EXECUTION COPY
CONTINGENT SUBORDINATE SECURITY AGREEMENT
This CONTINGENT SUBORDINATE SECURITY AGREEMENT (this "Agreement") is
dated as of October19, 2000 and entered into by and between SNAKE RIVER SUGAR
COMPANY, an Oregon cooperative ("Grantor"), and VALHI, INC., a Delaware
Corporation ("Secured Party") and is acknowledged by FIRST SECURITY BANK,
NATIONAL ASSOCIATION, as Collateral Agent for the holders of the Senior Notes
referred to below ("FSB"), and the holders of said Senior Notes.
PRELIMINARY STATEMENTS
A. Pursuant to those certain Note Purchase Agreements (said Note
Purchase Agreements as they may hereafter be amended, the "Note Purchase
Agreements"), each dated May 14, 1997 and amended as of November 30, 1998,
between Grantor and the purchasers referred to therein, Grantor has issued
$100,000,000 aggregate principal amount of its 10.80% Senior Notes due April 30,
2009 (said Senior Notes, as they may hereafter be amended, supplemented or
otherwise modified from time to time, being the "Senior Notes," and together
with the debt associated therewith, the "Senior Debt").
B. Pursuant to the Collateral Agency and Paying Agency Agreement, dated
as of May 14, 1997, among the holders of the Senior Notes and FSB (the "Agency
Agreement"), the holders of the Senior Notes have appointed FSB to act as
Collateral Agent for the holders of the Senior Notes.
C. In connection with the Note Purchase Agreements, Grantor and FSB
have entered into a Security Agreement dated as of May 14, 1997 (the "Security
Agreement") and a related Pledge Agreement dated May 14, 1997 (the "SR Pledge
Agreement") whereby Grantor has pledged the Collateral (as defined below) to
FSB, as Collateral Agent, for the holders of the Senior Notes.
D. Grantor and Secured Party are parties to a Subordinated Loan
Agreement dated January 3, 1997, as amended and restated May 14, 1997 and
amended as of November 30, 1998, (said Subordinated Loan Agreement, as it may
hereafter be amended, supplemented or otherwise modified from time to time,
being the "Subordinated Loan Agreement").
E. Grantor desires that certain further amendments be made to the
Subordinated Loan Agreement.
F. It is a condition precedent to the amendment of even date herewith
to the Subordinated Loan Agreement (the "Third Amendment") that Grantor shall
have undertaken the obligations and granted the contingent, subordinate security
interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Secured Party to enter into the Third Amendment and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Grantor hereby agrees with Secured Party as follows:
SECTION 1. Certain Definitions. Terms defined in the Subordinated Loan Agreement
and not otherwise defined herein are used herein as therein defined.
SECTION 2. Grant of Contingent Subordinate Security Interest. Immediately upon
the occurrence of the earliest to occur of the following (the "Grant
Effectiveness Condition"): (i) the full payment of the Secured Obligations, as
defined in the Security Agreement (the "Senior Secured Obligations"), (ii) the
date upon which Secured Party purchases all of the Senior Notes upon an exercise
of its rights under all of those certain Option Agreements between Secured
Party, Grantor and the holders of the Senior Notes, and (iii) the date at which
the outstanding balance of the Senior Secured Obligations is less than the
amount of cash or cash equivalents contained in the Distributable Cash
Collateral Account, as such term is defined in the Note Purchase Agreements, and
such cash or cash equivalents have been irrevocably and indefeasibly dedicated
by Grantor to, and are available solely for (as evidenced by a written
certificate from Grantor to the holders of the Senior Notes, acknowledged by
Secured Party) payment of the Senior Secured Obligations at the sole and
absolute discretion of the holders of the Senior Notes, Grantor will assign to
Secured Party, and hereby grants to Secured Party a contingent subordinate
security interest in, all of Grantor's right, title and interest in and to the
following (which assignment shall be effective only upon the occurrence of a
Grant Effectiveness Condition), in each case whether now or hereafter existing
or in which Grantor now has or hereafter acquires an interest and wherever the
same may be located (the "Collateral"):
(a) all equipment in all of its forms, all parts thereof and all accessions
thereto (any and all such equipment, parts and accessions being the
"Equipment");
(b) all inventory in all of its forms (including, but not limited to, (i) all
goods held by Grantor for sale or lease or to be furnished under contracts of
service or so leased or furnished, (ii) all raw materials, work in process,
finished goods, and materials used or consumed in the manufacture, packing,
shipping, advertising, selling, leasing, furnishing or production of such
inventory or otherwise used or consumed in Grantor's business, (iii) all goods
in which Grantor has an interest in mass or a joint or other interest or right
of any kind and (iv) all goods which are returned to or repossessed by Grantor)
and all accessions thereto and products thereof (all such inventory, accessions
and products being the "Inventory") and all negotiable documents of title
(including without limitation warehouse receipts, dock receipts and bills of
lading) issued by any Person covering any Inventory;
(c) all accounts, contract rights, chattel paper, documents, instruments,
general intangibles and other rights and obligations of any kind arising out of
or in connection with the sale or lease of goods or the rendering of services
and all rights in, to and under all security agreements, leases and other
contracts securing or otherwise relating to any such accounts, contract rights,
chattel paper, documents, instruments, general intangibles or other obligations,
excluding, however, accounts receivable from The Amalgamated Sugar Company LLC
("LLC") arising from the sale of sugarbeets from Grantor to LLC (any and all
such accounts, contract rights, chattel paper, documents, instruments, general
intangibles and other obligations being the "Accounts", and any and all such
security agreements, leases and other contracts being the "Related Contracts");
(d) all agreements and contracts with growers of sugarbeets or with other
Persons relating to the purchase by Grantor of sugarbeets, as each such
agreement may be amended, supplemented or otherwise modified from time to time
(said agreements, as so amended, supplemented or otherwise modified, being
referred to herein individually as an "Assigned Agreement" and collectively as
the "Assigned Agreements"), including without limitation (i) all rights of
Grantor to receive farm products (including sugarbeets) and moneys due or to
become due under or pursuant to the Assigned Agreements, (ii) all rights of
Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty
with respect to the Assigned Agreements, (iii) all claims of Grantor for damages
arising out of any breach of or default under the Assigned Agreements, and (iv)
all rights of Grantor to terminate, amend, supplement, modify or exercise rights
or options under the Assigned Agreements, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder;
(e) all deposit accounts;
(f) all trademarks, tradenames, tradesecrets, business names, patents, patent
applications, licenses, copyrights, registrations and franchise rights, and all
goodwill associated with any of the foregoing;
(g) to the extent not included in any other paragraph of this Section 2, all
other general intangibles (including without limitation tax refunds, rights to
payment or performance, choses in action and judgments taken on any rights or
claims included in the Collateral);
(h) all plant fixtures, business fixtures and other fixtures and storage and
office facilities, and all accessions thereto and products thereof;
(i) 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 Collateral or are otherwise necessary
or helpful in the collection thereof or realization thereupon; and
(j) all proceeds, products, rents and profits of or from any and all of the
foregoing Collateral and, to the extent not otherwise included, all payments
under insurance (whether or not the Secured Party is the loss payee thereof), or
any indemnity, warranty or guaranty, payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Collateral. For purposes of this
Agreement, the term "proceeds" includes whatever is receivable or received when
Collateral or proceeds are sold, exchanged, collected or otherwise disposed of,
whether such disposition is voluntary or involuntary.
SECTION 3. Security for Obligations. Following occurrence of the Grant
Effectiveness Condition, this Agreement shall secure, and the Collateral will be
collateral security for, the prompt payment or performance in full when due,
whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise (including the payment of amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the Bankruptcy
Code, 11 U.S.C. ss.362(a)), of all obligations and liabilities of every nature
of Grantor now or hereafter existing under or arising out of or in connection
with the Subordinated Loan Agreement and the other Loan Documents, and all
extensions or renewals thereof, whether for principal, interest (including
without limitation interest that, but for the filing of a petition in bankruptcy
with respect to Grantor, would accrue on such obligations), fees, expenses,
indemnities or otherwise, whether voluntary or involuntary, direct or indirect,
absolute or contingent, liquidated or unliquidated, whether or not jointly owed
with others, and whether or not from time to time decreased or extinguished and
later increased, created or incurred, and all or any portion of such obligations
or liabilities that are paid, to the extent all or any part of such payment is
avoided or recovered directly or indirectly from Secured Party as a preference,
fraudulent transfer or otherwise (all such obligations and liabilities being the
"Underlying Debt"), and all obligations of every nature of Grantor now or
hereafter existing under this Agreement (all such obligations of Grantor,
together with the Underlying Debt, being the "Secured Obligations").
SECTION 4. Grantor Remains Liable. Anything contained herein to the contrary
notwithstanding, (a) Grantor shall remain liable under any contracts and
agreements included in the Collateral, to the extent set forth therein, to
perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by Secured Party of any
of its rights hereunder shall not release Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) Secured Party shall not have any obligation or liability under any contracts
and agreements included in the Collateral by reason of this Agreement, nor shall
Secured Party be obligated to perform any of the obligations or duties of
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder.
SECTION 5. Representations and Warranties. Grantor represents and warrants as
follows: ------------------------------
(a) Ownership of Collateral. Except for (i) the security interests created by
the Security Agreement and the contingent, subordinate security interest
pursuant to this Agreement and (ii) Liens created, incurred, assumed or
permitted to exist pursuant to the Note Purchase Agreements, the Subordinated
Loan Agreement or documents related thereto, Grantor owns the Collateral free
and clear of any Lien. Except such as may have been filed in favor of FSB
relating to the Security Agreement or Secured Party relating to this Agreement
or such as shall be released in connection with the execution of this Agreement,
no effective financing statement or other instrument similar in effect covering
all or any part of the Collateral is on file in any filing or recording office.
(b) Location of Equipment and Inventory. All of the Equipment and Inventory is,
as of the date hereof, located at Grantor's chief place of business.
(c) Office Locations: Other Names. The chief place of business, the chief
executive office and the office where Grantor keeps its records regarding the
Accounts and all originals of all chattel paper that evidence Accounts is
located at 0000 Xxxxxxx Xxxxxx, Xxxxx, Xxxx 00000. Grantor has not in the past
done, and does not now do, business under any other name (including any
trade-name or fictitious business name).
(d) Delivery of Certain Collateral. All notes and other instruments (excluding
checks) comprising any and all items of Collateral have been delivered to FSB
duly endorsed and accompanied by duly executed instruments of transfer or
assignment in blank.
(e) Governmental Authorizations. No authorization, approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for either (i) the grant by Grantor of the contingent, subordinate
security interest granted hereby, (ii) the execution, delivery or performance of
this Agreement by Grantor, or (iii) the perfection of or the exercise by Secured
Party of its rights and remedies hereunder (except as may have been taken by or
at the direction of Grantor).
(f) Perfection. Following occurrence of the Grant Effectiveness Condition, this
Agreement, together with the filing of UCC-1 Financing Statements with the
Secretary of State (or Department of Business Regulation, if applicable) of the
states of Utah, Idaho, Oregon and Washington, will create a valid, perfected
subordinate security interest in the Collateral, securing the payment of the
Secured Obligations, and all filings and other actions necessary or desirable to
perfect and protect such subordinate security interest will have been duly made
or taken.
(g) Other Information. All information heretofore, herein or hereafter supplied
to Secured Party by or on behalf of Grantor with respect to the Collateral is
accurate and complete in all material respects.
SECTION 6. Further Assurances.
(a) Grantor agrees that from time to time, including without limitation
following occurrence of the Grant Effectiveness Condition, at the expense of
Grantor, Grantor will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that Secured Party may request, in order to perfect and protect any contingent
or present security interest granted or purported to be granted hereby or to
enable Secured Party to exercise and enforce its rights and remedies hereunder
with respect to any Collateral. Without limiting the generality of the
foregoing, following occurrence of the Grant Effectiveness Condition, Grantor
will: (i) xxxx conspicuously each item of chattel paper included in the Accounts
and, at the request of Secured Party, each of its records pertaining to the
Collateral with a legend, in form and substance satisfactory to Secured Party,
indicating that such Collateral is subject to the subordinate security interest
granted hereby, (ii) at the request of Secured Party, deliver and pledge to
Secured Party hereunder all promissory notes and other instruments (including
checks) and all original counterparts of chattel paper constituting Collateral,
duly endorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to Secured Party, (iii)
execute and file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Secured Party may request, in order to perfect and preserve the
security interests granted or purported to be granted hereby, (iv) promptly
after the acquisition by Grantor of any item of Equipment which is covered by a
certificate of title under a statute of any jurisdiction under the law of which
indication of a security interest on such certificate is required as a condition
of perfection thereof, execute and file with the registrar of motor vehicles or
other appropriate authority in such jurisdiction an application or other
document requesting the notation or other indication of the security interest
created hereunder on such certificate of title, (v) within 30 days after the end
of each calendar quarter, deliver to Secured Party or its agent copies of all
such applications or other documents filed during such calendar quarter and
copies of all such certificates of title issued during such calendar quarter
indicating the security interest created hereunder in the items of Equipment
covered thereby, (vi) at any reasonable time, upon request by Secured Party,
exhibit the Collateral to and allow inspection of the Collateral by Secured
Party, or persons designated by Secured Party, and (vii) at Secured Party's
request, appear in and defend any action or proceeding that may affect Grantor's
title to or Secured Party's security interest in all or any part of the
Collateral.
(b) Grantor hereby authorizes Secured Party, following occurrence of the Grant
Effectiveness Condition, to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the
Collateral without the signature of Grantor. Grantor agrees that, following
occurrence of the Grant Effectiveness Condition, a carbon, photographic or other
reproduction of this Agreement or of a financing statement signed by Grantor
shall be sufficient as a financing statement and may be filed as a financing
statement in any and all jurisdictions.
(c) Grantor will furnish to Secured Party from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as Secured Party may reasonably
request, all in reasonable detail.
SECTION 7. Certain Covenants of Grantor. Following occurrence of the Grant
Effectiveness Condition, Grantor shall:
(a) not use or permit any Collateral to be used unlawfully or in violation of
any provision of this Agreement or any applicable statute, regulation or
ordinance or any policy of insurance covering the Collateral;
(b) notify Secured Party of any change in Grantor's name, identity or corporate
structure within 15 days of such change;
(c) give Secured Party 30 days' prior written notice of any change in Grantor's
chief place of business, chief executive office or residence or the office where
Grantor keeps its records regarding the Accounts and all originals of all
chattel paper that evidence Accounts;
(d) if Secured Party gives value to enable Grantor to acquire rights in or the
use of any Collateral, use such value for such purposes; and
(e) pay promptly when due all property and other taxes, assessments and
governmental charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Collateral, except to the extent
the validity thereof is being contested in good faith; provided that Grantor
shall in any event pay such taxes, assessments, charges, levies or claims not
later than five days prior to the date of any proposed sale under any judgement,
writ or warrant of attachment entered or filed against Grantor or any of the
Collateral as a result of the failure to make such payment.
SECTION 8. Special Covenants With Respect to Equipment and Inventory. Following
occurrence of the Grant Effectiveness Condition, Grantor shall:
(a) keep the Equipment and Inventory at 0000 Xxxxxxx Xxxxxx, Xxxxx, Xxxx 00000
or, upon 30 days' prior written notice to Secured Party, at such other places in
jurisdictions where all action that may be necessary or desirable, or that
Secured Party may request, in order to perfect and protect any contingent or
present security interest granted or purported to be granted hereby, or to
enable Secured Party to exercise and enforce its rights and remedies hereunder,
with respect to such Equipment and Inventory shall have been taken; and
(b) cause any and all Equipment to be maintained and kept in good condition,
repair and working order, ordinary wear and tear excepted, and in accordance
with reasonable commercial practices, and shall forthwith, or, in the case of
any loss or damage to any of the Equipment when subsection (c) of Section 9 is
not applicable, as quickly as practicable after the occurrence thereof, make or
cause to be made all repairs, replacements and other improvements in connection
therewith that are necessary or desirable to such end. Grantor shall promptly
furnish to Secured Party a statement respecting any material loss or damage to
any of the Equipment.
SECTION 9. Insurance.
(a) Following occurrence of the Grant Effectiveness Condition, and following the
date upon which the book value of any of Grantor's Equipment and/or Inventory
exceeds $250,000, Grantor shall, at its own expense, maintain insurance with
respect to the Equipment and Inventory in accordance with the terms of the
Subordinated Loan Agreement. Such insurance shall include, without limitation,
property damage insurance and liability insurance. Each policy for property
damage insurance shall provide for all losses (except for losses of less than $
250,000 per occurrence) to be paid directly to Secured Party. Each policy shall
in addition name Grantor and Secured Party as insured parties thereunder
(without any representation or warranty by or obligation upon Secured Party) as
their interests may appear and have attached thereto a loss payable clause
acceptable to Secured Party that shall (i) contain an agreement by the insurer
that any loss thereunder shall be payable to Secured Party notwithstanding any
action, inaction or breach of representation or warranty by Grantor, (ii)
provide that there shall be no recourse against Secured Party for payment of
premiums or other amounts with respect thereto, and (iii) provide that at least
30 days' prior written notice of cancellation, material amendment, reduction in
scope or limits of coverage or of lapse shall be given to Secured Party by the
insurer. Grantor shall, if so requested by Secured Party, deliver to Secured
Party original or duplicate policies of such insurance and, as often as Secured
Party may reasonably request, a report of a reputable insurance broker with
respect to such insurance. Further, Grantor shall, at the request of Secured
Party, duly execute and deliver instruments of assignment of such insurance
policies to comply with the requirements of Section 6(a) and cause the
respective insurers to acknowledge notice of such assignment.
(b) Following occurrence of the Grant Effectiveness Condition, reimbursement
under any liability insurance maintained by Grantor pursuant to this Section 9
may be paid directly to the Person who shall have incurred liability covered by
such insurance. In case of any loss involving damage to Equipment or Inventory
when subsection (c) of this Section 9 is not applicable, Grantor shall make or
cause to be made the necessary repairs to or replacements of such Equipment or
Inventory, and any proceeds of insurance maintained by Grantor pursuant to this
Section 9 shall be paid to Grantor as reimbursement for the costs of such
repairs or replacements.
(c) Following occurrence of the Grant Effectiveness Condition, upon (i) the
occurrence and during the continuation of any Event of Default or (ii) the
actual or constructive loss (in excess of $250,000 per occurrence) of any
Equipment or Inventory, all insurance payments in respect of such Equipment or
Inventory shall be paid to and applied by Secured Party as specified in Section
19.
SECTION 10. Special Covenants with Respect to Accounts and Related Contracts.
(a) Following occurrence of the Grant Effectiveness Condition, Grantor shall
keep its chief place of business and chief executive office and the office where
it keeps its records concerning the Accounts and Related Contracts, and all
originals of all chattel paper that evidence Accounts, at the location therefor
specified in Section 5 or, upon 30 days' prior written notice to Secured Party,
at such other location in a jurisdiction where all action that may be necessary
or desirable, or that Secured Party may request, in order to perfect and protect
any security interest granted or purported to be granted hereby, or to enable
Secured Party to exercise and enforce its rights and remedies hereunder, with
respect to such Accounts and Related Contracts shall have been taken. Grantor
will hold and preserve such records and chattel paper and will permit
representatives of Secured Party at any time during normal business hours to
inspect and make abstracts from such records and chattel paper, and Grantor
agrees to render to Secured Party, at Grantor's cost and expense, such clerical
and other assistance as may be reasonably requested with regard thereto.
Promptly upon the request of Secured Party, Grantor shall deliver to Secured
Party complete and correct copies of each Related Contract.
(b) Following occurrence of the Grant Effectiveness Condition, Grantor shall,
for not less than 5 years from the date on which such Account arose, maintain
(i) complete records of each Account, including records of all payments
received, credits granted and merchandise returned, and (ii) all documentation
relating thereto.
(c) Following occurrence of the Grant Effectiveness Condition, except as
otherwise provided in this subsection (c), Grantor shall continue to collect, at
its own expense, all amounts due or to become due to Grantor under the Accounts
and Related Contracts. In connection with such collections, Grantor may take
(and, at Secured Party's direction, shall take) such action as Grantor or
Secured Party may deem necessary or advisable to enforce collection of amounts
due or to become due under the Accounts; provided, however, that Secured Party
shall have the right at any time, upon the occurrence and during the
continuation of an Event of Default or an event that, with the giving of notice
or the lapse of time, or both, would become an Event of Default and upon written
notice to Grantor of its intention to do so, to notify the account debtors or
obligors under any Accounts of the assignment of such Accounts to Secured Party
and to direct such account debtors or obligors to make payment of all amounts
due or to become due to Grantor thereunder directly to Secured Party, to notify
each Person maintaining a lockbox or similar arrangement to which account
debtors or obligors under any Accounts have been directed to make payment to
remit all amounts representing collections on checks and other payment items
from time to time sent to or deposited in such lockbox or other arrangement
directly to Secured Party and, upon such notification and at the expense of
Grantor, to enforce collection of any such Accounts and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as Grantor might have done. After receipt by Grantor of the notice from
Secured Party referred to in the proviso to the preceding sentence, (i) all
amounts and proceeds (including checks and other instruments) received by
Grantor in respect of the Accounts and the Related Contracts shall be received
in trust for the benefit of Secured Party hereunder, shall be segregated from
other funds of Grantor and shall be forthwith paid over or delivered to Secured
Party in the same form as so received (with any necessary endorsement) to be
held as cash Collateral and applied as provided by Section 19, and (ii) Grantor
shall not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any account debtor or obligor thereof, or allow any
credit or discount thereon.
SECTION 11. Special Provisions With Respect to the Assigned Agreements.
(a) Following occurrence of the Grant Effectiveness Condition, Grantor shall at
its expense:
(i) perform and observe all terms and provisions of the Assigned Agreements
to be performed or observed by it, maintain the Assigned Agreements in
full force and effect, enforce the Assigned Agreements in accordance
with their terms, and take all such action to such end as may be from
time to time reasonably requested by Secured Party; and
(ii) furnish to Secured Party, promptly upon receipt thereof, copies of all
notices, requests and other documents received by Grantor under or
pursuant to the Assigned Agreements, and from time to time furnish to
Secured Party such information and reports regarding the Assigned
Agreements as Secured Party may reasonably request.
(b) Following occurrence of the Grant Effectiveness Condition, Grantor shall
not:
(i) cancel or terminate any of the Assigned Agreements or consent to or
accept any cancellation or termination thereof;
(ii) amend or otherwise modify the Assigned Agreements or give any consent,
waiver or approval thereunder;
(iii) waive any default under or breach of the Assigned Agreements; or
(iv) take any other action in connection with the Assigned Agreements that
would impair the value of the interest or rights of Grantor thereunder
or that would impair the interest or rights of Secured Party except as
permitted or required under the Security Agreement;
(v) if the effect of any of the foregoing could reasonably be expected to
have a Material Adverse Effect.
SECTION 12. Deposit Accounts. Following occurrence of the Grant Effectiveness
Condition, upon the occurrence and during the continuation of an Event of
Default, Secured Party may exercise dominion and control over, and refuse to
permit further withdrawals (whether of money, securities, instruments or other
property) from any deposit accounts maintained with Secured Party constituting
part of the Collateral.
SECTION 13. License of Patents, Trademarks. Copyrights. etc. Grantor hereby
assigns, transfers and conveys to Secured Party, effective following occurrence
of the Grant Effectiveness Condition and the occurrence of the first Event of
Default thereafter, the nonexclusive right and license to use all trademarks,
tradenames, copyrights, patents or technical processes owned or used by Grantor
that relate to the Collateral and any other collateral granted by Grantor as
security for the Secured Obligations, together with any goodwill associated
therewith, all to the extent necessary to enable Secured Party to use, possess
and realize on the Collateral and to enable 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 Secured Party 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 Grantor.
SECTION 14. Transfers and Other Liens. Following occurrence of the Grant
Effectiveness Condition, Grantor shall not:
(a) except as permitted pursuant to the Note Purchase Agreements and the
Subordinated Loan Agreement, sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral; or
(b) except for (i) the security interests created by the Security Agreement and
the contingent, subordinate security interest pursuant to this Agreement and
(ii) Liens created, incurred, assumed or permitted to exist pursuant to the Note
Purchase Agreements and the Subordinated Loan Agreement, create or suffer to
exist any Lien upon or with respect to any of the Collateral to secure the
indebtedness or other obligations of any Person.
SECTION 15. Secured Party Appointed Attorney-in-Fact. Effective upon occurrence
of the Grant Effectiveness Condition, Grantor hereby irrevocably appoints
Secured Party as Grantor's attorney-in-fact, with full authority in the place
and stead of Grantor and in the name of Grantor, Secured Party or otherwise,
upon the occurrence of an Event of Default and in Secured Party's discretion, to
take any action and to execute any instrument that Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement, including
without limitation:
(a) to obtain and adjust insurance required to be maintained by Grantor or paid
to Secured Party pursuant to Section 9;
(b) to ask for, 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;
(c) to receive, endorse and collect any drafts or other instruments, documents
and chattel paper in connection with clauses (a) and (b) above;
(d) to file any claims or take any action or institute any proceedings that
Secured Party may deem necessary or desirable for the collection of any of the
Collateral or otherwise to enforce the rights of Secured Party with respect to
any of the Collateral;
(e) to pay or discharge taxes or Liens (other than Liens permitted under this
Agreement or the Subordinated Loan Agreement) levied or placed upon or
threatened against the Collateral, the legality or validity thereof and the
amounts necessary to discharge the same to be determined by Secured Party in its
sole discretion, any such payments made by Secured Party to become obligations
of Grantor to Secured Party, due and payable immediately without demand;
(f) to sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors, assignments,
verifications and notices in connection with Accounts and other documents
relating to the Collateral;
(g) generally to sell, transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though
Secured Party were the absolute owner thereof for all purposes, and to do, at
Secured Party's option and Grantor's expense, at any time or from time to time,
all acts and things that Secured Party deems necessary to protect, preserve or
realize upon the Collateral and Secured Party's security interest therein in
order to effect the intent of this Agreement, all as fully and effectively as
Grantor might do; and
(h) to execute on behalf of Grantor a security agreement that is neither
subordinated or contingent but is otherwise similar to this Agreement in all
material respects..
SECTION 16. Secured Party May Perform. Following occurrence of the Grant
Effectiveness Condition, Grantor fails to perform any agreement contained
herein, Secured Party may itself perform, or cause performance of, such
agreement, and the expenses of Secured Party incurred in connection therewith
shall be payable by Grantor under Section 20.
SECTION 17. Standard of Care. The powers conferred on Secured Party hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. Except for the exercise of reasonable
care in the custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, Secured Party shall have no duty as to
any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. Secured
Party shall be deemed to have exercised reasonable care in the custody and
preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which Secured Party accords its own
property.
SECTION 18. Remedies. Following occurrence of the Grant Effectiveness Condition,
if any Event of Default shall have occurred and be continuing, Secured Party 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 Uniform Commercial Code as in
effect in any relevant jurisdiction (the "Code") (whether or not the Code
applies to the affected Collateral), and also may (a) require Grantor to, and
Grantor hereby agrees that it will at its expense and upon request of Secured
Party forthwith, assemble all or part of the Collateral as directed by Secured
Party and make it available to Secured Party at a place to be designated by
Secured Party that is reasonably convenient to both parties, (b) enter onto the
property where any Collateral is located and take possession thereof with or
without judicial process, (c) prior to the disposition of the Collateral, store,
process, repair or recondition the Collateral or otherwise prepare the
Collateral for disposition in any manner to the extent Secured Party deems
appropriate, (d) take possession of Grantor's premises or place custodians in
exclusive control thereof, remain on such premises and use the same and any of
Grantor's equipment for the purpose of completing any work in process, taking
any actions described in the preceding clause (c) and collecting any Secured
Obligation, 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 Secured Party's offices or elsewhere, for cash, on credit or for
future delivery, at such time or times and at such price or prices and upon such
other terms as Secured Party may deem commercially reasonable. Secured Party may
be the purchaser of any or all of the Collateral at any such sale and shall be
entitled, for the purpose of bidding and making settlement or payment of the
purchase price for all or any portion of the Collateral sold at any such public
sale, to use and apply any of the Secured Obligations as a credit on account of
the purchase price for any Collateral payable by Secured Party at such sale.
Each purchaser at any such sale shall hold the property sold absolutely free
from any claim or right on the part of Grantor, and Grantor hereby waives (to
the extent permitted by applicable law) all rights of redemption, stay and/or
appraisal which it now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted. Grantor agrees that, to the
extent notice of sale shall be required by law, at least ten days' notice to
Grantor 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. Secured
Party shall not be obligated to make any sale of Collateral regardless of notice
of sale having been given. Secured Party 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. Grantor hereby waives any claims against Secured Party arising by
reason of the fact that the price at which any Collateral may have been sold at
such a private sale was less than the price which might have been obtained at a
public sale, even if Secured Party accepts the first offer received and does not
offer such Collateral to more than one offeree. If the proceeds of any sale or
other disposition of the Collateral are insufficient to pay all the Secured
Obligations, Grantor shall be liable for the deficiency and the fees of any
attorneys employed by Secured Party to collect such deficiency.
SECTION 19. Application of Proceeds. Except as expressly provided elsewhere in
this Agreement, all proceeds received by Secured Party in respect of any sale
of, collection from, or other realization upon all or any part of the Collateral
may, in the discretion of Secured Party, be held by Secured Party as Collateral
for, and/or then, or at any other time thereafter, applied in full or in part by
Secured Party against, the Secured Obligations in the following order of
priority:
FIRST: To the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation to
Secured Party and its agents and counsel, and all other expenses,
liabilities and advances made or incurred by Secured Party in
connection therewith, and all amounts for which Secured Party is
entitled to indemnification hereunder and all advances made by Secured
Party hereunder for the account of Grantor, and to the payment of all
costs and expenses paid or incurred by Secured Party in connection with
the exercise of any right or remedy hereunder, all in accordance with
Section 20;
SECOND: To the payment of all other Secured Obligations in
such order as Secured Party shall elect; and
THIRD: To the payment to or upon the order of Grantor, or to
whosoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
SECTION 20. Indemnity and Expenses.
(a) Grantor agrees to indemnify Secured Party from and against any and all
claims, losses and liabilities in any way relating to, growing out of or
resulting from this Agreement and the transactions contemplated hereby
(including, without limitation, enforcement of this Agreement), except to the
extent such claims, losses or liabilities result solely from Secured Party's
gross negligence or willful misconduct as finally determined by a court of
competent jurisdiction.
(b) Grantor shall pay to Secured Party upon demand the amount of any and all
costs and expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, that Secured Party may incur in connection with
(i) the administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any of
the Collateral, (iii) the exercise or enforcement of any of the rights of
Secured Party hereunder, or (iv) the failure by Grantor to perform or observe
any of the provisions hereof.
SECTION 21. Continuing Security Interest; Transfer of Subordinated Loan.
Following occurrence of the Grant Effectiveness Condition, this Agreement shall
create a continuing subordinate security interest in the Collateral and shall
(a) remain in full force and effect until the payment in full in cash of the
Secured Obligations, (b) be binding upon Grantor, its successors and assigns,
and (c) inure, together with the rights and remedies of Secured Party hereunder,
to the benefit of Secured Party and its successors, transferees and assigns.
Without limiting the generality of the foregoing clause (c), the Secured Party
may assign or otherwise transfer the Subordinated Loan to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted herein or otherwise. Upon the payment in full in cash of all
Secured Obligations, the security interest granted hereby shall terminate, and
all rights to the Collateral shall revert to Grantor. Upon any such termination
Secured Party will, at Grantor's expense, execute and deliver to Grantor such
documents as Grantor shall reasonably request to evidence such termination.
SECTION 22. Amendments; Etc. No amendment, modification, termination or waiver
of any provision of this Agreement, and no consent to any departure by Grantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Secured Party and, in the case of any such amendment or
modification, by Grantor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
SECTION 23. Notices. Any notice or other communication herein required or
permitted to be given shall be in writing and may be personally served or sent
by telefacsimile, United States mail or courier service and shall be deemed to
have been given when delivered in person or by courier service, upon receipt of
telefacsimile or three Business Days after depositing it in the United States
mail with postage prepaid and properly addressed. For the purposes hereof, the
address of each party hereto shall be as set forth under such party's name on
the signature pages hereof or, as to either party, such other address as shall
be designated by such party in a written notice delivered to the other party
hereto.
SECTION 24. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of Secured Party in the exercise of any power, right or
privilege hereunder 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 any other or
further exercise thereof or of any other power, right or privilege. All rights
and remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
SECTION 25. Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
SECTION 26. 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.
SECTION 27. Governing Law; Terms. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF UTAH (INCLUDING
WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF
NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO THE EXTENT
THAT THE CODE PROVIDES THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF UTAH.
SECTION 28. Consent to Jurisdiction and Service Of Process. ALL JUDICIAL
PROCEEDINGS BROUGHT AGAINST GRANTOR ARISING OUT OF OR RELATING TO THIS AGREEMENT
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF TEXAS AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT GRANTOR ACCEPTS
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE NONEXCLUSIVE 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. Grantor hereby agrees that service of
all process in any such proceeding in any such court may be made by registered
or certified mail, return receipt requested, to Grantor at its address provided
in Section 23, such service being hereby acknowledged by Grantor to be
sufficient for personal jurisdiction in any action against Grantor in any such
court and to be otherwise effective and binding service in every respect.
Nothing herein shall affect the right to serve process in any other manner
permitted by law or shall limit the right of Secured Party to bring proceedings
against Grantor in the courts of any other jurisdiction.
SECTION 29. Waiver of Jury Trial. GRANTOR AND SECURED PARTY HEREBY AGREE TO
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT. The scope of this waiver is
intended to be all-encompassing of any and all disputes that may be filed in any
court and that relate to the subject matter of this transaction, including
without limitation contract claims, tort claims, breach of duty claims, and all
other common law and statutory claims. Grantor and Secured Party each
acknowledge that this waiver is a material inducement for Grantor and Secured
Party to enter into a business relationship, that Grantor and Secured Party have
already relied on this waiver in entering into this Agreement and that each will
continue to rely on this waiver in their related future dealings. Grantor and
Secured Party 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. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS AGREEMENT. In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.
SECTION 30. Full Subordination. Notwithstanding anything herein to the contrary,
(i) all rights granted to Secured Party pursuant to this Agreement are subject
and subordinated to all rights granted in favor of FSB under the Security
Agreement and the related documents and (ii) prior to the occurrence of the
Grant Effectiveness Condition (or, in the case of the Grant Effectiveness
Condition contained in clause (iii) of Section 2 hereof, prior to the
satisfaction of the requirement set forth in Section 31 below), Secured Party
shall not exercise any remedies or initiate or pursue any proceedings of any
nature whatsoever against the Collateral or Grantor.
SECTION 31. Dedication of Distributable Cash Collateral Account. Notwithstanding
anything to the contrary herein, at the first date upon which the outstanding
balance of the Senior Secured Obligations is less than the amount of cash or
cash equivalents contained in the Distributable Cash Collateral Account, Grantor
hereby agrees to immediately dedicate that portion, and only that portion, of
the Distributable Cash Collateral Account, irrevocably and indefeasibly,
necessary for the full payment of the Senior Secured Obligations in such form as
reasonably required by the holders of the Senior Notes so that such
Distributable Cash Collateral Account will be available solely for payment of
the Senior Secured Obligations at the sole and absolute discretion of the
holders of the Senior Notes. Secured Party hereby agrees and acknowledges that
upon the dedication of the Distributable Cash Collateral Account as provided
herein, such Distributable Cash Collateral Account will not constitute
Collateral pursuant to this Agreement.
SECTION 32. Third Party Beneficiaries. The holders from time to time of the
Senior Notes shall be third party beneficiaries of this Agreement, and no
amendment, consent, waiver or other modification of the terms hereof may be
entered into, issued or granted without the prior written consent of such
holders.
SECTION 33. Counterparts. This Agreement may be executed in one or more
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.
IN WITNESS WHEREOF, Grantor and Secured Party have caused this
Agreement to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
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SNAKE RIVER SUGAR COMPANY
By: /s/ Xxxxxxxx X. Xxxxx
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
Notice Address:
SNAKE RIVER SUGAR COMPANY
0000 Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxx, Xxxx 00000
VALHI, INC.
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------------
Name:
----------------------------------------
Its:
---------------------------------------
Notice Address:
VALHI, INC.
Three Lincoln Centre
0000 XXX Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000-00(0
Attention: General Counsel
ACKNOWLEDGED
FIRST SECURITY BANK, NATIONAL ASSOCIATION,
as Collateral Agent
By: /s/ C. Xxxxx Xxxxxxx
---------------------------------------
Name:
---------------------------------------
Title:
---------------------------------------
Notice Address:
FIRST SECURITY BANK, NATIONAL ASSOCIATION
00 Xxxxx Xxxx Xxxxxx
Xxxxxxxxx Trust Department
Xxxx Xxxx Xxxx, Xxxx 00000
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: /s/ Xxxxxx Xxxxx
-------------------------------------
Its:
-------------------------------------
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: CIGNA INVESTMENTS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Its:
----------------------------------------
LIFE INSURANCE COMPANY OF NORTH AMERICA
By: CIGNA INVESTMENTS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Its:
---------------------------------------
MINNESOTA LIFE INSURANCE COMPANY
By: Advantus Capital Management, Inc.
By: /s/ Xxxxxxx Xxxxxxxxx
-------------------------------------
Its:
-------------------------------------
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: LINCOLN INVESTMENT
MANAGEMENT, INC.
Its Attorney-in-Fact
By:/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Its:
-----------------------------------------
LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK
By: LINCOLN INVESTMENT
MANAGEMENT, INC.
Its Attorney-in-Fact
By:/s/ Xxxxxxx X. Xxxxxx
-----------------------------------------
Its:
-----------------------------------------
