LOAN AND SECURITY AGREEMENT
DATED JANUARY 3, 1997
BETWEEN
SNAKE RIVER SUGAR COMPANY,
AS BORROWER,
AND
VALHI, INC.,
AS LENDER
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS....................................................1
1.1 Certain Defined Terms...........................................1
1.2 Accounting Terms................................................8
1.3 Other Definitional Provisions...................................9
SECTION 2 LOANS AND COLLATERAL...........................................9
2.1 Loans...........................................................9
(A) Tranche A Loan.............................................9
(B) Tranche B Loan..............................................9
(C) Notes.....................................................10
2.2 Interest.......................................................10
(A) Rate of Interest...........................................10
(B) Computation and Payment of Interest.......................10
(C) Interest Laws.............................................10
2.3 Fees...........................................................11
(A) Closing Fee...............................................11
(B) Financing Fee.............................................11
(C) Other Fees and Expenses...................................12
2.4 Payments and Prepayments.......................................12
(A) Manner and Time of Payment................................12
(B) Mandatory Prepayments.....................................12
(1) Proceeds of Asset Dispositions.......................12
(2) Prepayments from Excess Cash Flow....................12
(C) Voluntary Prepayments.....................................12
(D) Payments on Business Days.................................12
(E) Application of Prepayments................................12
2.5 Term of this Agreement.........................................13
2.6 Statements.....................................................13
2.7 Grant of Security Interest.....................................13
2.8 Taxes..........................................................13
(A) No Deductions.............................................13
(B) Changes in Tax Laws.......................................14
2.9 Use of Proceeds and Margin Security............................14
SECTION 3 CONDITIONS TO LOANS...........................................15
3.1 Conditions to Loans............................................15
(A) Closing Deliveries........................................15
(B) Security Interests........................................15
(C) Capital Contribution and Working Capital Borrowings.......15
(D) Representations and Warranties............................15
(E) Fees......................................................15
(F) No Default................................................15
(G) Performance of Agreements.................................15
(H) No Prohibition............................................15
(I) No Litigation.............................................16
SECTION 4 BORROWER'S REPRESENTATIONS AND WARRANTIES.....................16
4.1 Organization, Powers, Capitalization...........................16
(A) Organization and Powers...................................16
(B) Capitalization............................................16
4.2 Authorization of Borrowing, No Conflict........................16
4.3 Financial Condition............................................17
4.4 Indebtedness and Liabilities...................................17
4.5 Names..........................................................17
4.6 Locations; FEIN................................................17
4.7 Title to Properties; Liens.....................................17
4.8 Litigation; Adverse Facts......................................17
4.9 Payment of Taxes...............................................18
4.10 Performance of Agreements......................................18
4.11 Employee Benefit Plans.........................................18
4.12 Intellectual Property..........................................18
4.13 Broker's Fees..................................................18
4.14 Environmental Compliance.......................................18
4.15 Solvency.......................................................18
4.16 Disclosure.....................................................19
4.17 Insurance......................................................19
4.18 Compliance with Laws...........................................19
4.19 Bank Accounts..............................................19
4.20 Subsidiaries...................................................19
4.21 Employee Matters...............................................19
4.22 Governmental Regulation........................................20
SECTION 5 AFFIRMATIVE COVENANTS.........................................20
5.1 Financial Statements and Other Reports.........................20
(A) Monthly Financials........................................20
(B) Year-End Financials...................................20
(C) Accountants' Certification and Reports....................21
(D) Compliance Certificate....................................21
(E) Management Report.........................................21
(F) Government Notices........................................21
(G) Events of Default, etc....................................22
(H) Trade Names...............................................22
(I) Locations.................................................22
(J) Bank Accounts.............................................22
(K) Litigation................................................22
(L) Projections...............................................22
(M) LLC Notices and Financials................................22
(N) Other Information.........................................23
5.2 Access to Accountants..........................................23
5.3 Inspection.....................................................23
5.4 Collateral Records.............................................23
5.5 Corporate Existence, Etc.......................................23
5.6 Payment of Taxes...............................................23
5.7 Maintenance of Properties; Insurance...........................23
5.8 Compliance with Laws...........................................24
5.9 Further Assurances.............................................24
5.10 Collateral Locations...........................................24
5.11 Bailees........................................................24
5.12 Collection of Accounts and Payments............................24
5.13 Refinancing....................................................25
SECTION 6 FINANCIAL COVENANTS...........................................25
6.1 Tangible Net Worth.............................................25
6.2 Capital Expenditure Limits.....................................25
SECTION 7. NEGATIVE COVENANTS...........................................26
7.1 Indebtedness and Liabilities...................................26
7.2 Guaranties.....................................................26
7.3 Transfers, Liens and Related Matters...........................26
(A) Transfers.................................................26
(B) Liens.....................................................27
(C) No Negative Pledges.......................................27
(D) No Restrictions on Subsidiary Distributions to Borrower...27
7.4 Investments and Loans..........................................27
7.5 Restricted Junior Payments.....................................27
7.6 Restriction on Fundamental Changes.............................28
7.7 Changes to Certain Documents...................................28
7.8 Transactions with Affiliates and Members.......................29
7.9 Environmental Liabilities......................................29
7.10 Conduct of Business............................................29
7.11 Compliance with ERISA..........................................29
7.12 Tax Consolidations.............................................29
7.13 Subsidiaries...................................................29
7.14 Fiscal Year....................................................29
7.15 Press Release; Public Offering Materials.......................29
7.16 Bank Accounts..................................................29
SECTION 8 DEFAULT, RIGHTS AND REMEDIES..................................30
8.1 Event of Default...............................................30
(A) Payment...................................................30
(B) Default in Other Agreements...............................30
(C) Breach of Certain Provisions..............................30
(D) Breach of Warranty........................................30
(E) Other Defaults Under Loan Documents.......................30
(F) Change in Control.........................................30
(G) Involuntary Bankruptcy; Appointment of Receiver, etc......30
(H) Voluntary Bankruptcy; Appointment of Receiver, etc........31
(I) Liens....................................................31
(J) Judgment and Attachments..................................31
(K) Dissolution...............................................31
(L) Solvency..................................................32
(M) Injunction................................................32
(N) Invalidity of Loan Documents..............................32
(O) Failure of Security.......................................32
(P) Damage, Strike, Casualty..................................32
(Q) Licenses and Permits......................................32
(R) Tax Status................................................32
8.2 Acceleration...................................................32
8.3 Remedies.......................................................32
8.4 Appointment of Attorney-in-Fact................................33
8.5 Limitation on Duty of Lender with Respect to Collateral........34
8.6 Application of Proceeds........................................34
8.7 License of Intellectual Property...............................34
8.8 Waivers, Non-Exclusive Remedies................................34
SECTION 9 MISCELLANEOUS.................................................35
9.1 Assignments and Participations.................................35
9.2 Set Off........................................................35
9.3 Expenses and Attorneys' Fees...................................35
9.4 Indemnity......................................................36
9.5 Amendments and Waivers.........................................36
9.6 Notices........................................................36
9.7 Survival of Warranties and Certain Agreements..................37
9.8 Indulgence Not Waiver..........................................37
9.9 Marshaling; Payments Set Aside.................................38
9.10 Entire Agreement...............................................38
9.11 Independence of Covenants......................................38
9.12 Severability...................................................38
9.13 Headings.......................................................38
9.14 Appicable Law..................................................38
9.15 Successors and Assigns.........................................39
9.16 No Fiduciary Relationship; Limitation of Liabilities...........39
9.17 Consent to Jurisdiction........................................39
9.18 Waiver of Jury Trial...........................................39
9.19 Construction...................................................40
9.20 Counterparts; Effectiveness....................................40
9.21 No Duty........................................................40
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is dated as of January 3, 1997 and entered
into by and between SNAKE RIVER SUGAR COMPANY, an Oregon cooperative
("BORROWER"), with its principal place of business at 000 Xxxx Xxxxxx Xxxxx,
Xxxxxx 00000, and VALHI, INC., a Delaware corporation (`LENDER'') with offices
at Three Lincoln Centre, Suite 1700, 0000 XXX Xxxxxxx, Xxxxxx, Xxxxx 00000. All
capitalized terms used herein are defined in SECTION 1 of this Agreement.
WHEREAS, Borrower desires that Lender extend a credit facility to provide
financing for Borrower's investment in The Amalgamated Sugar Company LLC (the
`LLC'') and to provide funds for other general corporate purposes; and
WHEREAS, Borrower desires to secure its obligations under the Loan
Documents by granting to Lender a security interest in and lien upon Borrower's
property; and
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrower and Lender agree as follows:
SECTION 1 DEFINITIONS
1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement
---------------------
shall have the following meanings:
"ACCOUNTS" means, all "accounts" (as defined in the UCC) now owned or
hereafter created or acquired by Borrower, including all accounts receivable,
contract rights and general intangibles relating thereto, notes, drafts and
other forms of obligations owed to or owned by Borrower arising or resulting
from the sale of goods or the rendering of services, all proceeds thereof, all
guaranties and security therefor, and all goods and rights represented thereby
or arising therefrom including the right of stoppage in transit, replevin and
reclamation. Notwithstanding the foregoing, `Accounts'' shall not include
amounts owed to Borrower by the LLC pursuant to the memorandum of agreement
attached as Exhibit D-7 to the Formation Agreement if the Borrower has cured any
payment Defaults through implementation of a unit retain or otherwise.
"AFFILIATE" means any Person (other than Lender): (A) directly or
indirectly controlling, controlled by, or under common control with, Borrower;
(B) directly or indirectly owning or holding five percent (5%) or more of any
equity interest in Borrower; or (C) five percent (5%) or more of whose voting
stock or other equity interest is directly or indirectly owned or held by
Borrower. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with") means the possession directly or indirectly of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities or by contract or otherwise.
"AGREEMENT" means this Loan and Security Agreement, as it may be amended,
restated, supplemented or otherwise modified from time to time.
"ASSET DISPOSITION" means the disposition, whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise, of any of the
following: (A) any shares of the capital stock or other equity interest of
Borrower or of any Person held by the Borrower, or (B) any or all of the assets
of Borrower outside the ordinary course of business.
"BLOCKED ACCOUNTS" has the meaning assigned to that term in SUBSECTION
5.12.
"BORROWER" means Snake River Sugar Company, an Oregon cooperative.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any day which
is a legal holiday under the laws of the States of Utah or Texas or is a day on
which banking institutions located in either of such states are closed.
"CAPITAL EXPENDITURES" means all expenditures (excluding trade-in
allowances and reinvested proceeds of Asset Dispositions, but including
deposits) for, or contracts for expenditures (excluding contracts for
expenditures under or with respect to Capital Leases, but including cash down
payments for assets acquired under Capital Leases) with respect to, any fixed
assets or improvements, or for replacements, substitutions or additions thereto,
which have a useful life of more than one year, including the direct or indirect
acquisition of such assets by way of increased product or service charges,
offset items or otherwise.
"CAPITAL LEASE" means any lease of any property (whether real, personal or
mixed) that, in conformity with GAAP, should be accounted for as a capital
lease.
"CASH EQUIVALENTS" means: (A) marketable direct obligations issued or
unconditionally guarantied by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within six (6) months from the date of acquisition thereof;
(B) commercial paper maturing no more than six (6) months from the date issued
and, at the time of acquisition, having a rating of at least A-1 from Standard &
Poor's Ratings Services, or at least P-1 from Xxxxx'x Investors Service, Inc.;
and (C) certificates of deposit or bankers' acceptances maturing within six (6)
months from the date of issuance thereof issued by, or overnight reverse
repurchase agreements from, any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $250,000,000 and not subject to
setoff rights in favor of such bank.
"CHANGE IN CONTROL" means any transaction or series of transactions in
which any Person (other than Lenders) is deemed to have obtained control of the
Borrower, other than members of Borrower on the Closing Date who continue to
grow sugarbeets for sale to the Borrower and the LLC.
"CLOSING CERTIFICATE" means a certificate duly executed by the chief
executive officer or chief financial officer of Borrower appropriately completed
and in form and substance acceptable to Lender.
"CLOSING DATE" means December 31, 1996.
"COLLATERAL" has the meaning assigned to that term in SUBSECTION 2.7.
"COLLECTING BANKS" has the meaning assigned to that term in SUBSECTION
5.12.
"COMPANY AGREEMENT" means the Company Agreement dated as of the date of
this Agreement among the LLC, the Borrower and The Amalgamated Sugar Company, a
Utah corporation.
"COMPLIANCE CERTIFICATE" means a certificate duly executed on behalf of
Borrower by the chief executive officer or chief financial officer of Borrower
appropriately completed and in form and substance reasonably acceptable to
Lender.
"DEFAULT" means a condition or event that, after notice or lapse of time or
both, would constitute an Event of Default if that condition or event were not
cured or removed within any applicable grace or cure period.
"DEFAULT RATE" has the meaning assigned to that term in SUBSECTION 2.2.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (A) is maintained for employees of Borrower or
any ERISA Affiliate or (B) has at any time within the preceding six (6) years
been maintained for the employees of Borrower or any current or former ERISA
Affiliate.
"ENVIRONMENTAL CLAIMS" means claims, liabilities, investigations,
litigation, administrative proceedings, judgments or orders relating to
Hazardous Materials.
"ENVIRONMENTAL LAWS" means any present or future federal, state or local
law, rule, regulation or order relating to pollution, waste, disposal or the
protection of human health or safety, plant life or animal life, natural
resources or the environment.
"EQUIPMENT" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by Borrower including, without limitation, all machinery,
motor vehicles, trucks, trailers, vessels, aircraft and rolling stock and all
parts thereof and all additions and accessions thereto and replacements
therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.
"ERISA AFFILIATE" means any Person who is a member of a group which is
under common control with the Borrower, who together with the Borrower is
treated as a single employer within the meaning of Section 414(b) and (c) of the
IRC.
"EVENT OF DEFAULT" means each of the events set forth in SUBSECTION 8.1.
"EXCESS CASH FLOW" means, for any period, the greater of (A) zero (0); or
(B) without duplication, the total of the following for Borrower, each
calculated for such period: (1) cash distributions from the LLC; plus (2) net
----
income determined in accordance with GAAP, provided that in determining net
income, Borrower's expenses for the purchase of sugarbeets shall not exceed the
Beet Payment (as defined in the Company Agreement) and Borrower's other expenses
shall not exceed $5,000 in any month; plus, (3) to the extent included in the
----
calculation of net income, the sum of (A) interest paid in kind, (B)
amortization and depreciation expenses and (C) other non-cash charges, including
amortization of fees paid in connection with consummation of the transactions
contemplated by the Loan Documents and the Formation Agreement (excluding
accruals for cash expenses made in the ordinary course of business); less, (4)
----
to the extent included in the calculation of net income, the sum of (A) the
income of any Person in which Borrower has an ownership interest unless such
income is received by Borrower in a cash distribution, and (B) gains or losses
from Asset Dispositions; less (5) Capital Expenditures (to the extent permitted
----
by SUBSECTION 6.2 of this Agreement and to the extent actually made in cash
and/or due to be made in cash within such period); less (6) any principal
----
payment on the Obligations pursuant to SUBSECTIONS 2.1(A), 2.1(B) AND 2.4(C),
any interest expense paid on the Obligations pursuant to SUBSECTION 2.2(B), any
fees paid in connection with the Obligations pursuant to SUBSECTION 2.3, and any
other amounts paid in connection with the Obligations pursuant to SUBSECTIONS
9.3 AND 9.4; less (7) aggregate distributions in respect of income taxes, to the
----
extent permitted pursuant to SUBSECTION 7.5.
"FISCAL YEAR" means each twelve month period ending on the last day of
September 30 in each year.
"FORMATION AGREEMENT" means the Formation Agreement dated as of the date of
this Agreement entered into among the LLC, Borrower and The Amalgamated Sugar
Company.
"FORMATION DOCUMENTS" means the Formation Agreement, the Company Agreement,
and each other agreement or document entered into in connection with the
formation and operation of the LLC, including any agreements relating to the LLC
Indebtedness.
"GAAP" means U.S. generally accepted accounting principles applied on a
consistent basis.
"HAZARDOUS MATERIAL" means all or any of the following: (A) substances that
are defined or listed in, or otherwise classified pursuant to, any Environmental
Laws or regulations as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances" or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity or "EP
toxicity"; (B) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (C) any flammable substances or
explosives or any radioactive materials; and (D) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty parts per million.
"INDEBTEDNESS", as applied to any Person, means without duplication: (A)
all indebtedness for borrowed money; (B) obligations under leases which in
accordance with GAAP constitute Capital Leases; (C) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money; (D) any obligation owed for all or any part of
the deferred purchase price of property or services if the purchase price is due
more than six months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; (E) all indebtedness secured by any Lien
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person, and (F) any mandatorily redeemable
capital stock or other equity interest.
"INTELLECTUAL PROPERTY" means all present and future designs, patents,
patent rights and applications therefor, trademarks and registrations or
applications therefor, trade names, inventions, copyrights and all applications
and registrations therefor, software or computer programs, license rights, trade
secrets, methods, processes, know-how, drawings, specifications, descriptions,
and all memoranda, notes and records with respect to any research and
development, whether now owned or hereafter acquired, all goodwill associated
with any of the foregoing, and proceeds of all of the foregoing, including,
without limitation, proceeds of insurance policies thereon.
"INVENTORY" means all "inventory" (as defined in the UCC) now owned or
hereafter acquired, wherever located including finished goods, raw materials,
work in process and other materials and supplies used or consumed in a Person's
business including goods which are returned or repossessed. Notwithstanding the
foregoing, Inventory shall not include any sugarbeets.
"IRC" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute and all rules and regulations promulgated
thereunder.
"LENDER" means Valhi, Inc. together with its successors and permitted
assigns pursuant to SUBSECTION 9.1.
"LENDER'S ACCOUNT" has the meaning assigned to that term in SUBSECTION
2.4(A).
"LIABILITIES" shall have the meaning given that term in accordance with
GAAP and shall include Indebtedness.
"LIEN" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"LLC" means The Amalgamated Sugar Company LLC, a Delaware limited liability
company.
"LLC INDEBTEDNESS" means the LLC's Indebtedness pursuant to its working
capital loan agreement with United States National Bank of Oregon and First
Security Bank of Utah, N.A., as in effect on the Closing Date.
"LOAN" or "LOANS" means the Tranche A Loan and the Tranche B Loan.
"LOAN DOCUMENTS" means this Agreement, the Notes and all other instruments,
documents and agreements executed by or on behalf of Borrower and delivered
concurrently herewith or at any time hereafter to or for the benefit of Lender
in connection with the Loans and other transactions contemplated by this
Agreement, all as amended, restated, supplemented or otherwise modified from
time to time.
"MATERIAL ADVERSE EFFECT" means a material adverse effect upon (A) the
business, operations, properties, assets or condition (financial or otherwise)
of the Borrower and its Subsidiaries taken as a whole or (B) the ability of
Borrower to perform its obligations under any Loan Document to which it is a
party or of Lender to enforce or collect any of the Obligations.
"NET WORTH" means, as of any date, the difference between (A) the total
assets of the Borrower and (B) the sum of the total Liabilities of Borrower,
minority interests in Subsidiaries, and capital stock or equity interests of the
Borrower or any Subsidiary which by its terms is mandatorily redeemable by any
Person, in each case as those terms are used in accordance with GAAP.
"NOTE" means a Note evidencing the Tranche A Loan or a Note evidencing the
Tranche B Loan.
"OBLIGATIONS" means all obligations, liabilities and indebtedness of every
nature of Borrower from time to time owed to Lender under the Loan Documents
including the principal amount of all debts, claims and indebtedness, accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable.
"PERMITTED ENCUMBRANCES" means the following types of Liens: (A) Liens
(other than Liens relating to Environmental Claims or ERISA) for taxes,
assessments or other governmental charges not yet due and payable; (B) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen and other
similar liens imposed by law, which are incurred in the ordinary course of
business for sums not more than thirty (30) days delinquent; (C) Liens (other
than any Lien imposed by ERISA) incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, trade contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (D) easements, rights-of-way, restrictions,
and other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of Borrower or any of its
Subsidiaries; (E) Liens for purchase money obligations, provided that (I) the
--------
purchase of the asset subject to any such Lien is permitted under SUBSECTION
6.2, (II) the Indebtedness secured by any such Lien is permitted under
SUBSECTION 7.1, and (III) such Lien encumbers only the asset so purchased; and
(F) Liens in favor of Lender.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"PRO FORMA" means the unaudited balance sheet of Borrower as of the Closing
Date, after giving effect to the transactions contemplated by this Agreement and
the Formation Documents. The Pro Forma is annexed hereto as SCHEDULE 1.1(C).
"PROJECTIONS" means Borrower's forecasted: (A) balance sheets; (B) profit
and loss statements; (C) cash flow statements; and (D) capitalization
statements, all prepared on a basis consistent with the historical financial
statements of The Amalgamated Sugar Company, together with appropriate
supporting details and a statement of underlying assumptions.
"RESTRICTED JUNIOR PAYMENT" means: (A) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock, or any other
equity interest of Borrower or any of its Subsidiaries now or hereafter
outstanding, except a dividend or distribution payable solely in shares or
equity interests of such class; (B) any payment or prepayment of principal of,
premium, if any, or interest on, or any redemption, conversion, exchange,
retirement, defeasance, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any Indebtedness other than the
Loans or any shares of any class of stock or any equity interest of Borrower or
any of its Subsidiaries now or hereafter outstanding; (C) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire shares of any class of stock, or equity interests, of
Borrower or any of its Subsidiaries now or hereafter outstanding; and (D) any
payment by Borrower or any of its Subsidiaries of any management fees or similar
fees to any Affiliate, whether pursuant to a management agreement or otherwise.
"SCHEDULED INSTALLMENT" has the meaning assigned to that term in SUBSECTION
2.1(A).
"SUBSIDIARY" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
more than 50% of the total voting power of shares of stock (or equivalent
ownership or controlling interest) entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other subsidiaries of that Person or a combination
thereof. For all purposes of this Agreement, the LLC is a Subsidiary of
Borrower.
"TANGIBLE NET WORTH" means an amount equal to: (A) Borrower's Net Worth;
less (B) Borrower's intangible assets (determined in conformity with GAAP)
----
including, without limitation, goodwill, trademarks, tradenames, licenses,
organizational costs, deferred amounts, covenants not to compete, unearned
income and restricted funds; less (C) all obligations owed to Borrower or any of
----
its Subsidiaries by any Affiliate of Borrower or any of its Subsidiaries; and
less (D) all loans by Borrower to officers, stockholders or employees of
----
Borrower.
"TERMINATION DATE" means the date this Agreement is terminated as specified
in the manner set forth in SUBSECTION 2.5.
"TRANCHE A LOAN" means the loan made by Lender to Borrower in the initial
principal amount of $100,000,000 pursuant to SUBSECTION 2.1(A).
"TRANCHE B LOAN" means the loan made by Lender to Borrower in the initial
principal amount of $80,000,000 pursuant to SUBSECTION 2.1(B).
"UCC" means the Uniform Commercial Code as in effect on the date hereof in
the State of Utah, as amended from time to time, and any successor statute.
1.2 ACCOUNTING TERMS. For purposes of this Agreement, all accounting
----------------
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP. Financial statements and other information
furnished to Lender pursuant to SUBSECTION 5.1 shall be prepared in accordance
with GAAP (as in effect at the time of such preparation) on a consistent basis.
In the event any "Accounting Changes" (as defined below) shall occur and such
changes affect financial covenants, standards or terms in this Agreement, then
Borrower and Lender agree to enter into negotiations in order to amend such
provisions of this Agreement so as to equitably reflect such Accounting Changes
with the desired result that the criteria for evaluating the financial condition
of Borrower shall be the same after such Accounting Changes as if such
Accounting Changes had not been made, and until such time as such an amendment
shall have been executed and delivered by Borrower and Lender, (A) all financial
covenants, standards and terms in this Agreement shall be calculated and/or
construed as if such Accounting Changes had not been made, and (B) Borrower
shall prepare footnotes to each Compliance Certificate and the financial
statements required to be delivered hereunder that show the differences between
the financial statements delivered (which reflect such Accounting Changes) and
the basis for calculating financial covenant compliance (without reflecting such
Accounting Changes). "ACCOUNTING CHANGES" means: (A) changes in accounting
principles required by GAAP and implemented by Borrower; (B) changes in
accounting principles recommended by Borrower's certified public accountants;
and (C) changes in carrying value of Borrower's assets, liabilities or equity
accounts resulting from any adjustments that, in each case, were applicable to,
but not included in, the Pro Forma.
1.3 OTHER DEFINITIONAL PROVISIONS. References to "Sections",
-----------------------------
"subsections", "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in SUBSECTION 1.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. In this Agreement, words importing any gender include the
other genders; herein and hereunder means in this Agreement or under this
Agreement, except as specifically provided to the contrary; the words
"including," "includes" and "include" shall be deemed to be followed by the
words "without limitation"; references to agreements and other contractual
instruments shall be deemed to include subsequent amendments, assignments, and
other modifications thereto, but only to the extent such amendments, assignments
and other modifications are not prohibited by the terms of this Agreement or any
other Loan Document; references to Persons include their respective permitted
successors and assigns or, in the case of governmental Persons, Persons
succeeding to the relevant functions of such Persons; and all references to
statutes and related regulations shall include any amendments of same and any
successor statutes and regulations.
SECTION 2 LOANS AND COLLATERAL
2.1 LOANS.
-----
(A) TRANCHE A LOAN. Subject to the terms and conditions of this
--------------
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, Lender agrees to lend to the Borrower on the Closing Date the
Tranche A Loan in the initial principal amount of $100,000,000. The Tranche A
Loan shall be funded in one drawing and any amount of the Tranche A Loan repaid
may not be reborrowed. Borrower shall make monthly Scheduled Installments of
principal and interest on the Tranche A Loan on the dates and in the amounts set
forth below (or such lesser principal amount of the Tranche A Loan as shall then
be outstanding). "SCHEDULED INSTALLMENT" of the Tranche A Loan means, for the
last day of each month commencing with January 31, 1997, an amount equal to
$1,659,601.75 (subject to adjustment upon any adjustment of the interest rate
pursuant to SUBSECTION 2.2(A)(3)).
(B) TRANCHE B LOAN. Subject to the terms and conditions of this
--------------
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, Lender agrees to lend to the Borrower on the Closing Date the
Tranche B Loan in the initial principal amount of $80,000,000. The Tranche B
Loan shall be funded in one drawing and any amount of the Tranche B Loan repaid
may not be reborrowed. Borrower shall make one scheduled installment of
principal of the Tranche B Loan on December 31, 2003.
(C) NOTES.
-----
(1) Borrower shall execute and deliver to Lender a Tranche A
Term Note to evidence the Tranche A Loan, such Tranche A Term Note to be in the
principal amount of the Tranche A Loan and substantially in the form attached
hereto and Exhibit A.
(2) Borrower shall execute and deliver to Lender a Tranche B
Term Note to evidence the Tranche B Loan, such Tranche B Term Note to be in the
principal amount of the Tranche B Loan and substantially in the form attached
hereto as Exhibit B.
(3) In the event of an assignment under SUBSECTION 9.1, Borrower
shall, upon surrender of the assigning Lender's Notes, issue new Notes to the
Lender's assignees.
2.2 INTEREST
--------
(A) RATE OF INTEREST.
----------------
(1) The outstanding principal balance of the Tranche A Loan
shall bear interest at a rate per annum (meaning 360 days) equal to 9.99
percent.
(2) Prior to January 1, 1999, the outstanding principal balance
of the Tranche B Loan shall bear interest at a rate per annum (meaning 360 days)
equal to 10.99 percent, and commencing January 1, 1999, the outstanding
principal balance of the Tranche B Loan shall bear interest at a rate per annum
(meaning 360 days) equal to 12.99 percent.
(3) After the occurrence and during the continuance of an Event
of Default, each Loan and all other Obligations shall, at Lender's option, bear
interest at a rate per annum (meaning 360 days) equal to two percent (2.0%) plus
the interest rate otherwise applicable to such Loan hereunder (the "DEFAULT
RATE").
(B) COMPUTATION AND PAYMENT OF INTEREST. Interest on the Loans and
-----------------------------------
all other Obligations shall be computed on the daily principal balance on the
basis of a 360-day year consisting of twelve 30-day months and shall be payable
monthly in arrears on the last day of each month. Notwithstanding the
foregoing, interest on fifty percent (50%) of the outstanding principal balance
of the Tranche B Loan shall accrue and shall not be payable until December 31,
2003, and such accrued amounts shall bear interest, compounded annually, at the
rates set forth in SUBSECTION 2.2(A)(2).
(C) INTEREST LAWS.
-------------
Notwithstanding any provision to the contrary contained in this Agreement
or the other Loan Documents, Borrower shall not be required to pay, and Lender
shall not be permitted to collect, any amount of interest in excess of the
maximum amount of interest permitted by law ("EXCESS INTEREST"). If any Excess
Interest is provided for or determined by a court of competent jurisdiction to
have been provided for in this Agreement or in any of the other Loan Documents,
then in such event: (1) the provisions of this subsection shall govern and
control; (2) Borrower shall not be obligated to pay any Excess Interest; (3)
any Excess Interest that Lender may have received hereunder shall be, at
Lender's option, (A) applied as a credit against the outstanding principal
balance of the Obligations or accrued and unpaid interest (not to exceed the
maximum amount permitted by law), (B) refunded to the payor thereof, or (C) any
combination of the foregoing; (4) the interest rate(s) provided for in this
Agreement shall be automatically reduced to the maximum lawful rate allowed from
time to time under applicable law (the "MAXIMUM RATE"), and this Agreement and
the other Loan Documents shall be deemed to have been and shall be, reformed and
modified to reflect such reduction; and (5) Borrower shall not have any action
against Lender for any damages arising out of the payment or collection of any
Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligations is calculated at the Maximum Rate rather than the
applicable rate under this Agreement, and thereafter such applicable rate
becomes less than the Maximum Rate, the rate of interest payable on such
Obligations shall remain at the Maximum Rate until Lender shall have received
the amount of interest which Lender would have received during such period on
such Obligations had the rate of interest not been limited to the Maximum Rate
during such period.
2.3 FEES.
----
(A) CLOSING FEE. Borrower shall pay to Lender on the Closing Date a
-----------
closing fee in the amount of $3,600,000. If at least $100,000,000 of the
principal amount of the Loans is refinanced and prepaid in full (in addition to
Scheduled Installments and mandatory prepayments) on or prior to June 30, 1997,
then Lender shall refund to Borrower a portion of such closing fee equal to 2%
of the refinanced amount. If at least $100,000,000 of the principal amount of
the Loans is refinanced and prepaid in full (in addition to Scheduled
Installments and mandatory prepayments) after June 30, 1997 but on or prior to
September 30, 1997, then Lender shall refund to Borrower a portion of such
closing fee equal to 1.5% of the refinanced amount. If at least $100,000,000 of
the principal amount of the Loans is refinanced and prepaid in full (in addition
to Scheduled Installments and mandatory prepayments) after September 30, 1997
but on or prior to December 31, 1997, then Lender shall refund to Borrower a
portion of such closing fee equal to 1% of the refinanced amount. If any
principal amount of the Loans is refinanced and prepaid after December 31, 1997,
then no amount of such closing fee shall be refunded.
(B) FINANCING FEE. Borrower shall pay to Lender a financing fee in
-------------
the following amounts at the following dates: $1,000,000 will be due on June
30, 1997; $500,000 will be due on September 30, 1997; $500,000 will be due on
December 31, 1997; and $1,000,000 will be due on each March 31, June 30,
September 30 and December 31, commencing March 31, 1998. Such financing fee
shall terminate and Borrower shall have no obligation to pay any such fee (other
than to the extent such financing fee has previously accrued and become due) on
or after the date upon which at least $100,000,000 of the principal amount of
the Loans is refinanced and prepaid in full (in addition to Scheduled
Installments and mandatory prepayments).
(C) OTHER FEES AND EXPENSES. Borrower shall pay to Lender, for its
-----------------------
own account, all charges for returned items and all other bank charges incurred
by Lender.
2.4 PAYMENTS AND PREPAYMENTS.
------------------------
(A) MANNER AND TIME OF PAYMENT. If Lender elects to xxxx Borrower
--------------------------
for any amount due hereunder, such amount shall be immediately due and payable
with interest thereon as provided in this Agreement. All payments made by
Borrower with respect to the Obligations shall be made without deduction,
defense, setoff or counterclaim. All payments to Lender hereunder shall, unless
otherwise directed by Lender, be made in accordance with the terms and
conditions of this Agreement by delivery of such payment to Lender's Account
("LENDER'S ACCOUNT"), ABA No. 071 000 039, Account No. 78-27296, at Bank of
America, Illinois, Chicago, Illinois, Reference: Valhi, Inc. for the benefit of
Snake River Sugar Company. Proceeds remitted to Lender's Account shall be
credited to the Obligations on the Business Day on which received by Lender in
Lender's Account in immediately available funds; provided, however, for the
-------- -------
purpose of calculating interest on the Obligations, such funds shall be deemed
received on the first Business Day thereafter.
(B) MANDATORY PREPAYMENTS.
---------------------
(1) PROCEEDS OF ASSET DISPOSITIONS. (A) Immediately upon
------------------------------
receipt by Borrower of any net cash proceeds of any Asset Disposition (in one or
a series of related transactions), which net cash proceeds exceed $50,000 (it
being understood that if such proceeds exceed $50,000, the entire amount and not
just the portion above $50,000 shall be subject to this SUBSECTION 2.4(B)(1)),
Borrower shall prepay the Obligations in an amount equal to such proceeds.
(2) PREPAYMENTS FROM EXCESS CASH FLOW. On or prior to the end
---------------------------------
of any month in which Borrower has received any Excess Cash Flow, Borrower shall
prepay the Obligations in an amount equal to 100% of Excess Cash Flow for such
month. Concurrently with the making of any such payment, Borrower shall
deliver to Lender a certificate of Borrower's chief executive officer or chief
financial officer demonstrating its calculation of the amount required to be
paid.
(C) VOLUNTARY PREPAYMENTS. Borrower may, at any time upon not less
---------------------
than ten Business Days' prior notice to Lender, prepay the Obligations. The
Obligations may be prepaid or repaid in full or part without any penalty.
(D) PAYMENTS ON BUSINESS DAYS. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business Day, the
payment may be made on the next succeeding Business Day and such extension of
time shall be included in the computation of the amount of interest or fees due
hereunder.
(E) APPLICATION OF PREPAYMENTS. Any prepayments pursuant to this
--------------------------
SUBSECTION 2.4 shall be applied, FIRST, to all fees, costs and expenses incurred
by Lender with respect to this Agreement, the other Loan Documents or the
Collateral; SECOND, to all fees due and owing to Lender; THIRD, to accrued and
unpaid interest on the Obligations; FOURTH, to the principal amounts of the
Tranche A Loan, in the inverse order of maturity; FIFTH, to the principal
amounts of the Tranche B Loan, and SIXTH, to any other indebtedness or
obligations of Borrower owing to Lender.
2.5 TERM OF THIS AGREEMENT. This Agreement shall be effective until
----------------------
December 31, 2003 (the "TERMINATION DATE"). Upon acceleration in accordance
with SECTION 8.2 or on the Termination Date, all Obligations shall become
immediately due and payable without notice or demand. Notwithstanding any
termination, until all Obligations (other than continuing indemnity obligations)
have been fully paid and satisfied, Lender shall be entitled to retain security
interests in and liens upon all Collateral, and even after payment of all
Obligations hereunder, Borrower's obligation to indemnify Lender in accordance
with the terms hereof shall continue.
2.6 STATEMENTS. Lender shall render a monthly statement of account to
----------
Borrower within twenty (20) days after the end of each month. Such statement of
account shall constitute an account stated unless Borrower makes written
objection thereto within ten (10) days from the date such statement is mailed to
Borrower. Borrower promises to pay all of its Obligations as such amounts
become due or are declared due pursuant to the terms of this Agreement.
2.7 GRANT OF SECURITY INTEREST. To secure the prompt and complete
--------------------------
payment, performance and observance of the Obligations, including all renewals,
extensions, restructurings and refinancings of any or all of the Obligations,
Borrower hereby grants to Lender a continuing security interest, lien and
mortgage in and to all right, title and interest of Borrower in the following
property of Borrower, whether now owned or existing or hereafter acquired or
arising and regardless of where located (all being collectively referred to as
the "COLLATERAL"): (A) Accounts; (B) Inventory; (C) general intangibles (as
defined in the UCC); (D) documents (as defined in the UCC) or other receipts
covering, evidencing or representing goods; (E) instruments (as defined in the
UCC), including any membership interest in the LLC and any other capital stock
or other equity interests in any Person held by Borrower; (F) chattel paper (as
defined in the UCC); (G) Equipment; (H) Intellectual Property; (I) all deposit
accounts of Borrower maintained with any bank or financial institution; (J) all
cash and other monies and property of Borrower in the possession or under the
control of Lender or any participant; (K) all books, records, ledger cards,
files, correspondence, computer programs, tapes, disks and related data
processing software that at any time evidence or contain information relating to
any of the property described above or are otherwise necessary or helpful in the
collection thereof or realization thereon; and (L) proceeds of all or any of the
property described above, including, without limitation, the proceeds of any
insurance policies covering any of the above described property.
2.8 TAXES.
-----
(A) NO DEDUCTIONS. Any and all payments or reimbursements made
-------------
hereunder or under any of the other Loan Documents shall be made free and clear
of and without deduction for any and all taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto; excluding,
however, the following: (I) taxes imposed on the net income of Lender by the
jurisdiction under the laws of which Lender is organized or doing business or
any political subdivision thereof, and (II) similar taxes (including, without
limitation franchise taxes or gross receipts taxes) imposed in lieu of income
taxes, in each case by the jurisdiction under the laws of which Lender is
organized or any political subdivision thereof (all such taxes, levies, imposts,
deductions, charges or withholdings and all liabilities with respect thereto
excluding such taxes imposed on net income, herein "TAX LIABILITIES"). If
Borrower shall be required by law to deduct any such Tax Liabilities from or in
respect of any sum payable hereunder to Lender, then the sum payable hereunder
shall be increased as may be necessary so that, after making all required
deductions, Lender receives an amount equal to the sum it would have received
had no such deductions been made.
(B) CHANGES IN TAX LAWS. In the event that, subsequent to the
-------------------
Closing Date, (1) any changes in any existing law, regulation, treaty or
directive or in the interpretation or application thereof, (2) any new law,
regulation, treaty or directive enacted or any interpretation or application
thereof, or (3) compliance by Lender with any request or directive (whether or
not having the force of law) from any governmental authority, agency or
instrumentality:
(A) does or shall subject Lender to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or any Loans
made under this Agreement or change the basis of taxation of payments to Lender
of principal, fees, interest or any other amount payable hereunder (except for
net income taxes, or franchise taxes imposed in lieu of net income taxes,
imposed generally by federal, state or local taxing authorities with respect to
interest or commitment or other fees payable hereunder or changes in the rate of
tax on the overall net income of Lender); or
(B) does or shall impose on Lender any other condition or
increased cost in connection with the transactions contemplated hereby or
participations herein; and the result of any of the foregoing is to increase the
cost to Lender of continuing any Loan made under this Agreement, as the case may
be, or to reduce any amount receivable hereunder, then, in any such case,
Borrower shall promptly pay to Lender, upon its demand, any additional amounts
necessary to compensate Lender, on an after-tax basis, for such additional cost
or reduced amount receivable, as determined by Lender with respect to this
Agreement or the other Loan Documents. If Lender becomes entitled to claim any
additional amounts pursuant to this subsection, it shall promptly notify
Borrower of the event by reason of which Lender has become so entitled. A
certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by Lender to Borrower shall, absent manifest error, be final,
conclusive and binding for all purposes.
2.9 USE OF PROCEEDS AND MARGIN SECURITY. Borrower shall use the proceeds
-----------------------------------
of all Loans for proper business purposes consistent with all applicable laws,
statutes, rules and regulations. No portion of the proceeds of any Loan shall
be used by Borrower for the purpose of purchasing or carrying of margin stock
within the meaning of Regulation G or Regulation U, or use the proceeds of any
loan in any manner that might cause the borrowing or the application of such
proceeds to violate Regulation T or Regulation X or any other regulation of the
Board of Governors of the Federal Reserve System, or to violate the Exchange
Act.
SECTION 3 CONDITIONS TO LOANS
3.1 CONDITIONS TO LOANS. The obligations of Lender to make Loans on the
-------------------
Closing Date are subject to satisfaction of all of the conditions set forth
below.
(A) CLOSING DELIVERIES. Lender shall have received, in form and
------------------
substance satisfactory to Lender, all documents, instruments and information
identified on SCHEDULE 3.1(A) and all other agreements, notes, certificates,
orders, authorizations, financing statements, mortgages and other documents
which Lender may at any time reasonably request.
(B) SECURITY INTERESTS. Lender shall have received satisfactory
------------------
evidence that all security interests and liens granted to Lender pursuant to
this Agreement or the other Loan Documents have been duly perfected and
constitute first priority liens on the Collateral, subject only to Permitted
Encumbrances, including delivery of all certificates representing membership
interests in the LLC.
(C) CAPITAL CONTRIBUTION AND WORKING CAPITAL BORROWINGS. At least
---------------------------------------------------
two Business Days prior to the Closing Date, Lender shall have received
satisfactory evidence of the receipt by Borrower of cash proceeds of the
issuance of interests in the Borrower in an amount not less than $88,000,000.
On the Closing Date, Lender shall have received satisfactory evidence of the
formation of the LLC and the receipt by the LLC of the maximum amount of
borrowings permitted under the LLC Indebtedness.
(D) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties contained herein and in the Loan Documents shall be true, correct and
complete in all material respects on and as of the Closing Date.
(E) FEES. Borrower shall have paid the fees payable on the Closing
----
Date referred to in SUBSECTION 2.3(A).
(F) NO DEFAULT. No event shall have occurred and be continuing that
----------
would constitute an Event of Default or a Default.
(G) PERFORMANCE OF AGREEMENTS. Borrower shall have performed in all
-------------------------
material respects all agreements and satisfied all conditions which any Loan
Document provides shall be performed by it on or before that Closing Date.
(H) NO PROHIBITION. No order, judgment or decree of any court,
--------------
arbitrator or governmental authority shall purport to enjoin or restrain Lender
from making any Loans.
(I) NO LITIGATION. There shall not be pending or, to the knowledge
-------------
of Borrower, threatened, any action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration by, against or affecting
Borrower or the LLC or any property of the Borrower or the LLC (other than as
set forth in the Formation Agreement), and there shall have occurred no
development in any such action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration, that in each case, in the
opinion of Lender, could reasonably be expected to have a Material Adverse
Effect.
SECTION 4 BORROWER'S REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, and to make Loans, Borrower
represents and warrants to Lender that the following statements are true,
correct and complete:
4.1 ORGANIZATION, POWERS, CAPITALIZATION.
------------------------------------
(A) ORGANIZATION AND POWERS. Borrower is a cooperative corporation
-----------------------
duly organized, validly existing and in good standing under the laws of Oregon
and qualified to do business in all states where such qualification is required.
Borrower has all requisite power and authority to own and operate its
properties, to carry on its business as now conducted and proposed to be
conducted and to enter into each Loan Document.
(B) CAPITALIZATION. As of the Closing Date, the authorized capital
--------------
stock of Borrower is as set forth on SCHEDULE 4.1(B). All issued and
outstanding shares of capital stock of Borrower are duly authorized and validly
issued, fully paid, nonassessable, free and clear of all Liens and such shares
were issued in compliance with all applicable state and federal laws concerning
the issuance of securities. As of the Closing Date, the capital stock of
Borrower is owned by the Persons and in the amounts set forth on SCHEDULE
4.1(B). As of the Closing Date, no shares of the capital stock of Borrower,
other than those described above, are issued and outstanding. Except as set
forth on SCHEDULE 4.1(B), as of the Closing Date, there are no preemptive or
other outstanding rights, options, warrants, conversion rights or similar
agreements or understandings for the purchase or acquisition from Borrower of
any shares of capital stock or other securities of Borrower.
4.2 AUTHORIZATION OF BORROWING, NO CONFLICT. Borrower has the power and
---------------------------------------
authority to incur the Obligations and to grant security interests in the
Collateral. On the Closing Date, the execution, delivery and performance of the
Loan Documents by Borrower will have been duly authorized by all necessary
action. The execution, delivery and performance by Borrower of each Loan
Document to which it is a party and the consummation of the transactions
contemplated by this Agreement and the other Loan Documents by Borrower do not
contravene and will not be in contravention of any applicable law, the corporate
charter or bylaws of Borrower or any agreement or order by which Borrower or
Borrower's property is bound. This Agreement is, and the other Loan Documents,
including the Notes, when executed and delivered will be, the legally valid and
binding obligations of the Borrower, each enforceable against the Borrower, as
applicable, in accordance with their respective terms.
4.3 FINANCIAL CONDITION. All financial statements concerning Borrower and
-------------------
the LLC which have been or will hereafter be furnished by Borrower and the LLC
to Lender pursuant to this Agreement have been or will be prepared in accordance
with GAAP consistently applied throughout the periods involved (except as
disclosed therein) and do or will present fairly in all material respects the
financial condition of the Persons covered thereby as at the dates thereof and
the results of their operations for the periods then ended. The Pro Forma was
prepared by Borrower based on the unaudited balance sheet of The Amalgamated
Sugar Company dated September 30, 1996. The Projections delivered and to be
delivered have been and will be prepared by Borrower in light of the past
operations of the business of Borrower and the LLC, and such Projections
represent and will represent the good faith estimate of Borrower and its board
members concerning the most probable course of its business as of the date such
Projections are prepared and delivered. The Projections have been reviewed by
Xxxx Xxxxxxx PLLP and such firm has issued a review report on such Projections
which has been delivered to Lender.
4.4 INDEBTEDNESS AND LIABILITIES. Borrower has no (A) Indebtedness except
----------------------------
pursuant to this Agreement and the Loan Documents; or (B) Liabilities other than
as reflected on the Pro Forma or as incurred in the ordinary course of business
following the date of the Pro Forma.
4.5 NAMES. Snake River Sugar Company is the only name, tradename,
-----
fictitious name or business name under which Borrower currently conducts
business or under which Borrower (or any predecessor in interest of Borrower)
has at any time during the past five years conducted business.
4.6 LOCATIONS; FEIN. The Borrower's principal place of business and the
---------------
location of Borrower's books and records is 000 Xxxx Xxxxxx, Xxxxx, Xxxxxx
00000, and such location is Borrower's sole office and location for its business
and the Collateral. Borrower's federal employer identification number is set
forth on the signature page of this Agreement.
4.7 TITLE TO PROPERTIES; LIENS. Borrower has good, sufficient and legal
--------------------------
title, subject to Permitted Encumbrances, to all of its properties and assets.
Except for Permitted Encumbrances, all such properties and assets are free and
clear of Liens.
4.8 LITIGATION; ADVERSE FACTS. There are no judgments outstanding against
-------------------------
Borrower or affecting any property of Borrower nor is there any action, charge,
claim, demand, suit, proceeding, petition, governmental investigation or
arbitration now pending or, to the best knowledge of Borrower after due inquiry,
threatened, against or affecting Borrower or any property of Borrower which
could reasonably be expected to result in any Material Adverse Effect. Borrower
has not received any opinion or memorandum or legal advice from legal counsel to
the effect that it is exposed to any liability which could reasonably be
expected to result in any Material Adverse Effect.
4.9 PAYMENT OF TAXES. All material tax returns and reports of Borrower
----------------
required to be filed by it have been timely filed, and all taxes, assessments,
fees and other governmental charges upon Borrower and upon its properties,
assets, income and franchises which are shown on such returns as due and payable
have been paid when due and payable. None of the United States income tax
returns of Borrower are under audit. No tax liens have been filed and no claims
(except as otherwise permitted by SUBSECTION 5.6) are being asserted with
respect to any such taxes. The charges, accruals and reserves on the books of
Borrower in respect of any taxes or other governmental charges are in accordance
with GAAP.
4.10 PERFORMANCE OF AGREEMENTS. Borrower is not in material default in the
-------------------------
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any material contractual obligation of Borrower, and, to
the best of Borrower's knowledge, no condition exists that, with the giving of
notice or the lapse of time or both, would constitute such a material default.
4.11 EMPLOYEE BENEFIT PLANS. Borrower and each ERISA Affiliate is in
----------------------
compliance in all material respects with all applicable provisions of ERISA, the
IRC and all other applicable laws and the regulations and interpretations
thereof with respect to all Employee Benefit Plans. No material liability has
been incurred by Borrower or any ERISA Affiliate which remains unsatisfied for
any funding obligation, taxes or penalties with respect to any Employee Benefit
Plan.
4.12 INTELLECTUAL PROPERTY. As of the Closing Date, Borrower does not own,
---------------------
and is not licensed to use and does not otherwise have the right to use, any
Intellectual Property, other than its corporate name.
4.13 BROKER'S FEES. No broker's or finder's fee or commission will be
-------------
payable by Borrower with respect to the issuance and sale of the Notes or any of
the transactions contemplated by this Agreement.
4.14 ENVIRONMENTAL COMPLIANCE. Borrower has been and is currently in
------------------------
compliance with all applicable Environmental Laws, including obtaining and
maintaining in effect all permits, licenses or other authorizations required by
applicable Environmental Laws, the noncompliance with which could have a
Material Adverse Effect. There are no claims, liabilities, investigations,
litigation, administrative proceedings, whether pending or threatened, or
judgments or orders relating to any Hazardous Materials asserted or threatened
against Borrower or relating to any real property currently or formerly owned,
leased or operated by Borrower.
4.15 SOLVENCY. As of and from and after the date of this Agreement,
--------
Borrower: (A) owns and will own assets the fair salable value of which are (I)
greater than the total amount of its liabilities (including contingent
liabilities) and (II) greater than the amount that will be required to pay
probable liabilities as they mature; (B) has capital that is not unreasonably
small in relation to its business as presently conducted or any contemplated or
undertaken transaction; and (C) does not intend to incur and does not believe
that it will incur debts beyond its ability to pay such debts as they become
due.
4.16 DISCLOSURE. No representation or warranty of Borrower contained in
----------
this Agreement, the financial statements, the other Loan Documents, or any other
document, certificate or written statement furnished to Lender by or on behalf
of Borrower for use in connection with the Loan Documents contains any untrue
statement of a material fact or omitted, omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. The
Projections and pro forma financial information contained in such materials are
based upon good faith estimates and assumptions believed by Borrower to be
reasonable at the time made, it being recognized by Lender that such projections
as to future events are not to be viewed as facts and that actual results during
the period or periods covered by any such projections may differ from the
projected results. There is no material fact known to Borrower that has had or
could reasonably be expected to have a Material Adverse Effect and that has not
been disclosed in this Agreement or in such other documents, certificates and
statements furnished to Lender for use in connection with the transactions
contemplated by this Agreement.
4.17 INSURANCE. Borrower maintains adequate insurance policies for public
---------
liability, property damage for its business and properties, product liability,
and business interruption, no notice of cancellation has been received with
respect to such policies and Borrower is in compliance with all conditions
contained in such policies.
4.18 COMPLIANCE WITH LAWS. Borrower is not in violation of any law,
--------------------
ordinance, rule, regulation, order, policy, guideline or other requirement of
any domestic or foreign government or any instrumentality or agency thereof,
having jurisdiction over the conduct of its business or the ownership of its
properties, including, without limitation, any violation relating to any use,
release, storage, transport or disposal of any Hazardous Material, which
violation would subject Borrower or any of its officers to criminal liability or
have a Material Adverse Effect and no such violation has been alleged.
4.19 BANK ACCOUNTS. SCHEDULE 4.19 sets forth the account numbers and
-------------
locations of all bank accounts of Borrower as of the Closing Date.
4.20 SUBSIDIARIES. Borrower has no Subsidiaries other than the LLC.
------------
4.21 EMPLOYEE MATTERS. (A) no employee of Borrower is subject to any
----------------
collective bargaining agreement, (B) no petition for certification or union
election is pending with respect to the employees of Borrower and no union or
collective bargaining unit has sought such certification or recognition with
respect to the employees of Borrower and (C) there are no strikes, slowdowns,
work stoppages or controversies pending or, to the best knowledge of Borrower
after due inquiry, threatened between Borrower and its employees, other than
employee grievances arising in the ordinary course of business, which could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect. Borrower is not a party to any employment contract.
4.22 GOVERNMENTAL REGULATION. Borrower is not, and after giving effect to
-----------------------
the application of the proceeds of the Loan will not be, subject to regulation
under the Public Utility Holding Company Act of 1935, the Federal Power Act or
the Investment Company Act of 1940 or to any federal or state statute or
regulation limiting its ability to incur indebtedness for borrowed money.
SECTION 5 AFFIRMATIVE COVENANTS
Borrower covenants and agrees that until payment in full of all
Obligations, unless Lender shall otherwise give its prior written consent,
Borrower shall perform, and shall cause each of its Subsidiaries to perform, all
covenants in this SECTION 5 applicable to such Person.
5.1 FINANCIAL STATEMENTS AND OTHER REPORTS. Borrower will maintain a
--------------------------------------
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in conformity
with GAAP. Borrower will deliver to Lender the financial statements and other
reports described below.
(A) MONTHLY FINANCIALS. As soon as available and in any event within
------------------
thirty (30) days after the end of each month, Borrower will deliver (1) the
unaudited consolidated and consolidating balance sheet of Borrower and its
Subsidiaries as at the end of such month and the related unaudited consolidated
and consolidating statements of income, partners' equity and cash flow for such
month and for the period from the beginning of the then current Fiscal Year to
the end of such month, and (2) a schedule of the outstanding Indebtedness for
borrowed money of Borrower and its Subsidiaries describing in reasonable detail
each such debt issue or loan outstanding and the principal amount and amount of
accrued and unpaid interest with respect to each such debt issue or loan.
(B) YEAR-END FINANCIALS. As soon as available and in any event
-------------------
within ninety (90) days after the end of each Fiscal Year, Borrower will
deliver: (1) the audited consolidated balance sheet of Borrower and its
Subsidiaries as at the end of such year and the related audited consolidated
statements of income, shareholders' equity and cash flow for such Fiscal Year;
(2) a schedule of the outstanding Indebtedness of Borrower and its Subsidiaries
describing in reasonable detail each such debt issue or loan outstanding and the
principal amount and amount of accrued and unpaid interest with respect to each
such debt issue or loan; and (3) a report with respect to the financial
statements from a firm of independent certified public accountants selected by
Borrower, which report shall be unqualified as to going concern and scope of
audit of Borrower and its Subsidiaries and shall state that (A) such
consolidated financial statements present fairly the consolidated financial
position of Borrower and its Subsidiaries as at the dates indicated and the
results of their operations and cash flow for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years and (B) that
the examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; and (4) copies of the consolidating financial statements of
Borrower and its Subsidiaries, including (A) consolidating balance sheets of
Borrower and its Subsidiaries as at the end of such Fiscal Year showing
intercompany eliminations and (B) related consolidating statements of earnings
of Borrower and its Subsidiaries showing intercompany eliminations.
(C) ACCOUNTANTS' CERTIFICATION AND REPORTS. Together with each
--------------------------------------
delivery of audited consolidated financial statements of Borrower and its
Subsidiaries pursuant to SUBSECTION 5.1(B), Borrower will deliver (1) a written
statement by its independent certified public accountants (A) stating that the
examination has included a review of the terms of this Agreement as same relate
to accounting matters and (B) stating whether, in connection with the
examination, any condition or event that constitutes a Default or an Event of
Default has come to their attention and, if such a condition or event has come
to their attention, specifying the nature and period of existence thereof.
Promptly upon receipt thereof, Borrower will deliver copies of all significant
reports submitted to Borrower by independent public accountants in connection
with each annual, interim or special audit of the financial statements of
Borrower made by such accountants, including the comment letter submitted by
such accountants to management in connection with their annual audit.
(D) COMPLIANCE CERTIFICATE. Together with the delivery of each set
----------------------
of financial statements referenced in subparts (A) and (B) of this SUBSECTION
5.1, Borrower will deliver to Lender a Compliance Certificate evidencing the
Borrower's continued compliance with its obligations and agreements in this
Agreement, together with copies of the calculations and work-up employed to
determine Borrower's compliance or noncompliance with the financial covenants
set forth in SECTION 6.
(E) MANAGEMENT REPORT. Together with each delivery of financial
-----------------
statements of Borrower and its Subsidiaries pursuant to subdivisions (A) and (B)
of this SUBSECTION 5.1, Borrower will deliver a management report: (1)
describing the operations and financial condition of Borrower and its
Subsidiaries for the month then ended and the portion of the current Fiscal Year
then elapsed (or for the Fiscal Year then ended in the case of year-end
financials); (2) setting forth in comparative form the corresponding figures for
the corresponding periods of the previous Fiscal Year and the corresponding
figures from the most recent Projections for the current Fiscal Year delivered
to Lender pursuant to SUBSECTION 5.1(L); and (3) discussing the reasons for any
significant variations. The information above shall be presented in reasonable
detail and shall be certified by the chief financial officer of Borrower to the
effect that such information fairly presents in all material respects the
results of operations and financial condition of Borrower and its Subsidiaries
as at the dates and for the periods indicated.
(F) GOVERNMENT NOTICES. Borrower will deliver to Lender promptly
------------------
after receipt copies of all material notices, requests, subpoenas, inquiries or
other writings received from any governmental agency concerning any Employee
Benefit Plan, the violation or alleged violation of any Environmental Laws, the
storage, use or disposal of any Hazardous Material, the violation or alleged
violation of the Fair Labor Standards Act or Borrower's payment or non-payment
of any taxes including any tax audit.
(G) EVENTS OF DEFAULT, ETC. Promptly upon any officer of Borrower
-----------------------
obtaining knowledge of any of the following events or conditions, Borrower shall
deliver a certificate of Borrower's chief executive officer specifying the
nature and period of existence of such condition or event and what action
Borrower has taken, is taking and proposes to take with respect thereto: (1) any
condition or event that constitutes an Event of Default or Default; (2) any
notice of default that any Person has given to Borrower or any of its
Subsidiaries or any other action taken with respect to a claimed default; or (3)
any Material Adverse Effect.
(H) TRADE NAMES. Borrower and each of its Subsidiaries will give
-----------
Lender at least thirty (30) days advance written notice of any change of name or
of any new trade name or fictitious business name. Borrower's use of any trade
name or fictitious business name will be in compliance with all laws regarding
the use of such names.
(I) LOCATIONS. Borrower will give Lender at least thirty (30) days
---------
advance written notice of any change in Borrower's principal place of business
or any change in the location of its books and records or the Collateral or of
any new location for its books and records or the Collateral.
(J) BANK ACCOUNTS. Borrower will give Lender prompt notice of any
-------------
new bank accounts Borrower or any of its Subsidiaries intends to establish prior
to its their opening same.
(K) LITIGATION. Promptly upon any officer of Borrower or its
----------
Subsidiaries obtaining knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting
Borrower or any of its Subsidiaries or any property of Borrower or any of its
Subsidiaries not previously disclosed by Borrower to Lender or (2) any material
development in any action, suit, proceeding, governmental investigation or
arbitration at any time pending against or affecting Borrower or any of its
Subsidiaries or any property of Borrower or any of its Subsidiaries which is
reasonably likely to have a Material Adverse Effect, Borrower will promptly give
notice thereof to Lender and provide such other information as may be reasonably
available to them to enable Lender and its counsel to evaluate such matter.
(L) PROJECTIONS. As soon as available and in any event no later than
-----------
90 days prior to the start of Borrower's Fiscal Year, Borrower will deliver
consolidated and consolidating Projections of Borrower and its Subsidiaries for
the forthcoming Fiscal Year, month by month.
(M) LLC NOTICES AND FINANCIALS. Borrower shall promptly deliver
--------------------------
copies of all notices given or received by the LLC to Borrower, any other member
of the LLC, or any lender to the LLC with respect to noncompliance with any term
or condition of the LLC's organizational documents and loan agreements
(including the LLC Indebtedness), and shall promptly notify Lender of any
potential or actual event of default with respect to the LLC Indebtedness.
Borrower shall promptly deliver to Lender all financial statements of the LLC
required to be delivered to the members of the LLC pursuant to the Company
Agreement.
(N) OTHER INFORMATION. With reasonable promptness, Borrower will
-----------------
deliver such other information and data with respect to Borrower, the LLC or the
Collateral as Lender may reasonably request from time to time.
5.2 ACCESS TO ACCOUNTANTS. Borrower authorizes Lender to discuss the
---------------------
financial condition and financial statements of Borrower and its Subsidiaries
with Borrower's independent public accountants upon reasonable notice to
Borrower of its intention to do so, and authorizes such accountants to respond
to all of Lender's inquiries.
5.3 INSPECTION. Borrower shall permit Lender and any authorized
----------
representatives designated by Lender to visit and inspect any of the properties
of Borrower or any of its Subsidiaries, upon reasonable notice and at reasonable
times, including its and their financial and accounting records, and to make
copies and take extracts therefrom, and to discuss its and their affairs,
finances and business with its and their officers and independent public
accountants, at such reasonable times during normal business hours and as often
as may be reasonably requested.
5.4 COLLATERAL RECORDS. Borrower shall keep full and accurate books and
------------------
records relating to the Collateral and shall xxxx such books and records to
indicate Lender's security interests in the Collateral.
5.5 CORPORATE EXISTENCE, ETC.. Borrower will, and will cause each of its
-------------------------
Subsidiaries to, at all times preserve and keep in full force and effect its
corporate existence, as the case may be, and all rights and franchises material
to its business. Borrower will promptly notify Lender of any change in its or
any of its Subsidiaries' ownership or corporate structure. Borrower shall take
such action as shall be necessary such that each of the representations and
warranties set forth in SECTION 4 of this Agreement continues to be true and
correct in all material respects.
5.6 PAYMENT OF TAXES. Borrower will, and will cause each of its
----------------
Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or with respect to any of its
franchises, business, income or property before any penalty accrues thereon
provided that no such tax need be paid if Borrower or one of its Subsidiaries is
--------
contesting same in good faith by appropriate proceedings promptly instituted and
diligently conducted and if Borrower or such Subsidiary has established
appropriate reserves as shall be required in conformity with GAAP.
5.7 MAINTENANCE OF PROPERTIES; INSURANCE. Borrower will maintain or cause
------------------------------------
to be maintained in good repair, working order and condition all material
properties used in the business of Borrower and its Subsidiaries and will make
or cause to be made all appropriate repairs, renewals and replacements thereof.
Borrower will maintain or cause to be maintained, with financially sound and
reputable insurers, public liability and property damage insurance with respect
to its business and properties and the business and properties of its
Subsidiaries against loss or damage of the kinds customarily carried or
maintained by corporations of established reputation engaged in similar
businesses and in amounts reasonably acceptable to Lender. Within 15 days of
the Closing Date, Borrower shall cause Lender to be named as loss payee on all
insurance policies relating to any Collateral and as additional insured under
all liability policies, in each case pursuant to appropriate endorsements in
form and substance satisfactory to Lender and shall collaterally assign to
Lender as security for the payment of the Obligations any business interruption
insurance of Borrower. Borrower shall apply any proceeds received from any
policies of insurance relating to any Collateral to the Obligations as set forth
in SUBSECTION 2.4(B)(1).
5.8 COMPLIANCE WITH LAWS. Borrower will, and will cause each of its
--------------------
Subsidiaries to, comply with the requirements of all applicable laws, rules,
regulations and orders of any governmental authority as now in effect and which
may be imposed in the future in all jurisdictions in which Borrower or any of
its Subsidiaries is now doing business or may hereafter be doing business, other
than those laws the noncompliance with which would not have a Material Adverse
Effect.
5.9 FURTHER ASSURANCES. Borrower shall, and shall cause each of its
------------------
Subsidiaries to, from time to time, execute such guaranties, financing or
continuation statements, documents, security agreements, reports and other
documents or deliver to Lender such instruments, certificates of title or other
documents as Lender at any time may reasonably request to evidence, perfect or
otherwise implement the guaranties and security for repayment of the Obligations
provided for in the Loan Documents. At Lender's request, Borrower shall cause
any Subsidiaries of Borrower promptly to guaranty the Obligations and to grant
to Lender security interests in the real, personal and mixed property of such
Subsidiary to secure the Obligations.
5.10 COLLATERAL LOCATIONS. Borrower will keep the Collateral at the
--------------------
locations specified in SECTION 4.6. With respect to any new location (which in
any event shall be within the continental United States), Borrower will execute
such documents and take such actions as Lender deems necessary to perfect and
protect the security interests of the Lender in the Collateral prior to the
transfer or removal of any Collateral to such new location.
5.11 BAILEES. If any Collateral is at any time in the possession or control
-------
of any warehouseman, bailee or any of Borrower's agents or processors, Borrower
shall, upon the request of Lender, notify such warehouseman, bailee, agent or
processor of the security interests in favor of Lender created hereby and shall
instruct such Person to hold all such Collateral for Lender's account subject to
Lender's instructions.
5.12 COLLECTION OF ACCOUNTS AND PAYMENTS. Within 15 days of the Closing,
-----------------------------------
Borrower shall establish lockboxes and blocked accounts (collectively, "BLOCKED
ACCOUNTS") in Borrower's name with such banks (collectively, "COLLECTING BANKS")
as are acceptable to Lender (subject to irrevocable instructions acceptable to
Lender as hereinafter set forth) to which the all account debtors shall directly
remit all payments on Accounts and in which Borrower will immediately deposit
all payments constituting proceeds of Collateral (including any distributions
received from the LLC) in the identical form in which such payment was made,
whether by cash or check. The Collecting Banks shall acknowledge and agree, in
a manner satisfactory to Lender, that all payments made to the Blocked Accounts
are the sole and exclusive property of Lender, and that the Collecting Banks
have no right of setoff against the Blocked Accounts and that all such payments
received will be promptly transferred to Lender's Account. Borrower hereby
agrees that all payments received by Lender, whether by cash, check, wire
transfer or any other instrument, made to such Blocked Accounts or otherwise
received by Lender and whether on the Accounts or as proceeds of other
Collateral or otherwise will be the sole and exclusive property of Lender.
Borrower shall irrevocably instruct each Collecting Bank that each Collecting
Bank shall promptly transfer all payments or deposits to the Blocked Accounts
into Lender's Account. Borrower, and any of its Affiliates, employees, Lenders
or other Persons acting for or in concert with Borrower, shall, acting as
trustee for Lender, receive, as the sole and exclusive property of Lender, any
monies, checks, notes, drafts or any other payments relating to and/or proceeds
of Accounts or other Collateral which come into the possession or under the
control of Borrower or any of Borrower's Affiliates, employees, agents or other
Persons acting for or in concert with Borrower, and immediately upon receipt
thereof, Borrower or such Persons shall remit the same or cause the same to be
remitted, in kind, to the Blocked Accounts or to Lender at its address set forth
in SUBSECTION 9.6 below.
5.13 REFINANCING. Borrower shall use its best efforts (including payment
-----------
of any reasonable commitment fees and expenses) to cause at least $100 million
of the Loans to be refinanced (other than through Scheduled Installments and
mandatory prepayments) as soon as reasonably practicable. In connection with
such refinancing, Borrower shall agree to any reasonable commercial loan terms
and conditions, provided, however, that this SUBSECTION 5.13 shall not require
Borrower to agree to pay interest in excess of commercially reasonable terms and
conditions.
SECTION 6 FINANCIAL COVENANTS
Borrower covenants and agrees that so long as any of the Loans remain in
effect and until payment in full of all Obligations (other than continuing
indemnity obligations), Borrower shall comply with and shall cause each of its
Subsidiaries to comply with all covenants in this SECTION 6 applicable to such
Person.
6.1 TANGIBLE NET WORTH. Borrower shall maintain Tangible Net Worth of at
------------------
least $88 million at the end of each monthly accounting period.
6.2 CAPITAL EXPENDITURE LIMITS. Borrower will make no Capital
--------------------------
Expenditures and will not enter into any Capital Lease. The aggregate amount of
all Capital Expenditures of Borrower's Subsidiaries (excluding trade-ins and
excluding Capital Expenditures in respect of replacement assets to the extent
funded with casualty insurance proceeds) will not exceed $35,000,000 in any
Fiscal Year of the Company plus the two previous Fiscal Years (provided than,
for purposes of this SUBSECTION 6.2, Capital Expenditures for each Fiscal Year
prior to January 1, 1997 shall be deemed to be an amount equal to $12,000,000).
In the event that any Subsidiary of Borrower enters into a Capital Lease or
other contract with respect to fixed assets, for purposes of calculating Capital
Expenditures under this subsection only, the amount of the Capital Lease or
contract initially capitalized on such Subsidiary's balance sheet prepared in
accordance with GAAP shall be considered expended in full on the date that such
Subsidiary enters into such Capital Lease or contract.
SECTION 7. NEGATIVE COVENANTS
Borrower covenants and agrees that so long as any of the Loans remain in
effect and until payment in full of all Obligations (other than continuing
indemnity obligations), unless Borrower has received the prior written consent
of Lender:
7.1 INDEBTEDNESS AND LIABILITIES. Borrower shall not directly or
----------------------------
indirectly create, incur, assume, guaranty, or otherwise become or remain
directly or indirectly liable, on a fixed or contingent basis, with respect to,
any Indebtedness except the Obligations and except for Borrower's guarantee
dated as of the date of this Agreement of certain obligations to Henry's Fork
Financial, Inc. of Snake River Farms II, an Idaho limited liability company
(`the Guarantee''). Borrower shall not incur any Liabilities except for the
Guarantee and for trade payables and normal accruals in the ordinary course of
business not yet due and payable or with respect to which Borrower is contesting
in good faith the amount or validity thereof by appropriate proceedings and then
only to the extent that Borrower has established adequate reserves therefor, if
appropriate under GAAP.
7.2 GUARANTIES. Except for the Guarantee and for endorsements of
----------
instruments or items of payment for collection in the ordinary course of
business, Borrower shall not guaranty, endorse, or otherwise in any way become
or be responsible for any obligations of any other Person, whether directly or
indirectly by agreement to purchase the indebtedness of any other Person or
through the purchase of goods, supplies or services, or maintenance of working
capital or other balance sheet covenants or conditions, or by way of stock
purchase, capital contribution, advance or loan for the purpose of paying or
discharging any indebtedness or obligation of such other Person or otherwise.
7.3 TRANSFERS, LIENS AND RELATED MATTERS.
------------------------------------
(A) TRANSFERS. Except as a result of condemnation or casualty loss,
---------
Borrower shall not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to any of the Collateral or the
assets of Borrower, except that Borrower may (I) sell inventory in the ordinary
course of business; and (II) make Asset Dispositions if all of the following
conditions are met: (1) the market value of assets sold or otherwise disposed
of in any single transaction or series of related transactions does not exceed
$1,000,000 and the aggregate market value of assets sold or otherwise disposed
of in any Fiscal Year does not exceed $5,000,000; (2) the consideration received
is at least equal to the fair market value of such assets; (3) the sole
consideration received is cash or Cash Equivalents; (4) the net proceeds of
such Asset Disposition are applied as required by SUBSECTION 2.4(B); (5) after
giving effect to the sale or other disposition of the assets included within the
Asset Disposition and the repayment of the Obligations with the proceeds
thereof, Borrower is in compliance on a pro forma basis with the covenants set
forth in SECTION 6 recomputed for the most recently ended month for which
information is available and is in compliance with all other terms and
conditions contained in this Agreement; and (6) no Default or Event of Default
shall result from such sale or other disposition.
(B) LIENS. Except for Permitted Encumbrances, Borrower shall not
-----
directly or indirectly create, incur, assume or permit to exist any Lien on or
with respect to any of the Collateral or the assets of such Person or any
proceeds, income or profits therefrom.
(C) NO NEGATIVE PLEDGES. Borrower shall not enter into or assume any
-------------------
agreement (other than the Loan Documents) prohibiting the creation or assumption
of any Lien upon its properties or assets, whether now owned or hereafter
acquired.
(D) NO RESTRICTIONS ON SUBSIDIARY DISTRIBUTIONS TO BORROWER.
-------------------------------------------------------
Borrower shall not directly or indirectly create or otherwise cause or suffer to
exist or become effective or enter into any agreement permitting or providing
for, whether at the time of entering into such agreement or upon the occurrence
of an event subsequent to such time, any consensual encumbrance or restriction
of any kind on the ability of any Subsidiary to: (1) pay dividends or make any
other distribution on any of such Subsidiary's capital stock or equity interest
owned by Borrower or any Subsidiary of Borrower; (2) subject to subordination
provisions, pay any indebtedness owed to Borrower or to any other Subsidiary;
(3) make loans or advances to Borrower or any other Subsidiary; or (4) transfer
any of its property or assets to Borrower or any other Subsidiary, other than
pursuant to the LLC Indebtedness.
7.4 INVESTMENTS AND LOANS. Borrower shall not make or permit to exist
---------------------
investments in or loans to any other Person, except: (1) Cash Equivalents; (2)
loans and advances to employees for moving, entertainment, travel and other
similar expenses in the ordinary course of business in an aggregate outstanding
amount not in excess of $10,000 at any time; (3) Investments received by or
issued to Borrower or any Subsidiary of Borrower on account or in settlement of
any claim of Borrower or such Subsidiary against any other Person in any
bankruptcy or similar insolvency proceeding involving such Person, and (4) loans
to Valhi, Inc. in the aggregate principal amount of $250,000,000.
7.5 RESTRICTED JUNIOR PAYMENTS. Borrower shall not directly or indirectly
--------------------------
declare, order, pay, make or set apart any sum for any Restricted Junior
Payment, or permit any Subsidiary (including the LLC) to directly or indirectly
declare, order, pay, make or set apart any sum for any Restricted Junior
Payment, except that:
(A) The LLC may make Restricted Junior Payments with respect to its
membership interests to the extent set forth in the Company Agreement and with
respect to the purchase of sugarbeets from Borrower, so long as such expenses do
not exceed the amounts set forth in the contract set forth as Exhibit D-7 to the
Formation Agreement); and
(B) so long as before and after giving effect to each such distribution,
no Event of Default shall have occurred and be continuing, the Borrower may make
payments to its members in connection with the purchase of sugarbeets from
Borrower's members, so long as such payments do not exceed the amounts to be
received from the LLC pursuant to the Memorandum of Agreement set forth as
Exhibit D-7 to the Formation Agreement), provided, that not less than three
--------
Business Days prior to the date of any such payments, Borrower shall have
delivered to Lender a certificate of the Borrower's chief executive officer
setting forth in such form and with such specificity as shall be reasonably
satisfactory to Lender the calculation of the amount of each such payments; and
(C) so long as before and after giving effect to each such distribution,
no Event of Default shall have occurred and be continuing, following the
completion of Borrower's audit for its Fiscal Year, Borrower may make tax
distributions to its members in an amount not to exceed 30% of the taxable
income realized by such members during such completed Fiscal Year, provided,
--------
that not less than three Business Days prior to the date of any such
distribution, Borrower shall have delivered to Lender a certificate of the
Borrower's chief executive officer setting forth in such form and with such
specificity as shall be reasonably satisfactory to Lender the calculation of the
amount of each such distribution.
7.6 RESTRICTION ON FUNDAMENTAL CHANGES. Borrower shall not: (A) enter
----------------------------------
into any transaction of merger or consolidation; (B) liquidate, wind-up or
dissolve itself (or suffer any liquidation or dissolution); (C) convey, sell,
lease, sublease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any substantial part of its business or assets,
or the capital stock of any of its Subsidiaries or the membership interest in
the LLC, whether now owned or hereafter acquired; or (D) acquire by purchase or
otherwise all or any substantial part of the business or assets of, or stock or
other evidence of beneficial ownership of, any Person.
7.7 CHANGES TO CERTAIN DOCUMENTS. Borrower shall not amend, restate,
----------------------------
supplement or otherwise modify (A) any term or provision of its articles of
incorporation or by-laws, or (B) any of the Formation Documents, except for any
of the foregoing which would not singly or in the aggregate have, in Lender's
good faith opinion (based upon reasonable commercial standards of fair dealing),
a material and adverse affect on (I) Borrower's ability to perform and satisfy
its obligations and liabilities under this Agreement or any of the other Loan
Documents or (II) any right or remedies of Lender under this Agreement or any of
the other Loan Documents and in any event (1) which would not result in any
increase in the amount of any payment or distribution by Borrower to any
Affiliate or member of Borrower restricted pursuant to the terms hereof,
including, without limitation, any Restricted Junior Payment and (2) are not
otherwise expressly prohibited by the terms of any of the Loan Documents.
Borrower shall not permit the LLC to amend, restate, supplement or otherwise
modify any provision of the documents related to the LLC Indebtedness; provided,
however that the foregoing shall not prevent any amendment, restatement,
supplement, modification or waiver which (A) does no more than extend the
maturity date of the LLC Indebtedness, or (B) would not singly or in the
aggregate have, in Lender's good faith opinion (based upon reasonable commercial
standards of fair dealing), a material and adverse affect on Borrower's ability
to perform and satisfy its obligations and liabilities under this Agreement or
any of the other Loan Documents.
7.8 TRANSACTIONS WITH AFFILIATES AND MEMBERS. Borrower shall not directly
----------------------------------------
or indirectly, enter into or permit to exist any transaction (including the
purchase, sale or exchange of property or the rendering of any service) with any
Affiliate or with any officer, director, employee or member of Borrower, except
for (A) the purchase of sugarbeets from Borrower's members, other than pursuant
to the terms of the contract attached hereto as Exhibit C, and (B) transactions
(other than the purchase of sugarbeets) in the ordinary course of and pursuant
to the reasonable requirements of Borrower's business and upon fair and
reasonable terms which are fully disclosed to Lender and which are no less
favorable to Borrower than it would obtain in a comparable arm's length
transaction with an unaffiliated Person.
7.9 ENVIRONMENTAL LIABILITIES. Borrower shall not: (A) violate any
-------------------------
applicable Environmental Law; (B) dispose of any Hazardous Materials (except in
accordance with applicable law) into or onto or from, any real property owned,
leased or operated by Borrower; or (C) permit any Lien imposed pursuant to any
Environmental Law to be imposed or to remain on any real property owned, leased
or operated by Borrower.
7.10 CONDUCT OF BUSINESS. From and after the Closing Date, Borrower shall
-------------------
not engage in any business other than businesses of the type engaged in by
Borrower on the Closing Date, or cease to conduct its operations or its business
for any reason. Borrower shall, and shall cause the LLC to, comply with all
provisions of the Formation Documents, and Borrower shall not permit the LLC to
take any action requiring consent of any member of the LLC pursuant to the
Company Agreement.
7.11 COMPLIANCE WITH ERISA. Borrower shall not establish any new Employee
---------------------
Benefit Plan or amend any existing Employee Benefit Plan if the liability or
increased liability resulting from such establishment or amendment is material.
Borrower shall not fail to establish, maintain and operate each Employee
Benefit Plan in compliance in all material respects with the provisions of
ERISA, the IRC and all other applicable laws and the regulations and
interpretations thereof.
7.12 TAX CONSOLIDATIONS. Borrower shall not file or consent to the filing
------------------
of any consolidated income tax return with any Person.
7.13 SUBSIDIARIES. Borrower shall not establish, create or acquire any new
------------
Subsidiaries.
7.14 FISCAL YEAR. Borrower shall not change its Fiscal Year.
-----------
7.15 PRESS RELEASE; PUBLIC OFFERING MATERIALS. Borrower shall not disclose
----------------------------------------
the name of Lender in any press release or in any prospectus, proxy statement or
other materials filed with any governmental entity relating to a public offering
of the capital stock of Borrower or any Subsidiary of Borrower.
7.16 BANK ACCOUNTS. Borrower shall not establish any new bank accounts, or
-------------
amend or terminate any Blocked Account or lockbox agreement without Lender's
prior written consent.
SECTION 8 DEFAULT, RIGHTS AND REMEDIES
8.1 EVENT OF DEFAULT. "EVENT OF DEFAULT" shall mean the occurrence or
----------------
existence of any one or more of the following:
(A) PAYMENT. Failure to make payment of any principal payment within
-------
3 Business Days following the due date or any failure to make payment of any
other Obligations within 5 days following the due date; or
(B) DEFAULT IN OTHER AGREEMENTS. (1) Failure of Borrower or any of
---------------------------
its Subsidiaries to pay when due any principal on any Indebtedness within 3
Business Days following the due date, or failure of Borrower or any of its
Subsidiaries to pay when due any interest on any Indebtedness within 5 days
following the due date, (2) breach or default of Borrower under the Guarantee,
or (3) breach or default of Borrower or any of its Subsidiaries with respect to
any Indebtedness; if such failure to pay, breach or default entitles the holder
to cause such Indebtedness having an individual principal amount in excess of
$50,000 or having an aggregate principal amount in excess of $100,000 to become
or be declared due prior to its stated maturity; or
(C) BREACH OF CERTAIN PROVISIONS. Failure of Borrower to perform or
----------------------------
comply with any term or condition contained in SUBSECTIONS 5.1 (A), (B) and (C),
5.3 or 5.5 or contained in SECTION 6 or SECTION 7; or
(D) BREACH OF WARRANTY. Any representation, warranty, certification
------------------
or other statement made by Borrower in any Loan Document or in any statement or
certificate at any time given by such Person in writing pursuant or in
connection with any Loan Document is false in any material respect on the date
made; or
(E) OTHER DEFAULTS UNDER LOAN DOCUMENTS. Borrower defaults in the
-----------------------------------
performance of or compliance with any term contained in this Agreement or the
other Loan Documents and such default is not remedied or waived within ten (10)
days after receipt by Borrower of notice from Lender of such default (other than
occurrences described in other provisions of this SUBSECTION 8.1 for which a
different grace or cure period is specified or which constitute immediate Events
of Default); or
(F) CHANGE IN CONTROL. A Change in Control shall occur; or
-----------------
(G) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) A
-----------------------------------------------------
court enters a decree or order for relief with respect to the Borrower or the
LLC or any of Borrower's Subsidiaries in an involuntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, which decree or order is not stayed or other similar
relief is not granted under any applicable federal or state law; or (2) the
continuance of any of the following events for ninety (90) days unless
dismissed, bonded or discharged: (A) an involuntary case is commenced against
the Borrower, the LLC or any of the Borrower's Subsidiaries, under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect; or (B) a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having similar
powers over the Borrower, the LLC or any of the LLC's Subsidiaries, or over all
or a substantial part of their respective property, is entered; or (C) an
interim receiver, trustee or other custodian is appointed without the consent of
the Borrower, the LLC or any of the Borrower's Subsidiaries, for all or a
substantial part of the property of the Borrower, the LLC or any such
Subsidiary; or
(H) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. (1) An order
---------------------------------------------------
for relief is entered with respect to the Borrower, the LLC or any of the
Borrower's Subsidiaries or the Borrower, the LLC or any of the Borrower's
Subsidiaries commences a voluntary case under the Bankruptcy Code or any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or consents to the entry of an order for relief in an involuntary case
or to the conversion of an involuntary case to a voluntary case under any such
law or consents to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its property; or (2)
the Borrower, the LLC or any of the Borrower's Subsidiaries makes any assignment
for the benefit of creditors; or (3) the board of directors of the Borrower or
any of its Subsidiaries (including the managers of the LLC) adopts any
resolution or otherwise authorizes action to approve any of the actions referred
to in this SUBSECTION 8.1(H); or
(I) LIENS. Any lien, levy or assessment is filed or recorded with
-----
respect to or otherwise imposed upon all or any part of the Collateral or the
assets of Borrower or any of its Subsidiaries (including the LLC) by the United
States or any department or instrumentality thereof or by any state, county,
municipality or other governmental agency (other than Permitted Encumbrances)
and such lien, levy or assessment is not stayed, vacated, paid or discharged
within ten (10) days; or
(J) JUDGMENT AND ATTACHMENTS. Any money judgment, writ or warrant of
------------------------
attachment, or similar process involving (1) an amount in any individual case in
excess of $25,000 or (2) an amount in the aggregate at any time in excess of
$50,000 (in either case not adequately covered by insurance as to which the
insurance company has acknowledged coverage) is entered or filed against
Borrower or any of its Subsidiaries (including the LLC) or any of their
respective assets and remains undischarged, unvacated, unbonded or unstayed for
a period of thirty (30) days or in any event later than five (5) days prior to
the date of any proposed sale thereunder; or
(K) DISSOLUTION. Any order, judgment or decree is entered against
-----------
Borrower or any of its Subsidiaries (including the LLC) decreeing the
dissolution or split up of Borrower or that Subsidiary and such order remains
undischarged or unstayed for a period in excess of twenty (20) days; or
(L) SOLVENCY. Borrower ceases to be solvent (as represented by
--------
Borrower in SUBSECTION 4.15) or admits in writing its present or prospective
inability to pay its debts as they become due; or
(M) INJUNCTION. Borrower or any of its Subsidiaries (including the
----------
LLC) is enjoined, restrained or in any way prevented by the order of any court
or any administrative or regulatory agency from conducting all or any material
part of its business and such order continues for more than thirty (30) days; or
(N) INVALIDITY OF LOAN DOCUMENTS. Any of the Loan Documents for any
----------------------------
reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void, or Borrower denies that it has any further liability under any Loan
Documents to which it is party, or gives notice to such effect; or
(O) FAILURE OF SECURITY. Lender does not have or ceases to have a
-------------------
valid and perfected first priority security interest in the Collateral (subject
to Permitted Encumbrances), in each case, for any reason other than the failure
of Lender to take any action within its control; or
(P) DAMAGE, STRIKE, CASUALTY. Any material damage to, or loss, theft
------------------------
or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than fifteen (15) consecutive days (or, in
the case of any strike, for more than thirty (30) consecutive days), the
cessation or substantial curtailment of revenue producing activities at any
facility of Borrower or any of its Subsidiaries (including the LLC) if any such
event or circumstance could reasonably be expected to have a Material Adverse
Effect; or
(Q) LICENSES AND PERMITS. The loss, suspension or revocation of, or
--------------------
failure to renew, any license or permit now held or hereafter acquired by
Borrower or any of its Subsidiaries, (including the LLC) if such loss,
suspension, revocation or failure to renew could reasonably be expected to have
a Material Adverse Effect; or
(R) TAX STATUS. The Borrower ceases to be an agricultural cooperative
----------
taxed as an association or partnership for federal and applicable state income
taxes.
8.2 ACCELERATION. Upon the occurrence of any Event of Default described
------------
in the foregoing SUBSECTIONS 8.1(G) or 8.1(H), all Obligations shall
automatically become immediately due and payable, without presentment, demand,
protest or other requirements of any kind, all of which are hereby expressly
waived by Borrower. Upon the occurrence and during the continuance of any other
Event of Default, Lender may, by written notice to Borrower, declare all or any
portion of the Obligations to be, and the same shall forthwith become,
immediately due and payable.
8.3 REMEDIES. If any Event of Default shall have occurred and be
--------
continuing, in addition to and not in limitation of any rights or remedies
available to Lender at law or in equity, Lender may exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and may also (A) notify any or all obligors on Accounts to make all
payments directly to Lender; (B) require Borrower to, and Borrower hereby agrees
that it will, at its expense and upon request of Lender forthwith, assemble all
or part of the Collateral as directed by Lender and make it available to Lender
at a place to be designated by Lender which is reasonably convenient to both
parties; (C) withdraw all cash in the Blocked Accounts and apply such monies in
payment of the Obligations in the manner provided in SUBSECTION 8.6; (D) without
notice or demand or legal process, enter upon any premises of Borrower and take
possession of the Collateral; and (E) without notice except as specified below,
sell the Collateral or any part thereof in one or more parcels at public or
private sale, at any of the Lender's offices or elsewhere, at such time or
times, for cash, on credit or for future delivery, and at such price or prices
and upon such other terms as Lender may deem commercially reasonable. Borrower
agrees that, to the extent notice of sale shall be required by law, at least ten
(10) days notice to Borrower of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. At any sale of the Collateral, if permitted by law, Lender may
bid (which bid may be, in whole or in part, in the form of cancellation of
indebtedness) for the purchase of the Collateral or any portion thereof for the
account of Lender. Lender shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. Borrower shall remain liable
for any deficiency. Lender may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. To the extent permitted by law, Borrower hereby specifically waives
all rights of redemption, stay or appraisal which it has or may have under any
law now existing or hereafter enacted. Lender shall not be required to proceed
against any Collateral but may proceed against Borrower directly. Borrower
agrees that, in view of the nature of the Collateral, the foregoing is
commercially reasonable.
8.4 APPOINTMENT OF ATTORNEY-IN-FACT. Borrower hereby constitutes and
-------------------------------
appoints Lender as Borrower's attorney-in-fact with full authority in the place
and stead of Borrower and in the name of Borrower, Lender or otherwise, from
time to time in Lender's discretion to take any action and to execute any
instrument that Lender may deem necessary or advisable to accomplish the
purposes of this Agreement, including, (A) to ask, demand, collect, xxx for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any of the Collateral; (B) to adjust,
settle or compromise the amount or payment of any Account, or release wholly or
partly any customer or obligor thereunder or allow any credit or discount
thereon; (C) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with CLAUSE (A) above; (D) to file
any claims or take any action or institute any proceedings that Lender may deem
necessary or desirable for the collection of any of the Collateral or otherwise
to enforce the rights of Lender with respect to any of the Collateral; and (E)
to sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, assignments, verifications and notices in
connection with Accounts and other documents relating to the Collateral. The
appointment of Lender as Borrower's attorney and Lender's rights and powers are
coupled with an interest and are irrevocable until payment in full and complete
performance of all of the Obligations.
8.5 LIMITATION ON DUTY OF LENDER WITH RESPECT TO COLLATERAL. Beyond the
-------------------------------------------------------
safe custody thereof, Lender shall have no duty with respect to any Collateral
in its possession or control (or in the possession or control of any agent or
bailee) or with respect to any income thereon or the preservation of rights
against prior parties or any other rights pertaining thereto. Lender shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which Lender accords its own property. Lender shall
not be liable or responsible for any loss or damage to any of the Collateral, or
for any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by Lender in good faith.
8.6 APPLICATION OF PROCEEDS. Upon the occurrence and during the
-----------------------
continuance of an Event of Default, (A) Borrower irrevocably waives the right to
direct the application of any and all payments at any time or times thereafter
received by Lender from or on behalf of Borrower, and Borrower hereby
irrevocably agrees that Lender shall have the continuing exclusive right to
apply and to reapply any and all payments received at any time or times after
the occurrence and during the continuance of an Event of Default against the
Obligations in such manner as Lender may deem advisable notwithstanding any
previous entry by Lender upon any books and records and (B) the proceeds of any
sale of, or other realization upon, all or any part of the Collateral shall be
applied: FIRST, to all fees, costs and expenses incurred by Lender with respect
to this Agreement, the other Loan Documents or the Collateral; SECOND, to all
fees due and owing to Lender; THIRD, to accrued and unpaid interest on the
Obligations; FOURTH, to the principal amounts of the Obligations outstanding;
and FIFTH, to any other indebtedness or obligations of Borrower owing to Lender.
8.7 LICENSE OF INTELLECTUAL PROPERTY. Borrower hereby assigns, transfers
--------------------------------
and conveys to Lender, effective upon the occurrence of any Event of Default
hereunder, the non-exclusive right and license to use all Intellectual Property
owned or used by Borrower together with any goodwill associated therewith, all
to the extent necessary to enable Lender to realize on the Collateral and any
successor or assign to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of all successors, assigns and transferees of
Lender and its successors, assigns and transferees, whether by voluntary
conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise. Such right and license is granted free of charge,
without requirement that any monetary payment whatsoever be made to Borrower by
Lender.
8.8 WAIVERS, NON-EXCLUSIVE REMEDIES. No failure on the part of Lender to
-------------------------------
exercise, and no delay in exercising and no course of dealing with respect to,
any right under this Agreement or the other Loan Documents shall operate as a
waiver thereof; nor shall any single or partial exercise by Lender of any right
under this Agreement or any other Loan Document preclude any other or further
exercise thereof or the exercise of any other right. The rights in this
Agreement and the other Loan Documents are cumulative and are not exclusive of
any other remedies provided by law.
SECTION 9 MISCELLANEOUS
9.1 ASSIGNMENTS AND PARTICIPATIONS. Lender may assign its rights and
------------------------------
delegate its obligations under this Agreement and further may assign, or sell
participations in, all or any part of the Loans, the Notes or any other interest
herein to an affiliate or to another Person. In the case of an assignment
authorized under this SUBSECTION 9.1, the assignee shall have, to the extent of
such assignment, the same rights, benefits and obligations as it would if it
were a Lender hereunder. Borrower hereby acknowledges and agrees that any
assignment will give rise to a direct obligation of Borrower to the assignee and
that the assignee shall be considered to be a "Lender". Lender may furnish any
information concerning Borrower and its Subsidiaries in its possession from time
to time to assignees and participants (including prospective assignees and
participants).
9.2 SET OFF. In addition to any rights now or hereafter granted under
-------
applicable law and not by way of limitation of any such rights, upon the
occurrence of any Event of Default, Lender, each assignee of Lender's interest,
and each participant is hereby authorized by Borrower at any time or from time
to time, without notice to Borrower or to any other Person, any such notice
being hereby expressly waived, to set off and to appropriate and to apply any
and all balances held by it at any of its offices for the account of Borrower or
any of its Subsidiaries (regardless of whether such balances are then due to
Borrower or its Subsidiaries) and any other property at any time held or owing
by that Lender or assignee to or for the credit or for the account of Borrower
against and on account of any of the Obligations then outstanding; provided,
that no participant shall exercise such right without the prior written consent
of Lender.
Borrower hereby agrees, to the fullest extent permitted by law, that any
Lender, assignee or participant may exercise its right of setoff with respect to
amounts in excess of its pro rata share of the Obligations (or, in the case of a
participant, in excess of its pro rata participation interest in the
Obligations) and that such Lender, assignee or participant, as the case may be,
shall be deemed to have purchased for cash in the amount of such excess,
participations in each other Lender's or holder's share of the Obligations.
9.3 EXPENSES AND ATTORNEYS' FEES. Whether or not the transactions
----------------------------
contemplated hereby shall be consummated, Borrower agrees to promptly pay all
fees, costs and expenses incurred by Lender in connection with any matters
contemplated by or arising out of this Agreement or the other Loan Documents
including the following, and all such fees, costs and expenses shall be part of
the Obligations, payable on demand and secured by the Collateral: (A)
reasonable fees, costs and expenses (including attorneys' fees, allocated costs
of internal counsel and fees of environmental consultants, accountants and other
professionals retained by Lender) incurred in connection with the administration
of the Loan Documents, the Loans, and any amendments, waivers, consents,
forbearances and other modifications relating thereto or any subordination or
intercreditor agreements; (B) reasonable fees, costs and expenses incurred in
creating, perfecting and maintaining perfection of Liens in favor of Lender; (C)
fees, costs, expenses and bank charges, including bank charges for returned
checks, incurred by Lender in establishing, maintaining and handling lock box
accounts, blocked accounts or other accounts for collection of the Collateral;
and (D) reasonable fees, costs, expenses (including attorneys' fees and
allocated costs of internal counsel) and costs of settlement incurred in
collecting upon or enforcing rights against the Collateral or incurred in any
action to enforce this Agreement or the other Loan Documents or to collect any
payments due from Borrower under this Agreement or any other Loan Document or
incurred in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement, whether in the nature of a "workout"
or in connection with any insolvency or bankruptcy proceedings or otherwise.
9.4 INDEMNITY. In addition to the payment of expenses pursuant to
---------
SUBSECTION 9.3, whether or not the transactions contemplated hereby shall be
consummated, Borrower agrees to indemnify, pay and hold Lender, and the
officers, directors, employees, agents, consultants, auditors, persons engaged
by Lender to evaluate or monitor the Collateral, affiliates and attorneys of
Lender and such holders (collectively called the "INDEMNITIES") harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including the reasonable fees and disbursements of counsel
for such Indemnities in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not such Indemnitee
shall be designated a party thereto) that may be imposed on, incurred by, or
asserted against that Indemnitee, in any manner relating to or arising out of
this Agreement or the other Loan Documents, the consummation of the transactions
contemplated by this Agreement, the statements contained in the letters of
intent and commitment letters, if any, delivered by Lender, Lender's agreement
to make the Loans hereunder, the use or intended use of the proceeds of any of
the Loans or the exercise of any right or remedy hereunder or under the other
Loan Documents (the "INDEMNIFIED LIABILITIES"); provided that Borrower shall
--------
have no obligation to an Indemnitee hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of that
Indemnitee as determined by a court of competent jurisdiction.
9.5 AMENDMENTS AND WAIVERS. This Agreement together with the other Loan
----------------------
Documents constitutes the entire agreement between Lender and Borrower, and no
amendment, modification, termination or waiver of any provision of this
Agreement or of the other Loan Documents, or consent to any departure by
Borrower therefrom, shall be effective unless the same shall be in writing and
signed by Lender and Borrower. Each amendment, modification, termination or
waiver shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.6 NOTICES. Unless otherwise specifically provided herein, all notices
-------
shall be in writing addressed to the respective party as set forth below and may
be personally served, telecopied or sent by overnight courier service or United
States mail and shall be deemed to have been given: (A) if delivered in person,
when delivered; (B) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. (Dallas time) or, if not, on the
next succeeding Business Day; (C) if delivered by overnight courier, two days
after delivery to such courier properly addressed; or (D) if by U.S. Mail, four
Business Days after depositing in the United States mail, with postage prepaid
and properly addressed:
If to Borrower: SNAKE RIVER SUGAR COMPANY
000 Xxxx Xxxxxx
Xxxxx, Xxxxxx 00000
Attn: Chairman
Telecopy No.:
--------------
With a copy to: Jones, Waldo, Xxxxxxxx & XxXxxxxxx
0000 Xxxxx Xxxxxxxxxx Xxxxx
000 Xxxxx Xxxx Xxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attn: Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
If to Lender: VALHI, INC.
Three Lincoln Centre
Suite 1700
0000 XXX Xxxxxxx
Xxxxxx, Xxxxx 00000
Attn: General Counsel
Telecopy No.: (000) 000-0000
With a copy to: BARTLIT XXXX XXXXXX XXXXXXXXX & XXXXX
000 00xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx
Telecopy No.: (000) 000-0000
or to such other address as the party addressed shall have previously designated
by written notice to the serving party, given in accordance with this SUBSECTION
9.6.
9.7 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
---------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the making of the Loans hereunder.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower set forth in SUBSECTIONS 9.3 AND 9.4 shall survive
the payment of the Loans and the termination of this Agreement.
9.8 INDULGENCE NOT WAIVER. No failure or delay on the part of Lender in
---------------------
the exercise of any power, right or privilege, or any course of dealing between
the Borrower and Lender, shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.
9.9 MARSHALING; PAYMENTS SET ASIDE. Lender shall not be under any
------------------------------
obligation to marshal any assets in favor of Borrower or any other party or
against or in payment of any or all of the Obligations. To the extent that
Borrower makes a payment or payments to Lender or Lender enforces its security
interests or exercise its rights of setoff, and such payment or payments or the
proceeds of such enforcement or setoff or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, rights and remedies therefor, shall be revived and
continued in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
9.10 ENTIRE AGREEMENT. This Agreement, each Note, and the other Loan
----------------
Documents embody the final, entire agreement among the parties hereto and
supersede any and all prior commitments, agreements, representations, and
understandings, whether written or oral, relating to the subject matter hereof
and may not be contradicted or varied by evidence of prior, contemporaneous, or
subsequent oral agreements or discussions of the parties hereto. There are no
oral agreements among the parties hereto.
9.11 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
-------------------------
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
9.12 SEVERABILITY. The invalidity, illegality or unenforceability in any
------------
jurisdiction of any provision in or obligation under this Agreement or the other
Loan Documents shall not affect or impair the validity, legality or
enforceability of the remaining provisions or obligations under this Agreement,
or the other Loan Documents or of such provision or obligation in any other
jurisdiction.
9.13 HEADINGS. Section and subsection headings in this Agreement are
--------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.
9.14 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
--------------
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
UTAH, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.15 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns except that Borrower may not assign its rights or obligations hereunder
without the prior written consent of Lender.
9.16 NO FIDUCIARY RELATIONSHIP; LIMITATION OF LIABILITIES.
----------------------------------------------------
(A) No provision in this Agreement or in any of the other Loan
Documents and no course of dealing between the parties shall be deemed to create
any fiduciary duty by Lender to Borrower.
(B) Neither Lender, nor any affiliate, officer, director,
shareholder, employee, attorney, or agent of Lender shall have any liability
with respect to, and Borrower hereby waives, releases, and agrees not to xxx any
of them upon, any claim for any special, indirect, incidental, or consequential
damages suffered or incurred by Borrower in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or any
of the transactions contemplated by this Agreement or any of the other Loan
Documents. Borrower hereby waives, releases, and agrees not to xxx Lender or
any of Lender's affiliates, officers, directors, employees, attorneys, or agents
for punitive damages in respect of any claim in connection with, arising out of,
or in any way related to, this Agreement or any of the other Loan Documents, or
any of the transactions contemplated by this Agreement or any of the
transactions contemplated hereby.
9.17 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE JURISDICTION
-----------------------
OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF DALLAS, STATE OF
TEXAS AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE TERM NOTE OR THE
OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE TERM NOTE, THE OTHER
LOAN DOCUMENTS OR THE OBLIGATIONS.
9.18 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY WAIVE THEIR
--------------------
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS. BORROWER
AND LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A
BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING
INTO THIS AGREEMENT, THE NOTES AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL
CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER AND
LENDER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
9.19 CONSTRUCTION. Borrower and Lender each acknowledge that it has had the
------------
benefit of legal counsel of its own choice and has been afforded an opportunity
to review this Agreement and the other Loan Documents with its legal counsel and
that this Agreement and the other Loan Documents shall be construed as if
jointly drafted by Borrower and Lender.
9.20 COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendments,
---------------------------
waivers, consents, or supplements may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.
9.21 NO DUTY. All attorneys, accountants, appraisers, and other
-------
professional Persons and consultants retained by Lender shall have the right to
act exclusively in the interest of Lender and shall have no duty of disclosure,
duty of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to Borrower or any other Person.
Witness the due execution hereof by the respective duly authorized officers
of the undersigned as of the date first written above.
SNAKE RIVER SUGAR COMPANY
By:
---------------------
Title:
------------------
FEIN:
-------------------
VALHI, INC.
By:
----------------------
