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 Xxxxxx
Financial, Inc. in its individual capacity ("XXXXXX") and (if applicable
pursuant to Section 11.17 hereof) certain other "Lender(s)" under the Loan
Agreement referred to below (each, individually (including Xxxxxx), a "SELLER"
and collectively, the "SELLERS") and Xxxxxx 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., X.X. Xxxxxxx 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 Xxxxxx is the only Lender under the Loan Agreement
who has made a Term Loan, each reference herein to "Seller" or "Sellers" shall
mean only Xxxxxx; 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
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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.
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1.3 CLOSING. The funding of the purchase contemplated hereby (the
"CLOSING") shall take place at the offices of Xxxxxx Xxxxxx & Xxxxx, 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
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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
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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, xxx
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'
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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
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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
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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
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(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 Xxxxxxx Xxxxx, 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 Xxxxxxx Xxxxx, Oaktree Capital Management, LLC, 000 Xxxxx
Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxx, XX 00000, facsimile (000) 000-0000.
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 XXXX,
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 Xxxxxx) becomes a holder of all or any portion of the Term
Loan as confirmed in writing to Purchasers by Xxxxxx, 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
Xxxxxx 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.
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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.
XXXXXX FINANCIAL, INC.,
as a Seller and as Agent
By /s/ Xxxxxxx Xxxxxxxx
-------------------------
Name: Xxxxxxx Xxxxxxxx
Title: Assistant Vice President
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: HBC Portfolio Manager
Telecopy No.: (000) 000-0000
Attn: Legal Department/HBC
Telecopy No.: (000) 000-0000
OCM PRINCIPAL OPPORTUNITIES FUND, L.P.
By: Oaktree Capital Management, LLC
Its: General Partner
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
Xxxxxxx X. Xxxxxx
Principal
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
Xxxxxxx X. Xxxxxx
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/ Xxxxxxx Xxxxxx
-------------------------
Xxxxxxx Xxxxxx
Authorized Signatory
By: /s/ Xxxxxxx Xxxxxxx
-------------------------
Xxxxxxx Xxxxxxx
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]
Xxxxxx Financial, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
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 Xxxxxx Financial, Inc., a Delaware
corporation ("Xxxxxx"), 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
