Amendment to Amended and Restated Credit Agreement dated as of October 28, 1999, by and among UnionTools, the Company, H.B. Sherman Manufacturing Company, UnionTools Irrigation, Inc., Heller Financial, Inc., in its capacity as Agent and Lender, and the lending institutions signatory thereto. 99.3 Term Loan Note dated October 28, 1999, issued by UnionTools in favor of Heller Financial, Inc. pursuant to the Sixth Amendment to Amended and Restated Credit Agreement. 99.4 Subordinated Participation Agreement dated as of October 28, 1999, by and between Heller Financial, Inc., in its individual capacity and as Agent, and OCM Principal Opportunities Fund, L.P. and TCW Special Credits, as general partner and/or investment manager of the funds and accounts set forth on Schedule I-A thereto.
EX-99.1 2 EXHIBIT 99.1 EXHIBIT 99.1 ACORN PRODUCTS ANNOUNCES ELECTION OF NEW CHAIRMAN Acorn Products, Inc. (NASDAQ: ACRN) announced today that its Board of Directors has elected W. Wallace Abbott as Chairman of its Board of Directors. Mr. Abbott, who has been a director of Acorn since January 1997, is a retired senior executive of Procter & Gamble. Mr. Abbott brings with him extensive experience in consumer products marketing and general management to the Chairman's role. Mr. Abbott replaces Conor D. Reilly as Chairman, who resigned from his position as director and Chairman of the Board of Acorn pursuant to the policies of the law firm in which he is a partner. Mr. Abbott commented, "I look forward to contributing to the operational vision and direction of the Company. With the changes made in the management team and the support of our majority stockholder, the Company is poised to take advantage of its strong relationships with its customers, vendors and employees." Acorn also announced today that investment funds arranged and/or managed by Oaktree Capital Management LLC and Trust Company of the West (the "Funds"), which collectively constitute the majority stockholder of Acorn, made a capital infusion of $6 million into Acorn's operating subsidiary, UnionTools, Inc., in connection with a simultaneous amendment (the "Amendment") to Acorn's existing credit facility with a group of lenders led by Heller Financial, Inc. Cory Meyer, Acorn's President and Chief Executive Officer, stated, "We are gratified by the confidence that our majority stockholder and other constituencies have shown in the new management team and are excited about the opportunities ahead of us. We believe that now we have the resources necessary to carry out our operating plan that will enable us to continue to drive the business forward and improve stockholder value." Acorn Products, Inc., through its operating subsidiary UnionTools, Inc., is a leading manufacturer and marketer of non-powered lawn and garden tools in the United States. Acorn's principal products include long handle tools (such as forks, hoes, rakes and shovels), snow tools, posthole diggers, wheelbarrows, striking tools, cutting tools and watering products. Acorn sells its products under a variety of well-known brand names, including Razor-Back-TM-, Union-TM-, Yard 'n Garden-TM-, Perfect Cut-TM- and, pursuant to a license agreement, Scotts-TM-. In addition, Acorn manufactures private label products for a variety of retailers. Acorn's customers include mass merchants, home centers, buying groups and farm and industrial suppliers. Razor-Back-TM-, Union-TM-, Yard 'n Garden-TM- and Perfect Cut-TM- are registered trademarks of Acorn. Scotts-TM- is a registered trademark of The Scotts Company. The statements contained herein that are not purely historical are forward looking statements within the meaning of the Securities Exchange Act of 1934, including statements regarding Acorn's expectations, beliefs, hopes, intentions or strategies regarding the future. All forward looking statements contained herein are based upon information available to Acorn as of the date hereof, and Acorn assumes no obligation to update any such forward looking statements. Actual results could differ materially from Acorn's current expectations. Factors that could cause or contribute to such differences include, but are not limited to, the factors and risks discussed in Acorn's Annual Report on Form 10-K for the fiscal year ended July 31, 1998, Acorn's Current Report on Form 8-K dated September 18, 1997, as amended on October 29, 1998, and as may be amended from time to time, and the other reports filed from time to time by Acorn with the Securities and Exchange Commission. Contact: John G. Jacob, Vice President and Chief Financial Officer of Acorn Products, Inc. (614) 222-4400. EX-99.2 3 EXHIBIT 99.2 EXHIBIT 99.2 SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT THIS SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this "AMENDMENT") is dated as of October 28, 1999 and entered into by and among UNIONTOOLS, INC., a Delaware corporation ("BORROWER"), ACORN PRODUCTS, INC., a Delaware corporation ("HOLDINGS"), H.B. SHERMAN MANUFACTURING COMPANY, a Missouri corporation ("H.B. SHERMAN"), UNIONTOOLS IRRIGATION, INC., a Delaware corporation formerly known as UnionTools Watering Products, Inc. ("IRRIGATION" and together with Borrower, Holdings and H.B. Sherman collectively, the "LOAN PARTIES"), HELLER FINANCIAL, INC., in its individual capacity as a Lender and as Agent for all Lenders ("AGENT"), and the other Lenders party hereto. W I T N E S S E T H: WHEREAS, Borrower, Agent and Lenders have entered into an Amended and Restated Credit Agreement dated as of May 20, 1997, as amended by that certain Amendment No. 1 to Credit Agreement dated November 24, 1997, Second Amendment to Credit Agreement dated as of May 22, 1998, Third Amendment to Amended and Restated Credit Agreement dated as of October 29, 1998, Fourth Amendment to Amended and Restated Credit Agreement dated as of February 26, 1999 and Fifth Amendment to Amended and Restated Credit Agreement dated as of June 10, 1999 (as the same may be further amended, restated, supplemented or otherwise modified from time to time, the "LOAN AGREEMENT"), pursuant to which, among other things, Lenders have agreed, subject to the terms and conditions set forth in the Loan Agreement, to make loans and financial accommodations to Borrower; and WHEREAS, the Loan Parties have requested that the Agent and Lenders agree to modify the Loan Agreement pursuant to the terms and conditions of this Amendment; NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the Loan Parties, Lenders and Agent agree as follows: ARTICLE I. AMENDMENTS TO LOAN AGREEMENT. This Amendment No. 6 to Loan Agreement shall be deemed to be an amendment to the Loan Agreement, and shall not be construed in any way as a replacement therefor. All of the terms and provisions of this Amendment No. 6, including, without limitation, the representations and warranties set forth herein, are hereby incorporated by reference into the Loan Agreement as if such terms and provisions were set forth in full therein. The Loan Agreement is hereby amended, effective upon the satisfaction of the conditions precedent set forth in Article III hereof, in the following respects: 1.1 The Index of Defined Terms is amended by inserting the following term(s) in proper alphabetical order:
Defined Term Defined in Section ------------ ------------------ Lock Box Account Section 1.5(F) Term Loan Section 1.5(E) Term Note Section 1.1(D) Subordinated Participation Agreement Section 6.1(U)
1.2 Section 1.1(A)(1), "REVOLVING LOANS", is amended to replace the four sentences of such subsection, in their entirety, with the following: (A) REVOLVING LOANS. (1) Subject to the satisfaction of the terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein, each Lender agrees, severally and not jointly, to lend to Borrower from the Closing Date to the Expiry Date its Pro Rata Share of the loans requested by Borrower to be made by Lenders under this subsection 1.1(A), up to an aggregate maximum for all Lenders of (i) during the period from (x) the Amendment No. 6 Date through and including December 31, 1999, and (y) November 1 through and including December 31 of each year after 1999, $35,000,000, (ii) during the period from January 1 through and including July 30 of each year, $40,000,000, and (iii) during the period from July 31 through and including October 31 of each year, $30,000,000 (as the same may be reduced from time to time hereunder, the "Revolving Loan Commitment"). Advances or amounts outstanding under the Revolving Loan Commitment will be called "Revolving Loans". Revolving Loans may be repaid and reborrowed. The "Maximum Revolving Loan Balance" will be the lesser of (a) the difference (such difference referred to herein as the "Borrowing Base") between (x) the borrowing base (as calculated on Exhibit 4.10(F), the "Borrowing Base Certificate") minus (y) the Borrowing Base Reserve Amount or (b) the Revolving Loan Commitment less outstanding Risk Participation Liability. 1.3 Section 1.1(C), "ACQUISITION LOANS", is amended (a) to replace the first three sentences of such subsection, in their entirety, with the following: (C) ACQUISITION LOANS. Subject to the satisfaction of the terms and conditions set forth herein and in reliance upon the representations and warranties set forth herein, each Lender agrees, severally and not jointly, to lend to Borrower from the Closing Date to the Amendment No. 6 Date its Pro Rata Share of the loans requested by Borrower (upon not less than thirty (30) days prior written notice to Agent) to be made by Lenders under this subsection 2 1.1(C) (the "Acquisition Loans"), up to an aggregate maximum amount for all Lenders of $16,009,287 (the "Acquisition Loan Commitment"). No new Acquisition Loans shall be permitted after the Amendment No. 6 Date. Amounts borrowed under this subsection 1.1(C) and repaid may not be reborrowed. and (b) to restate subsection (10) thereof to read, in its entirety, as follows: (10) No event shall have occurred and be continuing or would result from the acquisition of the subject Target or the Acquisition Loan that would constitute an Event of Default or a Default. On the dates indicated below, Borrower shall repay the Acquisition Loans through periodic installments in the amounts equal to the applicable percentage of the Acquisition Loans outstanding as of the Amendment No. 6 Date ("Scheduled Acquisition Loan Installments").
DATE PAYMENT ---- ------- September 30, 2000 2.083% December 31, 2000 2.083% March 31, 2001 2.083% April 30, 2001 93.751%
On April 30, 2001, the entire remaining principal balance of the Acquisition Loans, together with all accrued but unpaid interest thereon, shall be due and payable in full. 1.4 Section 1.1, "LOANS", is amended (a) to restate subsection (D) thereof to read, in its entirety, as follows: (D) NOTES. Borrower shall execute and deliver to each Lender (i) a Note to evidence the Revolving Loans, such Note to be in the principal amount of such Lender's Pro Rata Share of the Revolving Loan Commitment, (ii) a Note to evidence the Acquisition Loans, such Note to be in the principal amount of such Lender's Pro Rata Share of the Acquisition Loan Commitment, and (iii) a Note to evidence the Term Loan, such Note to be in the principal amount of such of the Term Loan and in the form of Exhibit A to Amendment No. 6 (together with the other Term Notes issued with respect to interest on the Term Loan, a "Term Note"). In the event of an assignment under subsection 8.1, Borrower shall, upon surrender of the assigning Lender's Notes, issue new Notes to reflect the interests of the assigning Lender and the Person to which interests are to be assigned. 3 and (b) to insert a new subsection (E) thereof to read, in its entirety, as follows: (E) TERM LOAN. (i) Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties set forth herein and in the other Loan Documents, Heller agrees to lend to Borrower on the Amendment No. 6 Date, a term loan (the "Term Loan") in the aggregate original principal amount of $6,000,000 as evidenced by the Term Notes, PROVIDED, that Heller shall not be obligated to fund the Term Loan until it receives payment in full from the participants pursuant to the terms of the Subordinated Participation Agreement; (ii) Borrower shall make principal payments in respect of the Term Loan in the amount of the Scheduled Installments (or such lesser principal amount as shall then be outstanding) on the dates and in the amounts set forth below. "SCHEDULED INSTALLMENT" means, for each date set forth below, the amount set forth opposite such date.
AMOUNT OF PRINCIPAL INSTALLMENT OF DATE TERM LOAN ---- --------- Ninety-one days after the date Entire principal specified in clause (c) of the amount of the definition of "Expiry Date" Term Loan
(iii) The Term Loan shall be funded in one drawing on the Amendment No. 6 Date. Amounts of the Term Loan repaid may not be reborrowed. (iv) In no event may Borrower repay all or any portion of the Term Loan by using any of Borrower's or any other Loan Party's own cash or other assets (except out of proceeds of equity contributions or Subordinated Indebtedness but only upon the terms and conditions set forth in SUBSECTION 1.5(A) hereof) or proceeds of any Loan hereunder; provided that if any or all of the Obligations shall have been accelerated the provisions of this sentence shall not apply. (v) Proceeds of the Term Loan shall be used by Borrower to bring its accounts payable more current and for other working capital purposes. (vi) The Lenders and Agent agree that if the Acquisition Loans or Revolving Loans are accelerated, the Term Loan will also be accelerated. 4 1.5 Section 1.2(A), "INTEREST", is amended to (a) add a new subclause (3) to such subsection to read as follows: (3) If a Term Loan, than at a rate per annum equal to 12%. and (b) to restate the Pricing Grid appearing therein to read, in its entirety, as follows: PRICING TABLE
- ------------------------------------------------------------ Adjusted Total Indebtedness Base Rate LIBOR Margin to Operating Cash Margin on and on and after Flow Ratio after Amendment Amendment No. 6 Date No. 6 Date - ------------------------------------------------------------ Greater than 3.75:1 1.50% 3.50% - ------------------------------------------------------------ Equal to or greater than 1.50% 3.50% 3.00:1 but equal to or less than 3.75:1 - ------------------------------------------------------------ Less than 3:00:1 1.50% 3.50% - ------------------------------------------------------------
1.6 Section 1.2(D), "COMPUTATION OF INTEREST AND RELATED FEES", is amended to add a new sentence at the conclusion of subsection 1.2(D) to read as follows: Notwithstanding anything contained in this Agreement to the contrary, the Borrower shall not pay interest in cash on the Term Loan, but rather the Term Loan shall accrue interest at the rate otherwise applicable to the Term Loan and such interest shall be payable by the issuance of additional Term Notes. No cash may be paid with respect to interest on the Term Loans until the date on which all of the Obligations (including, without limitation, fees, costs and expenses in respect of the Loans and Risk Participation Liabilities) in which the "Purchasers" under the Subordinated Participation Agreement shall not have participated in or purchased (i.e., excluding principal of and interest on the Term Loan) shall have been paid indefeasibly (which term "indefeasibly" shall mean the ninety-first day following the final payment to Lenders and Agent) in full and the Revolving Loan Commitments shall have been terminated. Notwithstanding the foregoing, to the extent of a refinancing in full of all of the Revolving Loans and Acquisition Loans, the Term Loan may be refinanced or repaid contemporaneously with such refinancing. 1.7 Section 1.3, is amended to insert a new subsection (D) thereof to read, in its entirety, as follows: (D) Upon the repayment of the Revolving Loans and Acquisition Loans 5 in full (including via a refinancing of the facilities provided by this Agreement) or any extension of this Agreement, Borrower shall pay Agent, for the benefit of all Lenders (based upon their respective Pro Rata Shares), a success fee equal to the product of (i) the sum of (a) the outstanding amount of Acquisition Loans on the date immediately prior to the date of such repayment or extension plus (b) the average daily amount of the Revolving Loan Commitment (whether used or unused) from the Amendment No.6 Date through the date of such repayment or extension, multiplied by (ii) the applicable percentage set forth in the grid below (provided that no such success fee shall be payable to Heller in its individual capacity to the extent Heller is the lead agent bank on any such refinancing, in which case the success fee payable by Borrower shall be reduced by the amount which would otherwise be payable to Heller in such individual capacity):
IF THE REPAYMENT OCCURS DURING THE BELOW PERIOD: THE SUCCESS FEE IS: ----------------------- ------------------- On or prior to 4/30/2000 0.5% After 4/30/2000 but on or prior to 7/31/2000 1.0% After 7/31/2000 but on or prior to 10/31/2000 1.5% After 10/31/2000 but on or prior to 1/31/2001 2.0% After 1/31/2001 3.0%
In the event of an Event of Default under subclauses 6.1(F) and (G), then notwithstanding anything contained in this Agreement or the Loan Documents to the contrary, the success fee contemplated by this subclause 1.3(D) shall rank pari passu with the rights of the participants to receive payments of the Term Notes pursuant to the terms of the Subordinated Participation Agreement. The success fee, when expensed, shall be treated by Borrower as an interest expense for purposes of calculating EBIDAT. 1.8 Section 1.5(A), "VOLUNTARY PREPAYMENT OF TERM LOAN AND ACQUISITION LOAN", is amended to restate such subsection to read, in its entirety, as follows: (A) PREPAYMENTS. Borrower may, at any time upon not less than five (5) Business Days' prior notice to Agent, prepay the Acquisition Loan, terminate the Revolving Commitment or prepay the Term Loan; provided, however, the Revolving Loan Commitment may not be terminated by Borrower until the Acquisition Loan is paid in full, and no portion of the Term Loan may be prepaid until the Acquisition Loan and the Revolving Loans are paid in full and the Revolving Loan Commitment has been terminated, except that notwithstanding the foregoing, the Term Loan may be prepaid in full at any time exclusively and solely out of proceeds of an equity contribution (any terms of which relating to the redemption or other repayment of such contribution or any dividend or other return on such contribution must meet with the approval of the 6 Requisite Lenders, which approval shall not be unreasonably withheld or delayed) or Subordinated Indebtedness, in either case earmarked for payment of the Term Loan (such earmarking to be upon terms and conditions acceptable to the Lenders of the Term Loan in their sole discretion), it being agreed that in no event may Borrower prepay all or any portion of the Term Loan by using any of Borrower's or any other Loan Party's own cash or other assets or proceeds of any Loan hereunder (except for the proceeds of the above-described equity contribution or Subordinated Indebtedness subject to the terms of the preceding parenthetical regarding earmarking). Any such prepayment shall be accompanied by any applicable LIBOR Breakage Fees, if applicable. 1.9 Section 1.5(C), "PREPAYMENTS FROM ASSET DISPOSITIONS", is amended to restate such subsection to read, in its entirety, as follows: PREPAYMENTS FROM ASSET DISPOSITIONS. Borrower shall immediately use the proceeds from sales of inventory in the ordinary course of business and any payments received with respect to accounts receivable to immediately repay Revolving Loans. Immediately upon receipt of any Net Proceeds, Borrower shall repay the outstanding principal balance of the Revolving Loans by the amount of any reduction in the Borrowing Base attributable to the Asset Disposition giving rise to such Net Proceeds. To the extent not required to so prepay Revolving Loans as provided above, Borrower may, upon prior written notice to Agent, reinvest any remaining Net Proceeds of Asset Dispositions, within ninety (90) days, in productive replacement assets of a kind then used or usable in the business of Borrower; provided, that, if Borrower does not intend to so reinvest any such remaining Net Proceeds, or if the applicable ninety (90) day period expires without Borrower having reinvested any such remaining Net Proceeds, Borrower shall prepay the Loans in the amount thereof, such prepayments to be applied as provided in subsection 1.5(E); provided, that, notwithstanding the foregoing or any provision of subsection 1.5(E) to the contrary, from and after the Amendment No. 6 Date, the first $10,000,000 of such prepayments shall in any event be applied (1) with respect to the first $2,000,000 of such prepayments, to prepay the Revolving Loans or Acquisitions Loans (as determined by the Borrower) and (2) with respect to the next $8,000,000 in such prepayments, up to fifty percent (50%) (as determined by the Borrower) to prepay the Revolving Loans (and, at the option of Borrower, the Revolving Loan Commitment may be reduced by the amount of any such prepayment) and the remainder to prepay the Acquisition Loans. 1.10 Section 1.5(E), "APPLICATION OF PROCEEDS", is amended to restate such subsection to read, in its entirety, as follows: APPLICATION OF PROCEEDS. With respect to the mandatory prepayments described in subsections 1.5(B), 1.5(C) and 1.5(D), such prepayments shall first be 7 applied in payment of the Acquisition Loans (i) in the case of prepayments with respect to the remaining Net Proceeds as described in subsection 1.5(B), as the Borrower may determine in a written notice delivered to the Agent prior to such prepayment against remaining Scheduled Acquisition Loan Installments, and if the Borrower fails to deliver such a notice such prepayments shall be applied in the order of maturity of the remaining Scheduled Acquisition Loan Installments, and (ii) in the case of prepayments described in subsection 1.5(C) and 1.5(D), pro rata against all remaining Scheduled Acquisition Loan Installments and, with respect to prepayments under subsections 1.5(B), 1.5(C) and 1.5(D), at any time after the Acquisition Loans shall have been prepaid in full, such prepayments shall be applied to reduce the outstanding principal balance of the Revolving Loans and, subject to Section 1.5(C), as a permanent reduction of the Revolving Loan Commitment. 1.11 Section 1.5 is amended to insert a new subsection (F), "LOCK BOX PROCEEDS", to read, in its entirety, as follows: LOCK BOX PROCEEDS. At least daily on each Business Day, commencing as soon as possible but no later than thirty (30) days from the Amendment No. 6 Date, the Borrower shall cause, and hereby directs the Lender with whom the Borrower's operating account(s) (the "Lock Box Account") is located to cause, subject to the terms of the Lock Box Agreement, all funds in the Lock Box Account to be transferred to the Agent for immediate payment, such payments to be applied to reduce the outstanding principal balance of the Revolving Loans, and if no Revolving Loans are outstanding after giving effect to all or any portion of such repayment, pro rata against all remaining Scheduled Acquisition Loan Installments. 1.12 Section 3.1, "INDEBTEDNESS", is amended to change the period at the end of subsection (C) to "; and", and to add new a subsection (D) thereto to read, in its entirety, as follows: (D) Subordinated Indebtedness. 1.13 Section 3.8, "TRANSACTION WITH AFFILIATES", is amended to add the following sentence thereto to read, in its entirety, as follows: Borrower will not, and will not permit any Subsidiary to, make any payments of expenses or liabilities on behalf of their Affiliates in excess of $250,000 in the aggregate from and after the Amendment No. 6 Date. 1.14 Section 4.1, "CAPITAL EXPENDITURE LIMITS", is amended to delete the amount "$4,000,000" appearing in such subclause and replacing it with the amount "$3,500,000". 1.15 Section 4.2, 4.4, 4.5,and 4.6, are amended in their entirety to read 8 "[Intentionally Omitted]". 1.16 Section 4.3, "EBIDAT", is amended to restate such subsection to read, in its entirety, as follows: Borrower shall not permit EBIDAT for any of the periods set forth below to be less than the amount set forth for such period:
Period Amount --------------------------------------- 10/1/1999 - 12/31/99 ($1,990,000) --------------------------------------- 11/1/1999 - 1/30/2000 ($1,179,000) --------------------------------------- 12/1/1999 - 2/28/2000 $923,000 --------------------------------------- 1/1/2000 - 3/31/2000 $2,610,000 --------------------------------------- 1/1/2000 - 4/30/2000 $4,067,000 --------------------------------------- 1/1/2000 - 5/31/2000 $5,237,000 --------------------------------------- 1/1/2000 - 6/30/2000 $5,034,000 --------------------------------------- 1/1/2000 - 7/31/2000 $5,083,000 --------------------------------------- 1/1/2000 - 8/31/2000 $5,190,000 --------------------------------------- 1/1/2000 - 9/30/2000 $5,512,000 --------------------------------------- 1/1/2000 - 10/31/2000 $5,761,000 --------------------------------------- 1/1/2000 - 11/30/2000 $5,729,000 --------------------------------------- 1/1/2000 - 12/31/2000 $5,753,000 --------------------------------------- 2/1/2000 - 1/31/2001 $6,129,000 --------------------------------------- 3/1/2000 - 2/28/2001 $6,653,000 --------------------------------------- 4/1/2000 - 3/31/2001 $7,062,000 --------------------------------------- 5/1/2000 - 4/30/2001 $7,062,000 ---------------------------------------
"EBIDAT" will be calculated as illustrated on Exhibit 4.10(C). Notwithstanding anything else in subclause 6.1 or elsewhere in the Loan Documents to the contrary, the Borrower shall not be deemed to have breached this covenant, and no Default or Event of Default with respect to this covenant shall be deemed to exist, to the extent that: (1) within five (5) Business Days of the delivery of financial statements demonstrating that the Borrower has not generated 9 sufficient EBIDAT for the applicable period, the Borrower delivers a commitment from a credit worthy Person acceptable to Requisite Lenders to infuse new equity or Subordinated Indebtedness, in either case in the form of cash into the Borrower in an amount at least equal to the difference (the "EBIDAT Shortfall Amount") between the amount of EBIDAT which the Borrower was required to generate pursuant to this subsection for the applicable period and the amount of EBIDAT actually generated by the Borrower in such period and (2) within fifteen (15) Business Days of its delivery of such commitment the Borrower receives an equity infusion or the proceeds of Subordinated Indebtedness, in either case in the form of cash from the issuer of such commitment (or an affiliate of such issuer) in an amount at least equal to the EBIDAT Shortfall Amount. Notwithstanding subclause 1.5(E), equity or Subordinated Indebtedness infused into the Borrower pursuant to this subclause shall be applied as payments of the Revolving Loans and/or the Acquisition Loans, as the Borrower may determine in a written notice delivered to Agent prior to such prepayment (and if the Borrower fails to deliver such a notice such prepayments shall be applied first in the order of maturity of the remaining Scheduled Acquisition Loan Installments and next as payment of the Revolving Loans). Any equity or Subordinated Indebtedness infused into the Borrower pursuant to this subclause shall thereafter be deemed to be additional EBIDAT of the Borrower generated in the period covered by the financial stateents referred to above. 1.17 Section 4.10 is amended to change the requirement that the Borrower deliver the financial statements and schedules set forth therein within thirty (30) days after the end of each fiscal quarter to a requirement that from and after the Amendment No. 6 Date the Borrower deliver such financial statements and schedules on a monthly basis within twenty-eight (28) days after the end of each calendar month. 1.18 Section 4.10(F) is amended to restate such subsection to read, in its entirety, as follows: BORROWING BASE CERTIFICATE; WEEK CASH FLOW FORECAST. As soon as available and in any event on Tuesday of each week (or if Tuesday is not a Business Day on the immediately succeeding Business Day), or more frequently as the Borrower may desire, and from time to time upon the request of Agent, Borrower will deliver (1) a Borrowing Base Certificate (in substantially the same form as Exhibit 4.10(F)) as at the last Business Day of the prior week and (2) a cash flow forecast in form acceptable to Requisite Lenders covering the week in which such forecast is delivered and the immediately following 13 calendar weeks on a week by week basis. 1.19 Section 4.10(H) is amended to restate such subsection to read, in its entirety, as follows: COLLATERAL VALUE REPORT. Promptly after the Amendment No. 6 Date, and thereafter from time to time upon the reasonable request of Requisite Lenders, Borrower will cooperate with (including granting of access to its Property) and 10 assist Agent in obtaining, at the expense of Borrower, a report of an independent collateral auditor satisfactory to Requisite Lenders (which may be, or be affiliated with, a Lender) with respect to the accounts and inventory components included in the Borrowing Base, which report shall indicate whether or not the information set forth in the Borrowing Base Certificate most recently delivered is accurate and complete in all material respects based upon a review by such auditors of the accounts (including verification with respect to the amount, aging, identity and credit of the respective account debtors and the billing practices of Borrower) and inventory (including verification as to the value, location and respective types). 1.20 Section 4.10, is amended to insert a new subsection (P) thereof to read, in its entirety, as follows: (P) ASSET DISPOSITION SCHEDULE. Prior to any Asset Disposition, the Borrower shall deliver a report setting forth the EBIDAT producing assets subject to such Asset Disposition versus the non-EBIDAT producing assets. 1.21 Section 6.1, "EVENT OF DEFAULT", is amended to change the period at the end of subsection (T) to "; or", and to add new subsections (U) and (V) thereto to read, in their entirety, as follows: (U) SUBORDINATED PARTICIPATION AGREEMENT: (1) Any Purchaser (as defined in the Subordinated Participation Agreement referred to below) shall breach or be in violation of (a) any of its payment obligations at any time under the Subordinated Participation Agreement dated on or about the date of Amendment No. 6 by and among Agent, a certain "Seller" thereunder and the participants named therein (or certain constituents thereof) (as such Agreement may from time to time be amended, modified, supplemented or restated from time to time, and herein referred to as the "SUBORDINATED PARTICIPATION AGREEMENT"), or any Purchaser (as such terms are defined in the Subordinated Participation Agreement) shall breach or be in violation of any of its obligations, liabilities, representations, warranties or covenants under the Subordinated Participation Agreement (excluding the payment obligations covered under the preceding subsection (U)(1)) which breach or violation is not remedied or waived to the reasonable satisfaction of Agent within three (3) days after receipt by Borrower of notice from Agent of such breach or violation; or (V) CERTAIN SECURITY DOCUMENTS: Failure by Borrower or any of the applicable Loan Parties to have executed and delivered to Agent with reasonable promptness (but no later than thirty (30) days from the Amendment No. 6 Date unless an extension to such 30 day period is consented to in writing by Agent) such agreements, instruments and documents as the Agent may reasonably require in order to (1) modify any documents relating to real estate to reflect the terms of Amendment No. 6 and (2) transfer Borrower's accounts to a Lender who has executed the Lock Box 11 Agreement in form and substance satisfactory to Agent. 1.22 Section 9.1, "ASSIGNMENTS AND PARTICIPATIONS IN LOANS", is amended to add a new paragraph at the end of such subsection to read, in its entirety, as follows: Notwithstanding any other provision set forth in this Agreement, Heller may at its election on or about the Amendment No. 6 Date, enter into a participation agreement with the participants party to the Subordinated Participation Agreement (or any one or more of the constituents thereof) or any other affiliate thereof, which agreement shall provide for the purchase by the purchasers thereunder of a 100% interest in the Term Loan, provided that without the consent of all Lenders Heller shall not amend (i) the terms of Section 2.1 of the Subordinated Participation Agreement, or (ii) other terms of subordination under the Subordinated Participation Agreement in such a manner as to allow the Purchasers to receive payment earlier than is set forth in the Subordinated Participation Agreement as in effect on the date of execution and delivery of Amendment No. 6. 1.23 The section of Exhibit 4.10(C), "COMPLIANCE CERTIFICATE" pertaining to "Covenant 4.3 EBIDAT", is amended by (a) deleting the fourth item under the heading "Plus" in its entirety, and inserting a new fourth item as follows: Losses (or less gains) from Asset Dispositions (including sales of non-strategic assets) or other non-cash items included in the determination of net income (excluding sales, expenses or losses related to current assets) and the sale of obsolete inventory and (b) adding at the end of the first paragraph of the definition of EBIDAT immediately following the words ""or consolidated with the Borrower" the following language: and (c) an aggregate amount of expenses not to exceed Three Million Three Hundred Sixty-Two Thousand Dollars ($3,362,000) incurred, or to be incurred, by the Borrower during the period commencing August 1, 1999 and ending November 30, 1999, as reflected in the financial statement forecasts provided by the Borrower to the Lenders on October 15, 1999, which expenses pertain to (i) the consolidation of the operations of the Columbus manufacturing facility into the Frankfort, New York manufacturing facility, (ii) management restructuring costs (including severance payments and recruiting/relocation expenses) and (iii) expenses associated with Amendment No. 6 1.24 Section 10, "DEFINITIONS", is amended to add the following new definitions in appropriate alphabetical order, each to read, in its respective entirety, as follows: 12 "AMENDMENT NO. 6" means Sixth Amendment to Amended and Restated Credit Agreement dated as of October 28, 1999, by and among Borrower, Lenders signatory thereto and Agent. "AMENDMENT NO. 6 DATE" means the date on which Amendment No. 6 shall have become effective as provided therein. "BORROWING BASE RESERVE AMOUNT" means $500,000 or such lesser amount as Agent, acting at the direction of Lenders having greater than fifty-percent (50%) or more of the sum of the Revolving Loan Commitment and the Acquisition Loan Commitment, may specify in writing to the Borrower. "SUBORDINATED INDEBTEDNESS" means unsecured Indebtedness fully subordinated to the Obligations on terms, and pursuant to documentation, which meets with the approval of Agent and the Requisite Lenders (including, if required by Agent and the Requisite Lenders, a requirement that interest on any such Subordinated Indebtedness be paid only through the issuance of PIK notes), which approval will not be unreasonably withheld or delayed. 1.25 The following definitions are hereby amended and restated in their respective entirety as follows: "EXPIRY DATE" means the earlier of (a) the suspension (subject to reinstatement) of the Lenders' obligations to make Revolving Loans and Acquisition Loans pursuant to subsection 6.2, (b) the acceleration of the Obligations pursuant to subsection 6.3 or (c) April 30, 2001. "LOAN" or "LOANS" means an advance or advances under the Revolving Loan Commitment or the Acquisition Loans or the Term Loans. "LOCK BOX AGREEMENT" means that certain Lock Box Agreement entered into among the Borrower, the Agent and a Lender subsequent to the Amendment No. 6 Date relating to the Lock Box Account. "NOTE" or "NOTES" means one or more of the notes of Borrower substantially in the form of Exhibit 10.1(A), one or more of the Term Notes, or any combination thereof. "SECURITY DOCUMENTS" means all instruments, documents and agreements executed by or on behalf of any Loan Party to guaranty or provide collateral security with respect to the Obligations including, without limitation, any security agreement, lock box agreement or pledge agreement, any guaranty of the Obligations, any mortgage, any subordination and intercreditor agreements, 13 and all instruments, documents and agreements executed pursuant to the terms of the foregoing. ARTICLE II. REPRESENTATION AND WARRANTIES. Borrower represents and warrants as follows: 2.1 Borrower and each Loan Party is duly organized and validly existing under the laws of its jurisdiction of organization and has the power to own its assets and to transact the business in which it is presently engaged and in which it proposes to be engaged. 2.2 Borrower and each Loan Party is in good standing in its state or jurisdiction of incorporation and in each state or jurisdiction in which it is qualified to do business. There are no jurisdictions in which the character of the properties owned by Borrower or any other Loan Party or in which the transaction of the business of Borrower or any other Loan Party as now conducted requires or will require Borrower or any other Loan Party to qualify to do business, except jurisdictions in which the failure to so qualify would not have a material adverse effect on the Collateral in the Borrowing Base or on the business, operations, financial condition, or properties of Borrower or any other Loan Party. 2.3 Borrower and each Loan Party has the power to execute and deliver this Amendment No. 6 and to perform the Loan Agreement, as amended hereby, and to make and deliver the Term Notes and to perform its obligations under the Term Notes and the Loan Agreement as amended hereby, and Borrower and each Loan Party has taken all necessary action, corporate or otherwise, to authorize the execution and delivery of this Amendment No. 6, the making and delivery of the Term Notes, and the performance of the Loan Agreement, as amended hereby. No consent or approval of any Person (including, without limitation, any stockholder of Borrower or any other Loan Party), no consent or approval of any landlord or mortgagee, no waiver of any Lien or right of distraint or other similar right and no consent, license, approval, authorization or declaration of any governmental authority, bureau or agency, is or will be required in connection with the execution or delivery by Borrower or any other Loan Party of this Amendment No. 6 or the making and delivery of the Term Notes or the performance by Borrower, or the validity, enforcement or priority, of the Loan Agreement as amended hereby and the Term Notes. 2.4 The execution and delivery by Borrower and each other Loan Party of this Amendment No. 6 and the making and delivery of the Term Notes and performance by it hereunder and under the Term Notes, does not and will not violate any provision of law (including, without limitation, the Williams Act, Sections 13 and 14 of the Securities and Exchange Act of 1934, and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and Regulations U and X of the Board of Governors of the Federal Reserve System and the rules and regulations promulgated thereunder) and does not and will not conflict with or result in a breach of any order, writ, injunction, ordinance, resolution, decree, or other similar document or instrument of any court or governmental authority, bureau or agency, domestic or foreign, 14 or any certificate of incorporation or by-laws or comparable document of Borrower or any other Loan Party or create (with or without the giving of notice or lapse of time, or both) a default under or breach of any agreement, instrument, documents, bond, note or indenture to which Borrower or any other Loan Party is a party, or by which it is bound or any of its properties or assets is affected, or result in the imposition of any Lien of any nature whatsoever upon any of the properties or assets owned by or used in connection with the business of Borrower or any other Loan Party, except for the Liens created and granted pursuant to the Security Documents or otherwise permitted under the Loan Agreement. 2.5 This Amendment No. 6, the Term Notes, and the Loan Agreement as amended hereby have been duly executed and delivered by Borrower and each other Loan Party and each constitutes the valid and legally binding obligation of Borrower and each other Loan Party, enforceable in accordance with its terms, except that the remedy of specific performance and other equitable remedies are subject to judicial discretion and except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or. other similar laws, now or hereafter in effect, relating to or affecting the enforcement of creditors' rights generally. 2.6 The Liens granted pursuant to the Security Documents secure, without limitation, the obligations under the Loan Agreement as amended by this Amendment No. 6, including, without limitation, the Term Loan(s) and Note(s), whether or not so stated in the Security Documents. The term "OBLIGATIONS" as used in the Security Documents (or any other term used therein to refer to the Indebtedness, liabilities and obligations of Borrower to Lenders) include, without limitation, Indebtedness, liabilities and obligations to Lenders and Agent under the Loan Agreement as amended by this Amendment No. 6 and to Heller under the Term Note(s) made and delivered in connection with this Amendment No. 6. Each of the matters set forth in Article IV hereof is true and correct. 2.7 The letter executed by Borrower prior to the date hereof relating to payment to Agent of an agency fee in connection with the Loan Agreement remains in full force and effect in accordance with its terms and shall not be impaired in any way as a result of execution and delivery of this Amendment No. 6. ARTICLE III. CONDITIONS PRECEDENT. The effectiveness of this Amendment No. 6 shall be subject to the fulfillment by Borrower, in a manner satisfactory to Agent and Lenders, of all of the conditions precedent set forth in this Article III, and the date on which all such conditions shall have been fulfilled to the satisfaction of Agent and Lenders, and this Amendment No. 6 shall have become effective, shall be herein called the "AMENDMENT NO. 6 DATE": 3.1 Borrower shall have: (a) executed and delivered to Agent this Amendment No. 6 and Lenders and 15 the other Loan Parties shall have executed and delivered this Amendment No. 6; (b) executed and delivered to Heller the Term Note; (c) delivered to Agent a certificate confirming that its charter and by-laws remain in full force and effect without change since the Closing Date, each certified as being true and complete as of the Amendment No. 6 Date; (d) paid all fees and expenses of counsel to Agent incurred in connection herewith; and (e) otherwise complied in all respects with the terms hereof and of any other agreement, document, instrument or other writing to be delivered by Borrower in connection herewith. 3.2 Agent shall have received the following, each in form and substance satisfactory to Agent: (a) copies of the resolutions adopted by Borrower's and each other Loan Parties' respective Board of Directors, certified as of the Amendment No. 6 Date by an authorized officer thereof, authorizing the execution, delivery and performance by Borrower and the other Loan Parties of this Amendment No. 6 and the Term Notes; (b) a certificate of an authorized officer of Borrower, certifying as of the Amendment No. 6 Date the names and true signatures of the officer authorized to sign this Amendment No. 6 and the Term Notes, together with evidence of the incumbency of such authorized officer; and (c) favorable written opinions of Gibson, Dunn & Crutcher, LLP and in house counsel to the participants part to the Subordinated Participation Agreement, as to such matters relating to the transactions contemplated by this Amendment No. 6 as Lenders may reasonably request. 3.3 Heller shall have received a fully executed copy of a participation agreement entered into by and among Heller and OCM Principal Opportunities Fund, L.P. and TCW Special Credits, as general partner and/or investment manager of the funds and accounts set forth on Schedule I thereto, which agreement shall be in form and substance satisfactory to Heller and Requisite Lenders (the "SUBORDINATED PARTICIPATION AGREEMENT"), together with such other instruments and documents relating' thereto as Heller may require. 3.4 Borrower and the other Loan Parties shall have executed and delivered to Agent all agreements, instruments and documents required by Agent in order to confirm the existing and continuing liens in favor of Agent under the Security Documents. 3.5 The representations and warranties contained herein and each other agreement, 16 instrument, certificate or other writing delivered to Agent or any Lender pursuant hereto or to the Loan Agreement shall be correct on and as of the date hereof after giving effect to this Amendment No. 6 as though made on and as of such date except to the extent modified hereby and (b) no Default or Event of Default shall have occurred and be continuing on the Amendment No. 6 Date or would result from the taking effect of this Amendment No. 6; and the Agent shall have received a Compliance Certificate dated the Amendment No. 6 Date certifying that the conditions set forth in this Article III shall have been satisfied. 3.6 All legal matters incident to this Amendment No. 6 and the Loan Agreement shall be reasonably satisfactory to Agent and counsel to Agent. ARTICLE IV. ACKNOWLEDGMENTS AND CONFIRMATIONS. 4.1 Borrower acknowledges and confirms to Lenders and Agent that (a) the liens and security interests granted pursuant to the Loan Agreement and pursuant to the Security Documents executed by Borrower pursuant to the Loan Agreement secure, without limitation, the Obligations of Borrower to Lenders and Agent under the Loan Agreement, as amended hereby, and under the Revolving Notes, the Acquisition Loan Notes and the Term Note(s), whether or not so stated in such Security Documents, and (b) the term "OBLIGATIONS" as used in such Security Documents (or any other term used therein to describe or refer to the indebtedness, liabilities and obligations of Borrower to Lenders and Agent) includes, without limitation, the indebtedness, liabilities and obligations of Borrower under the Term Notes. 4.2 Holdings hereby acknowledges and confirms to Lenders and Agent that: (a) its Guaranty executed in favor of Agent, guarantying, without limitation, the full payment and performance of all of the Obligations of Borrower under the Loan Agreement, as amended hereby and under the Notes, including, without limitation, the Term Notes, (b) the term "OBLIGATIONS" as used in its guaranty (or any other term used therein to describe or refer to the indebtedness, liabilities and obligations of Borrower to the Lenders or Agent) includes, without limitation, all of the Obligations of Borrower to Lenders or Agent under the Loan Agreement, as amended hereby and under the Notes, including, without limitation, the Term Notes, (c) the liens and security interests granted pursuant to the Security Documents executed by it pursuant to the Loan Agreement or other Loan Documents secure, without limitation, the obligations of Holdings to the Lenders and Agent under its Guaranty, as confirmed hereby and the obligations of Borrower to Lenders and Agent under the Loan Agreement, as amended hereby, and the Notes, including without limitation, the Term Notes, whether or not so stated in such security documents, and (d) the term "OBLIGATIONS" as used in each security document (or any other term used therein to describe or refer to the indebtedness, liabilities and obligations of Borrower or the Holdings(s) to Lenders and Agent includes, without limitation, the obligations of Holdings to Lenders and Agent under its Guaranty, as confirmed hereby and the indebtedness, liabilities and obligations of Borrower under the Notes, including, without limitation, the Term Notes and under the Loan Agreement, as amended hereby. 4.3 Each of the Loan Parties hereby ratifies and affirms the validity and 17 enforceability of all of the Agreements to which the it is a party (all of which shall remain in full force and effect except to the extent they are inconsistent with this letter agreement), hereby waives any defenses to the enforcement of the Loan Documents and hereby releases the Agent and the Lenders and all of the Agent and the Lenders' predecessors, successors, assigns, officers, directors, attorneys, agents and employees from liability for any and all claims or causes of action of any nature whatsoever, in law or in equity, arising out of agreement or imposed by law or otherwise, from the beginning of time to the date on which this letter agreement is signed, whether or not known now, anticipated or unanticipated, suspected or claimed, fixed or contingent, and whether or not yet accrued and whether damage has yet resulted from such or not, including but not limited to any claims based on or arising out of or relating in any manner to (a) the administration of the Loan Documents or the Obligations prior to the date hereof, (b) the negotiation and execution of the Loan Documents or this Amendment, or (c) any other matter pertaining to the Loan Documents or the Obligations. In entering into this letter agreement, neither the Agent nor any Lender admits of any such liability of any sort to any Loan Party. Each of the Loan Parties further agrees that the provisions of this Amendment represent a fair and reasonable approach to the Loan Party's current financial and business circumstances. ARTICLE V. MISCELLANEOUS. 5.1 The Loan Agreement and the other Loan Documents to which Borrower is a party delivered in connection herewith or with the Loan Agreement are, and shall continue to be, in full force and effect, and are hereby ratified and confirmed in all respects, except that on and after the Amendment No. 6 Date (a) all references in the Loan Agreement to "this Agreement", "hereto", "hereof", "hereunder" or words of like import referring to the Loan Agreement shall mean the Loan Agreement as amended hereby, (b) all references in the Loan Agreement, the Security Documents or any other agreement, instrument or document executed and delivered in connection therewith to (i) the "Loan Agreement", "thereto", "thereof", "thereunder" or words of like import referring to the Loan Agreement shall mean the Loan Agreement as amended hereby, and (ii) the "Notes" shall be deemed to include the Term Notes, and (iii) the "Loans" (or any other term or terms used in any of such documents to describe or refer to Loans made by Lenders to the Borrower under the Loan Agreement) shall be deemed to refer to Loans made by Lenders to the Borrower pursuant to the Loan Agreement as amended hereby. 5.2 The Loan Agreement, the Security Documents and all agreements, instruments and documents executed and delivered in connection with any of the foregoing shall each be deemed amended hereby to the extent necessary, if any, to give effect to the provisions of this Amendment No. 6. Except as so amended hereby, the Loan Agreement and the other Loan Documents shall remain in full force and effect in accordance with their respective terms. The execution and delivery of this Amendment No. 6 by Borrower, Lenders and Agent shall not waive or be deemed to waive any default which has occurred or which may be occurring in respect of the Loan Agreement. All of the terms and provisions of this Amendment No. 6 are hereby incorporated by reference into the Loan Agreement as if such terms and provisions 18 were set forth in full therein. 5.3 This Amendment No. 6 may be executed in counterparts by the parties hereto, and each such counterpart shall be considered an original, and all such counterparts shall constitute one and the same instrument. Facsimile copies of any signature will be treated as original signatures. 5.4 THIS AMENDMENT NO. 6 SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 19 IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No. 6 to the Loan Agreement to be duly executed as of the date first above written. UNIONTOOLS, INC. By: /s/ John Jacob -------------------------- Title: Vice President, Chief Financial Officer ------------------------------------------- ACORN PRODUCTS, INC. By: /s/ John Jacob -------------------------- Title: Vice President, Chief Financial Officer ------------------------------------------- H.B. SHERMAN MANUFACTURING COMPANY By: /s/ John Jacob -------------------------- Title: Vice President, Chief Financial Officer ------------------------------------------- UNIONTOOLS IRRIGATION, INC. By: /s/ John Jacob -------------------------- Title: Vice President, Chief Financial Officer ------------------------------------------- HELLER FINANCIAL, INC., as Agent and a Lender By: /s/ William Vukovich -------------------------- Title: Assistant Vice President -------------------------- FLEET BUSINESS CREDIT CORP., formerly known as Sanwa Business Credit Corporation By: /s/ Matthew R. Van Steenhuyse -------------------------- Title: Senior Vice President ----------------------- FLEET CAPITAL CORPORATION By: /s/ Matthew R. Van Steenhuyse -------------------------- Title: Senior Vice President ----------------------- PNC BANK, NATIONAL ASSOCIATION By: /s/ William Miles -------------------------- Title: Vice President ----------------------- 20 BANKBOSTON, N.A., formerly known as The First National Bank Of Boston By: Robert Allen -------------------------- Title: Managing Director ---------------------- FIRSTAR BANK, N.A. By: /s/ Douglas Worden -------------------------- Title: Assistant Vice President ---------------------------- 21 EXHIBIT A TO AMENDMENT NO. 6 TERM LOAN NOTE $6,000,000 Chicago, Illinois October 28, 1999 FOR VALUE RECEIVED, UNIONTOOLS, Inc., a Delaware corporation (the "BORROWER"), promises to pay to the order of HELLER FINANCIAL, INC., a Delaware corporation ("HELLER"), the principal sum of Six Million Dollars ($6,000,000; the "PRINCIPAL AMOUNT") and to pay interest on the outstanding principal amount of this Term Loan Note (this "NOTE"), in accordance with Section 2 hereof. This Note is the Term Loan Note defined in, and is delivered in connection with the execution and delivery of, that certain Sixth Amendment (the "AMENDMENT"; capitalized terms used and not defined herein shall have the meanings ascribed thereto in the Amendment) to the Amended and Restated Credit Agreement dated as of May 20, 1997 (as amended, the "CREDIT AGREEMENT") by and among the Borrower, Heller and each of the Lenders under the Credit Agreement. 1. MATURITY. If the Note has not previously been exchanged for common stock of Acorn Holdings, Inc., a Delaware corporation ("ACORN"), in accordance with Section 5 hereof, the Borrower shall repay the unpaid Principal Amount outstanding hereunder on the later of (i) August 1, 2001 and (ii) the date which is ninety-one (91) days after the Expiry Date, as defined in the Credit Agreement (such date, the "MATURITY DATE"). 2. INTEREST. The Borrower further agrees to pay interest ("INTEREST") on the unpaid Principal Amount hereunder until such amount shall be paid in full at the rate of twelve percent (12%) per annum (the "INTEREST RATE"). Interest shall be payable quarterly in arrears on each February 1, May 1, August 1 and November 1 (each such date, an "INTEREST PAYMENT DATE"), and on the Maturity Date. Interest shall be paid by the Borrower by issuing to Heller, on each Interest Payment Date, a term loan note evidencing principal indebtedness in an amount equal to the Interest owing on such date, on terms and conditions commensurate with those set forth in this Note. If any payment of Interest hereunder becomes due and payable on a day other than a Business Day, such Interest Payment Date shall be extended to the next succeeding Business Day and Interest thereon shall be payable at the Interest Rate during such extension. 3. PREPAYMENT. The unpaid Principal Amount, all accrued Interest and any and all other sums payable to Heller hereunder may be prepaid by the Borrower in full or in part at any time prior to the Maturity Date without prepayment penalty, upon five (5) days prior written notice to Heller in accordance with the terms of Section 1.5(a) of the Credit Agreement. All prepayments shall be applied in accordance with the terms of the Credit Agreement. 22 4. DEFAULT / ACCELERATION. Upon the occurrence of an Event of Default, Heller shall have the right to declare the unpaid Principal Amount and all accrued Interest immediately due and payable. 5. EXCHANGE. Heller shall have the right, at any time during which any unpaid Principal Amount remains outstanding hereunder, upon two (2) days prior notice to the Borrower, to exchange the Note for a number of shares of common stock of Acorn (the "SHARES") to be issued to Heller, or, at the election of Heller, directly to the Persons named in the Exchange Direction (as defined in the Subordinated Participation Agreement dated as of the date hereof by and between Heller and the participants named therein) equal to (i) the sum of the unpaid Principal Amount hereunder plus accrued and unpaid Interest through the date of exchange, divided by (ii) Three Dollars and Fifty Cents ($3.50). No fractional shares shall be issued thereupon and the recipient(s) of the Shares shall receive a cash payment equal to the value of any fractional shares that would be called for by the foregoing formula. The aforementioned formula will be adjusted in the event of a stock split, stock dividend or similar event by Acorn so that the exchange rights set forth herein are, after the occurrence of such event, as possible to such rights prior to such event. As a condition to the issuance of the Shares, the recipient(s) thereof, shall, at the time of exchange, make such representations and warranties to Acorn and the Borrower as they shall reasonably require so as to permit the issuance of the Shares without registration thereof under the Securities Act of 1933, as amended, including, without limitation, acknowledgement that the Shares will not be registered under the Securities Act of 1933, as amended, will not be freely tradable on the public markets, will be subject to certain restrictions imposed by that Act and will have a legend on the certificates for such Shares so indicating. The Borrower covenants to Heller to have available for exchange the number of Shares necessary to satisfy its obligations hereunder. Upon exchange of the Note for the Shares pursuant to this Section 5, the rights and obligations of the Borrower and Heller hereunder shall be fully and forever satisfied. 6. SECURED OBLIGATIONS; PRIORITY. The obligations of the Borrower under this Note are secured by the Collateral in accordance with the terms of the Amendment. The Borrower covenants to Heller that its obligations under this Note will, at all times, rank senior to all of the Borrower's obligations for indebtedness for borrowed money (other than pursuant to the Credit Agreement and any refinancings thereof, as to which its obligations hereunder will rank junior), and will rank pari passu with all trade indebtedness of the Borrower. 7. MISCELLANEOUS. (a) The Borrower hereby waives presentment, demand, protest, notice of diligence and all other notices of any kind. (b) This Note shall be governed by and construed in accordance with the laws of the State of Illinois applicable to contracts wholly made and performed in the State of Illinois. (c) All amounts owing to Heller hereunder shall be paid to Heller in accordance with the terms of the Credit Agreement. 23 (d) Heller shall have the right to assign its benefits hereunder, or to grant participations therein, at its discretion, upon written notice to the Borrower. [remainder of page intentionally left blank] IN WITNESS WHEREOF, The Borrower has executed this Term Loan Note as of the day and date first above written. UNIONTOOLS, INC. By: /s/ John Jacob ------------------------------------- Name: John Jacob Title: Vice President, Chief Financial Officer 24 EX-99.3 4 EXHIBIT 99.3 EXHIBIT 99.3 TERM LOAN NOTE $6,000,000 Chicago, Illinois October 28, 1999 FOR VALUE RECEIVED, UNIONTOOLS, Inc., a Delaware corporation (the "BORROWER"), promises to pay to the order of HELLER FINANCIAL, INC., a Delaware corporation ("HELLER"), the principal sum of Six Million Dollars ($6,000,000; the "PRINCIPAL AMOUNT") and to pay interest on the outstanding principal amount of this Term Loan Note (this "NOTE"), in accordance with Section 2 hereof. This Note is the Term Loan Note defined in, and is delivered in connection with the execution and delivery of, that certain Sixth Amendment (the "AMENDMENT"; capitalized terms used and not defined herein shall have the meanings ascribed thereto in the Amendment) to the Amended and Restated Credit Agreement dated as of May 20, 1997 (as amended, the "CREDIT AGREEMENT") by and among the Borrower, Heller and each of the Lenders under the Credit Agreement. 1. MATURITY. If the Note has not previously been exchanged for common stock of Acorn Holdings, Inc., a Delaware corporation ("ACORN"), in accordance with Section 5 hereof, the Borrower shall repay the unpaid Principal Amount outstanding hereunder on the later of (i) August 1, 2001 and (ii) the date which is ninety-one (91) days after the Expiry Date, as defined in the Credit Agreement (such date, the "MATURITY DATE"). 2. INTEREST. The Borrower further agrees to pay interest ("INTEREST") on the unpaid Principal Amount hereunder until such amount shall be paid in full at the rate of twelve percent (12%) per annum (the "INTEREST RATE"). Interest shall be payable quarterly in arrears on each February 1, May 1, August 1 and November 1 (each such date, an "INTEREST PAYMENT DATE"), and on the Maturity Date. Interest shall be paid by the Borrower by issuing to Heller, on each Interest Payment Date, a term loan note evidencing principal indebtedness in an amount equal to the Interest owing on such date, on terms and conditions commensurate with those set forth in this Note. If any payment of Interest hereunder becomes due and payable on a day other than a Business Day, such Interest Payment Date shall be extended to the next succeeding Business Day and Interest thereon shall be payable at the Interest Rate during such extension. 3. PREPAYMENT. The unpaid Principal Amount, all accrued Interest and any and all other sums payable to Heller hereunder may be prepaid by the Borrower in full or in part at any time prior to the Maturity Date without prepayment penalty, upon five (5) days prior written notice to Heller in accordance with the terms of Section 1.5(a) of the Credit Agreement. All prepayments shall be applied in accordance with the terms of the Credit Agreement. 4. DEFAULT / ACCELERATION. Upon the occurrence of an Event of Default, Heller shall have the right to declare the unpaid Principal Amount and all accrued Interest immediately due and payable. 5. EXCHANGE. Heller shall have the right, at any time during which any unpaid Principal Amount remains outstanding hereunder, upon two (2) days prior notice to the Borrower, to exchange the Note for a number of shares of common stock of Acorn (the "SHARES") to be issued to Heller, or, at the election of Heller, directly to the Persons named in the Exchange Direction (as defined in the Subordinated Participation Agreement dated as of the date hereof by and between Heller and the participants named therein) equal to (i) the sum of the unpaid Principal Amount hereunder plus accrued and unpaid Interest through the date of exchange, divided by (ii) Three Dollars and Fifty Cents ($3.50). No fractional shares shall be issued thereupon and the recipient(s) of the Shares shall receive a cash payment equal to the value of any fractional shares that would be called for by the foregoing formula. The aforementioned formula will be adjusted in the event of a stock split, stock dividend or similar event by Acorn so that the exchange rights set forth herein are, after the occurrence of such event, as possible to such rights prior to such event. As a condition to the issuance of the Shares, the recipient(s) thereof, shall, at the time of exchange, make such representations and warranties to Acorn and the Borrower as they shall reasonably require so as to permit the issuance of the Shares without registration thereof under the Securities Act of 1933, as amended, including, without limitation, acknowledgement that the Shares will not be registered under the Securities Act of 1933, as amended, will not be freely tradable on the public markets, will be subject to certain restrictions imposed by that Act and will have a legend on the certificates for such Shares so indicating. The Borrower covenants to Heller to have available for exchange the number of Shares necessary to satisfy its obligations hereunder. Upon exchange of the Note for the Shares pursuant to this Section 5, the rights and obligations of the Borrower and Heller hereunder shall be fully and forever satisfied. 6. SECURED OBLIGATIONS; PRIORITY. The obligations of the Borrower under this Note are secured by the Collateral in accordance with the terms of the Amendment. The Borrower covenants to Heller that its obligations under this Note will, at all times, rank senior to all of the Borrower's obligations for indebtedness for borrowed money (other than pursuant to the Credit Agreement and any refinancings thereof, as to which its obligations hereunder will rank junior), and will rank pari passu with all trade indebtedness of the Borrower. 7. MISCELLANEOUS. (a) The Borrower hereby waives presentment, demand, protest, notice of diligence and all other notices of any kind. (b) This Note shall be governed by and construed in accordance with the laws of the State of Illinois applicable to contracts wholly made and performed in the State of Illinois. 2 (c) All amounts owing to Heller hereunder shall be paid to Heller in accordance with the terms of the Credit Agreement. (d) Heller shall have the right to assign its benefits hereunder, or to grant participations therein, at its discretion, upon written notice to the Borrower. [remainder of page intentionally left blank] IN WITNESS WHEREOF, The Borrower has executed this Term Loan Note as of the day and date first above written. UNIONTOOLS, INC. By: /s/ John Jacob ----------------------------- Name: John Jacob Title: Vice President, Chief Financial Officer 3 EX-99.4 5 EXHIBIT 99.4 EXHIBIT 99.4 SUBORDINATED PARTICIPATION AGREEMENT THIS SUBORDINATED PARTICIPATION AGREEMENT (the "AGREEMENT") is made and entered into as of this 28th day of October, 1999, by and among Heller Financial, Inc. in its individual capacity ("HELLER") and (if applicable pursuant to Section 11.17 hereof) certain other "Lender(s)" under the Loan Agreement referred to below (each, individually (including Heller), a "SELLER" and collectively, the "SELLERS") and Heller Financial, Inc. in its capacity as Agent under the Loan Agreement referred to below (in such capacity, together with its successors in such capacity, the "AGENT") and OCM Principal Opportunities Fund, L.P. and TCW Special Credits, as general partner and/or investment manager of the funds and accounts set forth on Schedule IA hereto (collectively, the "PURCHASERS"). WITNESSETH: WHEREAS, pursuant to that certain Amended and Restated Credit Agreement dated as of May 20, 1997 among Uniontools, Inc. (the "BORROWER"), Acorn Products, Inc., H.B. Sherman Manufacturing Company, Uniontools Irrigation, Inc., formerly known as UnionTools Watering Products, Inc., the Agent and the lending institutions from time to time signatory thereto (the "LENDERS"), the Lenders agreed to extend credit to the Borrower in the form of revolving credit advances, standby letters of credit, risk participations and term loans; WHEREAS, the Agent, the Lenders, the Loan Parties and the Borrower have entered into that certain Sixth Amendment to Amended and Restated Credit Agreement, dated as of the date hereof (the "AMENDMENT") providing, among other things, for the making by certain of the Sellers to Borrower of an additional term loan, referred to therein as the Term Loan, in one advance (such additional loan, whether made by any one of the Sellers above or by Sellers under the Loan Agreement, including the principal amount of any Term Notes issued by the Borrower respect of interest on the Term Loans, the "TERM LOAN") subject to the terms and conditions set forth therein (the aforementioned Amended and Restated Credit Agreement, dated as of May 20, 1997, as heretofore amended, as amended by the Amendment and as it may hereafter be further amended, supplemented, restated or otherwise modified, is referred to herein as the "LOAN AGREEMENT"); WHEREAS, to evidence its obligation to repay the Term Loan under the Loan Agreement, the Borrower issued to each Seller agreeing to make the Term Loan a promissory note (whether one or more, and as they may from time to time be amended, modified, supplemented, renewed, restated or replaced, individually or collectively, as the context may require, together with any additional paid-in-kind promissory notes issued in respect of interest on the Term Loan, the "TERM NOTES") in the principal amount of the Term Loan; WHEREAS, the Purchasers acknowledge that the Loans, including the Term Loan, are of value to the Purchasers, and subject to the terms and conditions contained herein, the Sellers desire to convey to the Purchasers, and the Purchasers desire to purchase and assume from the Sellers, an undivided, non-voting, last out, subordinated participation interest in and to all of the Sellers' right, title, interest, claims and causes of action in and to, or arising under or in connection with (i) the Term Loan and the Loan Documents to the extent applicable thereto, and (ii) any and all cash, securities, dividends and other property or consideration, regardless of type, that may be exchanged for, distributed or collected in respect of the foregoing ("PROCEEDS"). The items described in clauses (i) and(ii) of this recital are referred to collectively herein as the "TRANSFERRED INTERESTS"; WHEREAS, so long as Heller is the only Lender under the Loan Agreement who has made a Term Loan, each reference herein to "Seller" or "Sellers" shall mean only Heller; and WHEREAS, certain capitalized terms used herein are defined in Section 6 hereof and capitalized terms used and not otherwise defined herein shall have the meanings ascribed thereto in the Loan Agreement; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto hereby agree as follows: 1. PARTICIPATION AND CLOSING 1.1 PARTICIPATION; SUBORDINATION. (a) In the manner and to the extent hereinafter set forth, the Sellers hereby grant, sell, transfer and assign to the Purchasers and the Purchasers hereby accept, effective immediately, without recourse to any Seller, an undivided non-voting junior and fully subordinate last out participation in the Transferred Interests (the "PARTICIPATION"). (b) Purchasers shall pay to the Sellers, in immediately available funds, an amount equal to Six Million Dollars ($6,000,000) for the Participation (the "PURCHASED AMOUNT"). (c) The obligations of the Purchasers hereunder are absolute, unconditional and irrevocable and without limiting the generality of the foregoing neither the existence of any Default (including, without limitation, the occurrence of any insolvency proceeding or bankruptcy case of any kind with respect to the Borrower or any other Loan Party) nor any breach by any Loan Party under any Loan Document shall affect or limit the Purchasers' obligations hereunder, regardless of whether any such Default or breach occurs before, after or concurrently with the making of the Term Loan under the Loan Agreement. (d) The Purchaser agree that except as set forth herein, as between the 2 Sellers, the Lenders, Agent and the Purchasers, the Participation shall be subject and subordinate in all respects to all interests of the Sellers (and the other Lenders) in the Loans and shall be subordinate to (and not paid prior to) the prior payment indefeasibly in full in cash of all of the Obligations of the Borrower (including as a debtor-in possession) to the Lenders and the Agent (including, without limitation, all post-petition interest, fees and expenses in any bankruptcy proceeding, whether or not allowed by a bankruptcy court) and termination of the Revolving Loan Commitments. For all purposes of this Agreement, the term "Obligations" includes, without limitation, all of the Loans, regardless of how or in what manner the Loans may be incurred, or whether already incurred or incurred in the future by future advances or other financial accommodations (including to the Borrower as a debtor-in-possession) made or extended by the Lender(s) as of the date hereof or hereafter or by any other persons or entities that become holders of Loans after the date hereof, whether by amendment, modification, supplement or restatement or whether such future advances or other financial accommodations are made at the discretion of the Lender(s) or such other person or entity under the Loan Documents or pursuant to the Revolving Loan Commitments or otherwise (collectively, "FULL PAYMENT"). Notwithstanding the foregoing, (i) the Purchasers shall be entitled to receive payments in respect of the Term Loan in accordance with Section 1.5(a) of the Loan Agreement ("SECTION 1.5 PAYMENTS"), which payments shall not be subject to the subordination set forth in this Section 1.1(d), and (ii) the Purchasers' rights hereunder shall rank pari passu with, and shall not be subject or subordinate to, the success fee payable to the Lenders in accordance with Section 1.3(d) of the Loan Agreement. For purposes of this Agreement, the term "indefeasibly" shall be deemed to mean the ninety-first (91st) day following the last payment to the Lenders and Agent in respect of Full Payment, subject, however, to the disgorgement obligations of the Purchasers under Sections 3 and 5(b) hereof. The Purchasers' interests in the liens on and security interests in the collateral securing the Term Loan from time to time (including, without limitation, any guaranties by any third parties and any property in any Seller's, Lender's or Agent's possession or control or in any deposit held or other indebtedness owing by any Seller which may be or become collateral or otherwise be available for payment to any Seller of the Loans or by reason of the right of set-off, counterclaim or otherwise) (collectively, the "COLLATERAL") shall be subject and subordinate to the Sellers' and Agent's liens on and security interests in or other rights in the Collateral and otherwise subject to the terms and conditions of this Agreement. (e) Notwithstanding the sale of the Participation hereunder, the Sellers shall remain the holders of the Term Loan, and the Participation shall not give rise in any way to a direct obligation of the Borrower to the Purchasers or any right of the Purchasers against the Borrower whether before or after the bankruptcy or insolvency of the Borrower or any other Loan Party, and the Sellers shall retain the right to vote any claim in respect of the Term Loan and the Participation in any bankruptcy case or insolvency proceeding, provided that following Full Payment (excluding payment of the Term Loan), each Seller's right to vote any such claim shall be assigned to the Purchasers in accordance with Section 5(b) below. 1.2 PURCHASE PRICE. The aggregate purchase price to be paid hereunder at the Closing (the "PURCHASE PRICE") shall equal the Purchased Amount. 3 1.3 CLOSING. The funding of the purchase contemplated hereby (the "CLOSING") shall take place at the offices of Katten Muchin & Zavis, in Chicago, Illinois, on the Funding Date. 2. ALLOCATIONS AND SUBORDINATION PROVISIONS 2.1 ALLOCATIONS. After the Funding Date, all monies received or held by the Lenders or the Agent on or at any time from the Borrower or out of its assets or as proceeds of any Collateral (i) as payments or prepayments of interest on or principal or reimbursements of the Obligations, or (ii) as proceeds from the sale or other disposition of the Collateral, or (iii) as proceeds of set-offs or banker's liens or otherwise, and actually applied by the Lenders to the payment of the Borrower's Obligations under the Loan Agreement and the Notes, shall be applied first, to the Obligations in which the Purchasers shall not have any participation (i.e., to the Obligations other than the Term Loan) in such order as the Agent may elect, and then, following Full Payment (excluding payment of the Term Loan and assuming that the Purchasers shall have fulfilled their obligations to the Sellers hereunder) to the Term Loan, in the same funds in which such amount was received. Notwithstanding the foregoing, monies received by the Lenders or the Agent in respect of Section 1.5 Payments shall be paid to the Purchasers in accordance with Section 1.5(a) of the Loan Agreement. Accordingly, in confirmation of the terms of the first sentence herein above (but without limiting the generality thereof), subject to the immediately preceding sentence, and except to the extent that the order of items "first" through "fifth" below may be modified by the Agent or the Lenders, all monies received or held by the Seller or the Agent as referred to in the preceding sentence shall be applied, FIRST, to the payment in full of the costs and expenses (including attorney's fees) incurred by the Agent and the Lenders in effecting the recovery or collection of such monies or enforcing the Agent's or the Lender's rights and remedies under the Loan Documents, SECOND, to the payment in full of all fees, indemnities and other obligations of the Borrower to the Agent and the Lenders under any Loan Document (other than the obligation to pay principal and interest on the Loans), THIRD, to the payment in full of interest accrued on Lenders' Share of the Loans (excluding the Term Loan) at the rate specified in the Loan Agreement and the Notes, FOURTH, to the payment of all principal then due (whether in ordinary course, by acceleration, or otherwise) on the Lenders' Share of the Loans (excluding the Term Loan), FIFTH, to the repayment in full of the principal of the Lenders' Share of the Loans (excluding the Term Loan), SIXTH, to the payment in full of interest accrued on the Term Loan at the rate specified in the Loan Agreement in respect of the Term Loan, and, SEVENTH, to the repayment in full of the Term Loan. Notwithstanding anything to the contrary contained in this paragraph, the Purchasers shall not be entitled to share in any fee paid by the Borrower to any Seller. The Sellers' actions hereunder are strictly administrative, and all payments to be made by any Seller to the Purchasers hereunder shall be made only if, when and to the extent funds received by the Sellers are available in accordance with the priority of allocation provided for in this Section 2.1, and any repayment of principal or interest to the Purchasers hereunder is solely dependent on receipt by the Sellers of payment or proceeds from the Borrower. 2.2 WAIVERS. This Agreement shall be applicable both before and after the 4 commencement, whether voluntary or involuntary, of any bankruptcy case or insolvency proceeding of the Borrower (including, without limitation, the Borrower as a debtor-in-possession). The Purchasers shall not be entitled to any monies or other property or interests in property received by any Seller or the Agent in accordance with the provisions of the Loan Documents, whether directly or indirectly from the sale or liquidation of any Collateral, any payment or distribution of any kind, whether in cash, properties or securities (excluding, for purposes of this Section 2.2, (i) additional term notes issued by the Borrower in accordance with the requirements of Section 2 of the Term Note and (ii) the Shares (as defined herein below) to be issued by Holdings upon exchange of the Term Note in accordance with Section 5 thereof), pursuant to any bankruptcy case or insolvency proceeding or otherwise in reduction of its Participation hereunder unless and until the Lenders have received Full Payment (excluding payment of the Term Loan). Notwithstanding the foregoing, the Purchasers shall be entitled to receive Section 1.5 Payments in accordance with Section 1.5(a) of the Loan Agreement. Subject to the foregoing until the Lenders have received Full Payment (excluding payment of the Term Loan), any payment received by the Purchasers at any time with respect to the Term Loan shall not be commingled with any assets of the Purchasers and shall be held in trust for the benefit of the Sellers and the amount thereof remitted promptly to the Sellers in the same type of funds as received by the Purchasers for application to the payment of the Term Loan. In the event that any Seller makes any debtor-in-possession financing arrangements with the Borrower, the proceeds of which are used to repay in full or in part the Term Loan, the Purchasers shall have a continuing participation in the replacement loan therefor on the same terms and with the same priorities as set forth herein and no proceeds of any such debtor-in-possession financing shall be paid in cash to the Purchasers but shall instead be deemed to constitute a continuing Participation hereunder. Without limiting the generality of the foregoing, the Purchasers will not as a result of the Closing or otherwise, directly or indirectly, unless otherwise explicitly provided in this Agreement, acquire (and the Purchasers hereby waive and agree that they will not, unless otherwise explicitly provided in this Agreement, exercise) (a) any right to vote the Participation acquired hereunder, provided that notwithstanding any other provision contained herein, without the prior written consent of the Purchasers the Sellers shall not agree to: (1) a reduction of the principal amount of, or rate of interest on, the Term Loan, (2) a change the stated date for final payment of the Term Loan or interest thereon (unless concurrently with any such date change, the maturity date or final termination date of the outstanding Revolving Loans and Acquisition Loans are extended so that the Term Loan and interest thereon retain stated maturity dates no later than thirty-one days following final stated maturity of the Acquisition Loans and/or Revolving Loans) or (3) a change in the exchange rate or terms of exchange of the Term Loan for the Shares; PROVIDED that the terms of the foregoing proviso shall not be applicable in the event of any bankruptcy case or insolvency proceedings or similar action of any kind, (b) any right to vote on any matter as a participant under the Loan Agreement or any other Loan Document, (c) any right to receive payments directly from the Borrower or any other Loan Party under the Loan Agreement or otherwise in respect of the Obligations or the Participation acquired hereunder, (d) any right to require any Seller or the Agent to marshal any of the Collateral or any other Collateral for the Loans or that the any Seller, Lender or the Agent pursue or not pursue any guarantor, (e) any rights of recourse to or with respect to the Collateral or any other assets or property of the Borrower or any other security for any or all of the Loans and other 5 Obligations or any other rights to proceed or deal directly with or against the Borrower in respect of the Term Loan (or any other Obligations) or the Participation or the Collateral until, in each case, such time as the Lenders have been indefeasibly repaid in full in cash all of their respective interests in the Loans and other Obligations (i.e., Full Payment), (f) ask, demand, sue for, take, receive, accept or retain from any source (other than any Seller) any payment with respect to the Participation or any security or collateral therefor, (g) make or present any proof of claim against the Borrower with regard to the Participation in the event of any distribution of assets or readjustment of indebtedness of the Borrower whether by reason of a bankruptcy or the application of the assets of the Borrower to the payment or liquidation thereof, or contest any use of cash collateral or debtor-in-possession financing arrangements consented to by any Seller, or (h) set off any amounts owing to the Purchasers by the Borrower with regard to the Participation against any amounts owing by the Purchasers to the Borrower. The Purchasers agree that they shall not become members of any creditors committee nor shall the Purchasers extend any debtor in possession financing arrangements to the Borrower or any other Loan Party unless all of the Obligations (other than the Term Loan) have been satisfied in full. All references in this Agreement to the Term Loan shall also include any proceeds, replacements and substitutions for the Term Loan, including, without limitation, cash, stock, notes or any other property received in any bankruptcy, insolvency or liquidation proceedings relating to the Borrower and the terms and conditions of this Agreement shall apply to any and all of the foregoing referred to in this sentence. 3. EFFECT OF PAYMENT RESCISSION. If, after any Seller has paid to the Purchasers the Purchasers' share of any amount received by any Seller or of any application of funds made by the Lenders in respect of the Loans, such payment or application is rescinded or must otherwise be returned by the Lenders or the Agent, whether to the Borrower or to a trustee, receiver, liquidator, custodian or other similar official or otherwise, for any reason, the Purchasers will upon demand by any Seller or the Agent promptly pay back to such Seller as applicable the Purchasers' share of the amount so returned, together with the Purchasers' share of any interest paid by the Seller with respect thereto. 4. RIGHTS OF LENDERS 4.1 EXERCISE OF RIGHTS AND REMEDIES. (a) The Purchasers covenant and agree that, until such time as the Lenders have been indefeasibly repaid in full in cash all of their respective interests in the Obligations (I.E., until Full Payment), without notice to or by the Purchasers and without affecting or impairing in any way the obligations or liability of the Purchasers hereunder, the Agent or any Lender may, from time to time, all in their sole discretion, as though the Sellers had not sold the Participation, exercise any right or remedy that the Agent or such Lender may have with respect to any or all of the Loans and other Obligations or any Collateral or other assets or property securing any or all of the Loans and other Obligations or any guaranty thereof, including, without limitation, judicial foreclosure, nonjudicial foreclosure, exercise of a power of sale, and taking a deed, assignment or transfer in lieu of foreclosure as to any such property and the Purchasers expressly waive any defense based upon the exercise of any such right or remedy, notwithstanding the effect thereof upon any of the Purchasers' rights, including, without limitation, any destruction of the Purchasers' 6 right of subrogation against Borrower. (b) The Sellers hereby agree that notwithstanding anything to the contrary contained herein, the right of the Sellers to exchange the Term Loan for capital stock of Holdings (the "SHARES") pursuant to Section 5 of the Term Note shall be exercisable by the Sellers only upon the written direction (the "EXCHANGE DIRECTION") of the Purchasers in the form attached hereto as Exhibit A. The Sellers further agree that upon receipt of the Exchange Direction, the Sellers shall promptly (i) comply with the terms thereof and of such Section 5 and (ii) designate that the Shares be issued in the name of the Person specified in the Exchange Direction. 4.2 COSTS. Subject to Section 5.2(b) below, the Lenders and the Agent shall determine in their sole discretion whether to incur any costs or expenses (including attorneys' fees and court costs, collection expenses and other legal or extraordinary expenses), in connection with the collection of any monies from the Borrower or out of its assets, the enforcement of any of the Lenders' or the Agent's rights and remedies under the Loan Agreement or any other Loan Documents and the care, preservation or disposition of the Collateral. In the event that the Lenders or the Agent incur any such costs or expenses, such costs and expenses shall, in accordance with Section 2.1 above, be payable out of any monies received or held by the Lenders or the Agent from the Borrower or out of the Borrower's or any Loan Party's assets before such monies are applied to the payment of the principal of or interest on the Loans. 5. ADMINISTRATION. (a) Except upon an assignment as provided in subsection (b) of this Section 5, the account of the Borrower and all transactions in connection therewith shall be conducted solely in the Lenders', the Sellers' or the Agent's name, without charge to the Purchasers for the Sellers' or the Agent's administrative or clerical expenses except as provided in Section 4.2 and/or Section 9 hereof. So long as any Loans are outstanding the respective Seller or the Agent as applicable shall service and manage the Loans and handle all matters concerning the Collateral (including the protection, preservation and disposition thereof) in accordance with the Seller's or Agent's usual practice in managing their respective affairs in the ordinary course of business; PROVIDED, HOWEVER, that neither any Seller nor the Agent shall be liable for any error of judgment or for any action taken or omitted by any Seller or the Agent except for actions taken or omitted by such Seller or the Agent as a result of such Seller's or the Agent's bad faith or willful misconduct as determined by a court of competent jurisdiction after all possible appeals have been exhausted. (b) Upon payment in full of the Lenders' Share of the Loans and all other amounts owing to the Lenders and the Agent under the Loan Agreement, the Note and the other Loan Documents (other than the principal amount of the Term Loan and interest accrued thereon), no Seller nor the Agent shall have any obligation to enforce their rights under this Agreement for the Purchasers' benefit, including, without limitation, their rights in the Collateral, but the Sellers shall upon the request of the Purchaser promptly thereafter assign to the Purchasers the Sellers' respective rights under the Term Notes, without recourse, representation or warranty of any kind; PROVIDED, HOWEVER, that any such assignment shall 7 automatically and without further action revert to the respective Seller in the event that such Seller is required to disgorge any payment theretofore received by such Seller in respect of the Loans or such payment is otherwise rescinded as a result of any of the circumstances set forth in Section 3 above, and the Purchasers will upon demand by any Seller or the Agent promptly pay back to such Seller as applicable any amount received by the Purchasers in respect of the Term Loan up to the amount disgorged by such Seller. 6. DEFINITIONS. For purposes hereof, (a) "LOANS" shall mean the loans, advances or other financial accommodations made by Lenders to the Borrower (including, without limitation, Term Loans and the Risk Participation Liabilities owing to the Lenders) from time to time under the Loan Agreement, (b) "LENDERS' SHARE OF THE LOANS" shall mean the excess, if any, of the Obligations outstanding from time to time over the amount of the Term Loan, (c) "NOTE" shall mean collectively the promissory notes evidencing the Loans from time to time and shall include the Risk Participation Liabilities whether or not evidenced by any promissory note, and (d) "SECURITY DOCUMENTS" shall mean the Loan Documents, as defined in the Loan Agreement, relating to collateral security for the Loans each between the Agent and any other Loan Party, as each such Agreement may be supplemented, modified, amended and/or renewed. 7. REPRESENTATIONS, WARRANTIES AND COVENANTS 7.1 PURCHASERS REPRESENTATIONS, WARRANTIES AND COVENANTS. The Purchasers hereby represent and warrant to the Sellers and the Agent, subject to Section 11.18 below, that: (a) this Agreement has been duly and validly authorized, executed and delivered and constitutes the valid and binding obligation of the Purchasers, enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (b) the execution and delivery of this agreement does not violate or constitute a default under any order, judgment, decree, instrument, contract, agreement or other document to which the Purchasers are a party or by which it or its property is affected or bound; (c) it is in the Purchasers' direct interest to assist the Borrower by entering into this Agreement and providing this commitment; (d) the Purchasers are experienced and knowledgeable in financial matters and are fully aware of the current financial condition of Borrower and is executing and delivering this Agreement at Borrower's request and based solely upon the Purchasers' own independent investigation of all matters pertinent hereto and are not relying in any manner upon any representation or statements of any Seller, Lender or the Agent with respect thereto; (e) the Purchasers are in a position to obtain, and hereby assume, full 8 responsibility for obtaining any additional information concerning Borrower's financial condition and any other matter pertinent hereto as the Purchasers may desire, and not relying upon or expecting any Seller, Lender or the Agent to furnish to the Purchasers any information now or hereafter in any Seller's possession concerning the same or any other matter; and (f) the Purchasers will, independently and without reliance upon any Seller, Lender or the Agent and based on such documents and information as the Purchasers may deem appropriate at the time, continue to make their own credit decisions with respect to the Participation sold to the Purchasers hereunder. 7.2 ACKNOWLEDGMENT OF LIMITATION. The Purchasers acknowledge that no Seller, Lender or the Agent has made representations or warranties (express or implied) as to, and no Seller, Lender or the Agent assumes nor shall any Seller, Lender or the Agent have any liability or responsibility (express or implied) for or with respect to, (a) the due execution, legality, validity or enforceability of the Loan Agreement, the Notes or any other Loan Document, (b) the collectability of the Loans, (c) the financial condition of the Borrower or any other obligor under any Loan Document, (d) the value of the Collateral or of any Lender's or Agent's ability to realize upon the Collateral, (e) the accuracy or completeness of any statement, representation or warranty made by the Borrower or any other Loan Party in or in connection with any Loan Document, (f) the accuracy or completeness of any credit or other information furnished by any Seller, Lender or the Agent to the Purchasers, (g) the performance or observance by the Borrower or any other Loan Party of any of the terms, covenants or conditions of the Loan Agreement, the Notes or any other Loan Document or (h) the legality, validity, enforceability or priority of the Purchasers' interest in the Term Loan or the Collateral. The Purchasers acknowledge that they have received and reviewed copies of the Loan Agreement, the Notes and the other Loan Documents and that the Purchasers have, based on the Purchasers' review of the Loan Documents and such other documents and information as the Purchasers have deemed appropriate, made their own credit analysis and decision to purchase the Participation pursuant to the terms of this Agreement. Neither any Seller nor the Agent shall be under any obligation to provide the Purchasers with any information which has been or may hereafter be from time to time received by any Seller or the Agent from the Borrower or any Loan Party with respect to the Loan Agreement, the Loans or the other Loan Documents. 7.3 SELLERS' REPRESENTATIONS. Each Seller represents and warrants to the Purchasers that this Agreement is such Seller's valid and binding obligation enforceable in accordance with its terms. 7.4 SURVIVAL. All agreements, representations and warranties made in this Agreement shall survive delivery of this Agreement. 8. TERMINATION. This Agreement, and each of the rights and obligations hereunder shall terminate on the earliest to occur of (a) the indefeasible repayment in full in cash of all Loans and other Obligations under the Loan Agreement (including, without limitation, the Term Loan), and the permanent reduction of the Commitments to zero (i.e., Full Payment) and 9 (b) the repayment in full in cash of all Loans and other Obligations under the Loan Agreement with the proceeds of a refinancing by the Borrower of the Loan Agreement, and the permanent reduction of the Revolving Loan Commitments to zero, and (c) if expressly consented to in writing by the Sellers, the date of a refinancing (if any) of the Term Loan on terms and conditions satisfactory to Lenders and Agent, and (d) exchange of the Term Loan for the Shares, and assignment to the Purchasers of all of the Sellers' right, title and interest in and to the Shares, in accordance with the terms of Section 2 of the Note and Section 4.1(b) herein above. 9. INDEMNIFICATION; DEFAULT BY PURCHASERS; WITHHOLDING TAXES. 9.1 The Purchasers hereby exonerate and hold harmless each Seller, Lender and the Agent from any obligation or liability, express or implied, suffered by the Purchasers as a result of (i) any loss, depreciation of or failure to realize upon, the Loans or any Collateral securing the Loans or (ii) the Sellers', the Lenders' or the Agent's exercising or refraining from exercising any rights or taking or refraining from taking any actions arising pursuant to the Loans or (iii) the failure by the Sellers, the Lenders or the Agent to collect or receive payments of any sums owing from the Borrower with respect to the Loans, or for any mistake, omission or error of judgment in passing upon or accepting the Loans, the Collateral securing the Loans, if any, the Loan Documents, or in making any advances of monies or extensions of credit to Borrower in respect of the Loans, or in making any examinations, audits, or reviews of the affairs of Borrower in enforcing any remedies with respect to the Loans, or in granting to Borrower extensions of time for payment of the Loans, or in administering or monitoring the Loans and the Collateral securing the Loans. The Sellers, the Lenders and the Agent may consult with legal counsel, independent public accountants and other experts selected by them and shall not be liable for any action taken or omitted to be taken by them (i) in accordance with the advice of such Person or (ii) in connection with the Loans or the Loan Documents pursuant to any notice, consent, certificate or other writing received by any Seller, Lender or the Agent and believed by such Seller, Lender or the Agent in good faith to be genuine. Notwithstanding the foregoing, the Purchasers shall have no obligation to exonerate or hold harmless the Sellers, the Lenders or the Agent with respect to any such loss, cost, obligation or liability incurred by the Purchasers or any of them as a result of the gross negligence or willful misconduct of any Seller, Lender or the Agent. References to any Seller, Lender or the Agent in his Section 9 will be deemed to include its respective officers, directors, employees, agents, auditors, attorneys, affiliates, subsidiaries, successors, and assigns. Nothing contained in this Section 9.1 shall be deemed to be a guaranty (or other assurance) by the Purchasers of the payment to the Sellers, Lenders or Agent of any of the Obligations. 9.2 COSTS AND INDEMNIFICATION. (a) All routine costs and expenses of administering the Loan Agreement and the Loans shall be borne exclusively by the Lenders, except that any costs, expenses, attorneys' fees or disbursements which the Lenders or the Agent may incur after the Funding Date in enforcing, maintaining or preserving rights with respect to the Term Loan, under the Loan Agreement or the Loan Documents as they pertain to the Term Loan, or which may be incurred in enforcing, protecting or realizing on the Collateral securing the Term Loan shall, to the extent not reimbursed by the Borrower, be 10 shared by the Purchasers based on the proportionate share that the Term Loan bears to all of the Loans and Risk Participation Liabilities. (b) The Purchasers agree to reimburse each Seller, Lender and the Agent (to the extent not reimbursed by the Borrower and without limiting the obligations of the Borrower under the Loan Documents), ratably from and against any and all claims of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against any Seller, Lender and the Agent in any way relating to or arising out of this Agreement with respect to the Term Notes (including any claim relating to the exchange of the Term Notes for the Shares (including any claims arising under securities laws)); PROVIDED, HOWEVER, that the Purchasers shall not be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from any Seller's or Lender's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction after the possible appeals have been exhausted. The Purchasers agree to indemnify and hold each Seller, Lender and the Agent harmless against any and all losses, liabilities, costs and expenses (including, without limitation, all expenses of litigation or preparation thereof, whether or not any Seller, Lender or the Agent, is a party thereto and all reasonable attorneys' fees) incurred by any Seller, Lender or the Agent, in connection with any legal action or proceeding arising as a result of this Agreement, the Term Notes (including any and all losses, liabilities, costs and expenses relating to the exchange of the Term Notes for the Shares (including any claims arising under securities laws)) or the sale of the Participation hereunder. 9.3 NO INCONSISTENT ACTIONS. The Purchasers hereby agree that they will not, directly or indirectly, take any action or vote in any way that would be in violation of, or be inconsistent with, or result in a breach of, this Agreement or so as to challenge or contest in any bankruptcy case or insolvency proceeding or otherwise the validity or enforceability of this Agreement or any of the Loan Documents or any lien on or security interest in any Collateral. The Purchasers acknowledge and agree that the provisions herein contained are, and are intended to be, an inducement and a consideration to the Sellers and the Lenders to continue to hold or to acquire and continue to hold the Loans and each Seller shall be deemed conclusively to have relied on such provisions in making the Term Loan and in continuing to hold the Loans. If the Purchasers shall attempt to take any action in violation of this Agreement, any Seller, Lender or the Agent may interpose as a defense or plea the making of this Agreement and any Seller, Lender or the Agent may intervene and interpose such defense in its name, and any Seller, Lender or the Agent may by virtue of this Agreement restrain the violation thereof. 9.4 WITHHOLDING TAXES. The Purchasers represent that they are entitled to receive all payments hereunder without the withholding of any tax and will furnish to the Sellers such forms, certifications, statements and other documents as any Seller may request from time to time in evidence and confirmation thereof and to enable any Seller to comply with any applicable laws or regulations relating thereto. 10. LOAN DOCUMENTS. To the fullest extent permitted by law (taking into account all waivers permitted by law), the validity and enforceability of this Agreement shall not be 11 impaired or affected by any of the following: (a) any extension, amendment, modification or renewal of, or indulgence with respect to, or increases with respect to, or substitutions for, the Loans or any part thereof or any agreement relating thereto at any time; (b) any failure or omission by the Agent to perfect or maintain any Lien on, or preserve rights to, any security or collateral or to enforce any right, power or remedy with respect to the Loans or any part thereof or any agreement relating thereto, or any collateral securing the Loans, or any part thereof; (c) any waiver of any right, power or remedy or of any default with respect to the Loans or any part thereof for any agreement relating thereto or with respect to any Collateral securing the Loans or any part thereof; (d) any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, of any Collateral (other than all or substantially all of the Collateral) securing the Loans or any part thereof, any guaranties with respect to the Loans or any part thereof, or any other obligation of any Person with respect to the Loans or any part thereof, (e) the enforceability or validity of the Loans or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to any Collateral securing the Loans or any part thereof; (f) the application of payments received from any source to the payment of indebtedness other than the Loans or any part thereof or amounts which are not covered by this Agreement even though any Seller, Lender or the Agent might lawfully have elected to apply such payments to any part or all of the Loans or to amounts which are not covered by this Agreement; (g) any change of ownership of the Borrower or the insolvency, bankruptcy or any other change in the legal status of the Borrower; (h) te change in or the imposition of any law, decree, regulation or other governmental act which does or might impair, delay or in any way affect the validity, enforceability or the payment when due of the Loans; (i) the existence of any claim, setoff or other rights which the Purchasers may have at any time against the Borrower or any Seller, Lender or the Agent or any Person related thereto, whether in connection herewith or any unrelated transaction; (j) the success or failure of the business of the Borrower or the inability of the Purchasers to realize anticipated benefits therefrom; (k) any borrowing, use of cash collateral, or grant of a Lien by the Borrower, as debtor in possession, under Section 363 or 364 of the United States Bankruptcy Code or otherwise; (l) the disallowance of all or any portion of any Seller's claims for repayment of the Loans under Section 502 or 506 of the United States Bankruptcy Code or otherwise; or (m) any other fact or circumstance which might otherwise constitute grounds at law or equity for the discharge or release of the Purchasers from their obligations hereunder, all whether or not any of the Purchasers shall have had notice or knowledge of any act or omission referred to in the foregoing clauses (a) through (m) of this Section. Without limiting the generality of the foregoing, any Seller or Lender may lend money to, and generally engage in any kind of banking, trust or other business with any Loan Party as if it were not a party hereto or acting as Agent, and no such lending or other activities shall affect or modify in any way any of any Seller's, Lender's or Agent's rights hereunder or any Purchasers' obligations hereunder. 11. MISCELLANEOUS. 11.1 AMENDMENT. The terms and provisions hereof may not be waived, altered, modified or amended, except in writing executed by all of the parties hereto. 12 11.2 NOTICES. Any notice that a party shall be required or shall desire to give to any other hereunder shall be given by personal delivery, by telecopy or by depositing the same in the U.S. mail first class postage prepaid, return receipt requested at the address specified with respect to each party on the signature page hereof, and any such notice shall be deemed duly given on the date of personal delivery or the date of transmission by telecopier or three days after the date of mailing as aforesaid. Any party may change its address for the purpose of receiving notices hereunder by giving written notice thereof to the other parties in accordance therewith. Notwithstanding the foregoing, any notice to the Purchasers shall be deemed to have been delivered to all of the Purchasers upon delivery of the same to Kenneth Liang, in his capacity as the designated representative to receive notices on behalf of the Purchasers hereunder, in accordance with this Section 11.2. Such notices shall be given to the Purchasers c/o Kenneth Liang, Oaktree Capital Management, LLC, 333 South Grand Avenue, 28th Floor, Los Angeles, CA 90071, facsimile (213) 830-8522. 11.3 REFERENCES TO BORROWER. The term "Borrower" as used herein shall also refer to the successors and assigns of the Borrower including, without limitation, a receiver, trustee, custodian or debtor or debtor in possession of or for such Borrower. No other Person (including, without limitation, the Borrower) shall have any right, benefit, priority or interest under, or because of the existence of, this Agreement or shall be a direct or indirect beneficiary of or have any direct or indirect cause of action or claim in connection with this Agreement, nor shall this Agreement affect the obligations of the Borrower to any Seller or the Agent under the Loan Agreement or any other Loan Document. 11.4 SECTION HEADINGS. Section headings are used herein for convenience of reference only. Each party acknowledges that the same may not describe completely the subject matter of the applicable Section and the same shall not be used in any manner to construe, limit, define or interpret any term or provision hereof. 11.5 ASSIGNMENT. The Purchasers may not assign, sell, participate, pledge, hypothecate, exchange or otherwise transfer all or any part of the Participation without the prior written consent of the Sellers, which consent shall not be unreasonably withheld. Any assignment permitted in accordance with this Section 11.5 shall be conditioned upon such assignee's expressly agreeing in writing to be bound by the obligations of the Purchasers hereunder and the terms and conditions of this Agreement. 11.6 BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors and permitted assigns. The provisions contained in this Agreement relating to the priority of payments with respect to the Obligations and the subordination of the Participation are intended solely to define the relative rights of the Seller, Lenders, Agent and the Purchasers and their respective successors and permitted assigns. Nothing contained in this agreement is intended to or shall impair, as between the holders of the Obligations and the Borrower, the obligation of the Borrower to pay the Obligations, or is intended to or shall affect the relative rights of the Borrower or creditors of the Borrower other than the Sellers and, as holders of the Participation, the Purchasers. 13 11.7 NOT SECURITIES. The Purchasers acknowledge that the Participation is being made at the Purchasers' request and suggestion based upon the Borrower's request to the Sellers, and is the purchase of an undivided, subordinate interest in an ordinary debt and related Collateral, if any. The Purchasers acknowledge that the Loan Documents, this Agreement and the Participation hereunder are not intended to constitute a security for purposes of any applicable securities law and are not being acquired with a view for resale that would violate any applicable securities law. The Purchasers are purchasing the Participation to assist the Borrower in meeting its immediate working capital needs which could not otherwise be met. Nothing herein contained shall create a partnership or joint venture or confer upon any of the parties hereto any interest in, or subject any of them to any liability for the business, assets, profits, losses or obligations of the other, except only for the transfer of the interest represented by the sale of the Participation in which the Purchasers are expressly hereunder participating with the Sellers. The execution of this Agreement shall not impose any fiduciary or other similar duty on the Sellers, Lenders or the Agent in relation to the Purchasers. 11.8 CONSTRUCTION: SEVERABILITY. If any provision of this Agreement or the application hereof to any party or circumstances is held invalid, void, inoperative or unenforceable, the remainder of this Agreement and the application of such provision to other parties or circumstances shall not be affected thereby, the provisions of this Agreement being severable in such instance. Ambiguities herein shall not be construed against the Sellers, Lenders or the Agent. Defined terms may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. 11.9 DELAYS. No delay, omission or neglect with respect to the exercise of any right under this Agreement shall impair such right or be construed to be a waiver or any acquiescence herein and any single or partial exercise of any such right shall not preclude other or further exercise hereof or the exercise of any other right. All remedies contained in this Agreement and the documents, instruments and collateral related thereto or otherwise afforded to the Sellers, Lenders or the Agent by law or in equity shall be cumulative and all shall be available to the Sellers, Lenders or the Agent until Full Payment of the Loans. 11.10 SPECIFIC ENFORCEMENT; NO IMPAIRMENT. The Purchasers agree that (a) the provisions of this Agreement shall be specifically enforceable against it by each Seller and irrevocably waives any defense based upon the adequacy of a remedy at law which might be asserted as a bar to such remedy of specific performance and (b) without notice to or further assent by it, the Loans may from time to time, in whole or in part, be renewed, extended, increased or released by the Lenders, the Sellers or the Agent, as any of them may deem advisable, and that any Seller and/or the Agent may take any other action it may deem necessary or appropriate in connection with the Loans, all without in any manner or to any extent impairing or affecting the obligations of the Purchasers hereunder. 11.11 ENTIRE AGREEMENT. This Agreement, together with any schedules and exhibits hereto constitute the entire agreement among the parties hereto with respect to the subject matter hereof. All previous agreements between the parties hereto with respect to the subject matter hereof, written or oral, are superseded by this Agreement. All representations, 14 warranties, covenants and agreements shall survive execution, delivery of this Agreement and the purchase and sale of the Participation contemplated herein. 11.12 GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Illinois. 11.13 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument, and facsimile copies of any signature will be treated as original signatures. 11.14 CONSENT TO JURISDICTION. THE PURCHASERS HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS OR WITHIN NEW YORK COUNTY, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO SELLERS' OR AGENT'S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TERM NOTE(S), OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. THE PURCHASERS HEREBY SUBMIT TO THE PERSONAL JURISDICTION OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING AND FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF ANY COMPLAINT, SUMMONS, NOTICE OR OTHER PROCESS RELATING TO ANY SUCH ACTION OR PROCEEDING BY DELIVERY THEREOF TO IT BY HAND OR BY MAIL IN THE MANNER PROVIDED FOR IN SECTION 11.2 HEREOF. THE PURCHASERS ACCEPT FOR THEMSELVES AND IN CONNECTION WITH THEIR PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS OR ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR SIMILAR BASIS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE TERM NOTE(S), THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS. 11.15 CURRENT. All payments required hereunder shall be made in United States dollars. 11.16 WAIVER. THE PURCHASERS AND THE SELLERS AND THE AGENT ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. THE PURCHASERS, THE SELLERS AND THE AGENT EACH HEREBY KNOWINGLY, VOLUNTARILY, AND WITHOUT COERCION, WAIVE ALL RIGHTS TO A TRIAL BY JURY FOR ALL DISPUTES INVOLVING OR RELATING TO THIS AGREEMENT. NEITHER THE PURCHASERS NOR ANY SELLER NOR THE AGENT WILL BE DEEMED TO HAVE RELINQUISHED THIS JURY TRIAL WAIVER UNLESS SUCH RELINQUISHMENT IS IN A WRITTEN INSTRUMENT SIGNED BY THE PARTY TO BE CHARGED. 11.17 ADDITIONAL SELLERS. Without limiting the generality of any other provision 15 contained herein (including the right of a Seller to assign), at any time that any Lender (besides Heller) becomes a holder of all or any portion of the Term Loan as confirmed in writing to Purchasers by Heller, such other Lender shall thereupon, without further action hereunder by any other person, firm or entity, be deemed to be a Seller hereunder as if it were an original party hereto and each reference to "Seller" shall also mean and be a reference to such other Lender. Each such new Seller shall execute and deliver to the other parties hereto a counterpart signature page hereof in form and substance satisfactory to Heller in confirmation of the foregoing. 11.18 LIMITATIONS ON LIABILITY OF PURCHASERS. The parties hereto acknowledge and agree that in no event shall any of the partners, officers, directors, shareholders, employees, agents or investment managers (collectively, "Representatives") of Oaktree Capital Management, LLC or TCW Special Credits or of any Purchasers have any obligation or liability to Sellers for any action taken or omitted to be taken or omitted by or on behalf of any Purchasers hereunder or in connection herewith (such obligation and liability being the sole responsibility of such Purchasers hereunder) except for any liability or obligation arising from gross negligence or willful misconduct. The parties hereto further acknowledge and agree that (i) all obligations and liabilities of each Purchasers under this Agreement or in connection herewith are enforceable solely against such Purchasers and their assets and not against the assets of Oaktree Capital Management, LLC or TCW Special Credits or of any Purchasers or any Representatives of Oaktree Capital Management, LLC or TCW Special Credits or of any Purchasers, and (ii) the obligations and liabilities of each of the Purchasers shall be several in the proportions set forth on Schedule IA hereto and not joint and several. 16 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective duly authorized officers as of the date first above written. HELLER FINANCIAL, INC., as a Seller and as Agent By /s/ William Vukovich ------------------------- Name: William Vukovich Title: Assistant Vice President 500 West Monroe Chicago, Illinois 60661 Attn: HBC Portfolio Manager Telecopy No.: (312) 441-7026 Attn: Legal Department/HBC Telecopy No.: (312) 441-6969 OCM PRINCIPAL OPPORTUNITIES FUND, L.P. By: Oaktree Capital Management, LLC Its: General Partner By: /s/ Stephen A. Kaplan ------------------------- Stephen A. Kaplan Principal By: /s/ Vincent J. Cebula ------------------------- Vincent J. Cebula Managing Director 17 TCW SPECIAL CREDITS, as general partner and investment manager of the funds and accounts set forth on Schedule I By: TCW Asset Management Company Its: Managing General Partner By: /s/ Richard Masson ------------------------- Richard Masson Authorized Signatory By: /s/ Matthew Barrett ------------------------- Matthew Barrett Authorized Signatory 18 SCHEDULE I TCW SPECIAL CREDITS FUND IIIB TCW SPECIAL CREDITS TRUST IIIB THE COMMON FUND FOR BOND INVESTMENTS, INC. DELAWARE STATE EMPLOYEES' RETIREMENT FUND WEYERHAEUSER COMPANY MASTER RETIREMENT TRUST (TCW) TCW SPECIAL CREDITS TRUST TCW SPECIAL CREDITS TRUST IV TCW SPECIAL CREDITS TRUST IV-A TCW SPECIAL CREDITS FUND IV TCW SPECIAL CREDITS PLUS FUND 19 SCHEDULE IA
PARTICIPANT ALLOCATION ----------- ---------- TCW SPECIAL CREDITS FUND IIIB 17.333% TCW SPECIAL CREDITS TRUST IIIB 12.333% THE COMMON FUND FOR BOND INVESTMENTS, INC. 1.167% DELAWARE STATE EMPLOYEES RETIREMENT FUND 3.333% WEYERHOUSER COMPANY MASTER RETIREMENT TRUST (TCW) 6.333% TCW SPECIAL CREDITS TRUST 8.667% TCW SPECIAL CREDITS TRUST IV 5.000% TCW SPECIAL CREDITS TRUST IV-A 1.833% TCW SPECIAL CREDITS FUND IV 5.667% TCW SPECIAL CREDITS PLUS FUND 6.333% OCM PRINCIPAL OPPORTUNITIES FUND, L.P. 32.000%
20 Exhibit A to Subordinated Participation Agreement [PURCHASERS] Heller Financial, Inc. 500 West Monroe Street Chicago, Illinois 60661 Attention: Exchange Instruction Ladies and Gentlemen: With reference to the Subordinated Participation Agreement dated as of October ___, 1999 (the "Participation Agreement"; capitalized terms used and not defined herein shall have the meanings ascribed to such terms in the Participation Agreement), by and between [Purchaser] and Heller Financial, Inc., a Delaware corporation ("Heller"), you are hereby authorized and instructed to exercise the right granted to you pursuant to Section 5 of the Term Loan Note (the "Note") issued in your favor on October ___, 1999, by UnionTools, Inc., a Delaware corporation. Without limiting the foregoing, you are hereby instructed to (i) submit a written notice to the Borrower in accordance with Section 5 of the Note within ___ days of your receipt of this instruction and (ii) designate [___________________] as the Person in whose name the Shares should be issued in accordance with Section 4.1(b) of the Participation Agreement. In consideration of the foregoing, the [Purchaser] hereby represents and warrants to you and to the Borrower as follows: (a) We are each an "accredited investor" within the meaning of Rule 501 of the Securities Act of 1933, as amended (the "Act"); 21 (b) The Shares are being acquired by us for our own account, and not with a view to any distribution thereof in a transaction that would violate the Act or the securities laws of any State of the United States or any other applicable jurisdiction; (c) We intend to hold the Shares for investment purposes only and have no present intention to resell the Shares; (d) We 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 connection with our decision to acquire the Shares; and (e) We understand that the Shares are being offered in a transaction not involving any public offering within the meaning of the Act and that the Shares have not been and will not be registered under the Act. Sincerely, [PURCHASERS] 22 -----END PRIVACY-ENHANCED MESSAGE-----