EXECUTION COPY
EXHIBIT 10.3
SECOND AMENDED AND RESTATED PLEDGE AGREEMENT
THIS SECOND AMENDED AND RESTATED PLEDGE AGREEMENT (this "AGREEMENT") is
entered into as of October 14, 2005, between SNAKE RIVER SUGAR COMPANY, an
Oregon cooperative (the "COMPANY"), as secured party, and ASC HOLDINGS, INC., a
Utah corporation ("ASC"; formerly known as The Amalgamated Sugar Company), as
debtor.
WHEREAS, pursuant to a Pledge Agreement and a Limited Recourse Pledge
Agreement, each dated January 3, 1997 and each between the Company and ASC
(collectively, the "ORIGINAL PLEDGE AGREEMENTS"), ASC granted to the Company a
security interest in the limited liability company interest (the "AGM INTEREST")
held by ASC in The Amalgamated Sugar Company LLC, a Delaware limited liability
company (the "LLC");
WHEREAS, ASC granted such security interest in order to secure the
obligations of Valhi, Inc. ("VALHI"), the indirect holder of 100% of ASC's
outstanding stock under (i) that certain Subordinated Promissory Note dated
January 3, 1997, in aggregate principal amount of $37,500,000, issued by Valhi
to the Company (the "SUBORDINATED PROMISSORY NOTE") and (ii) that certain
Limited Recourse Promissory Note dated January 3, 1997, in aggregate principal
amount of $212,500,000, issued by Valhi to the Company (the "LIMITED RECOURSE
PROMISSORY NOTE," and together with the Subordinated Promissory Note, the "SNAKE
RIVER LOAN NOTES");
WHEREAS, pursuant to a Deposit Trust Agreement (the "DEPOSIT TRUST
AGREEMENT"), dated as of May 14, 1997, as the same may be amended, supplemented
or otherwise modified from time to time, between ASC and Wilmington Trust
Company, a Delaware banking corporation, as Resident Trustee, ASC transferred
its interest in the AGM Interest to the Amalgamated Collateral Trust (the
"TRUST"), in exchange for a 100% Certificate of Beneficial Interest issued by
the Trust (the "CERTIFICATE");
WHEREAS, in connection with the transfer of the AGM Interest by ASC to the
Trust in exchange for the issuance of the Certificate by the Trust to ASC, ASC
and the Company amended and restated the Original Pledge Agreements in their
entirety and combined them into the Amended and Restated Pledge Agreement dated
as of May 14, 1997 (the "FIRST AMENDED AND RESTATED PLEDGE AGREEMENT"), in order
to (i) reflect the change of the name of ASC from The Amalgamated Sugar Company
to ASC Holdings, Inc., (ii) acknowledge the transfer of the Collateral (as
defined in the Original Pledge Agreements) to the Trust, (iii) acknowledge that
the security interest in the AGM Interest granted by the Trust pursuant to that
certain Pledge Agreement (SPT) dated as of May 14, 1997 ("ORIGINAL PLEDGE
AGREEMENT (SPT)") replaced and superseded the security interest in the AGM
Interest granted by the Existing Pledge Agreements, and (iv) grant to the
Company a security interest in ASC's interest in the Certificate; and
WHEREAS, ASC and the Company desire to amend and restate the First Amended
and Restated Pledge Agreement in its entirety, as reflected herein, and
therefore this Agreement shall supersede the First Amended and Restated Pledge
Agreement in order to (i) acknowledge that the security interest in the AGM
Interest granted by the Trust pursuant to the Second Pledge Agreement (SPT)
dated as of October 14, 2005 has replaced and superseded the security interest
in the AGM Interest granted by the Trust pursuant to the Original Pledge
Agreement (SPT) and (ii) continue to grant to the Company a security interest in
ASC's interest in the Certificate.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto hereby agree as follows:
1. Pledge. For value received, ASC grants to the Company a security
interest (the "SECURITY INTEREST") in (i) the Certificate and the beneficial
interest of ASC in the Trust, (ii) following a Snake Loan Default (as defined
below), all dividends, distributions and cash from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Certificate and/or the beneficial interest in the Trust and (iii) any
other interest of ASC in or relating to the AGM Interest (and following a Snake
Loan Default, all proceeds thereof) (the "COLLATERAL"). The Security Interest is
created to secure all obligations and indebtedness arising pursuant to the Snake
River Loan Notes and all other agreements or instruments entered into in
connection therewith (the "OBLIGATIONS"). Except as provided below, the
Collateral includes all rights to receive future distributions, increases,
substitutions, accessions, voting rights or other property or benefits which ASC
receives or is entitled to receive or exercise on account of the Collateral. The
Collateral shall not include and the Security Interest shall terminate and be
automatically released with respect to (i) rights to Retained Amounts (as
defined in the Amended and Restated Company Agreement of the Amalgamated Sugar
Company LLC dated as of October 14, 2005 (the "COMPANY AGREEMENT OF LLC"), as
the same may be amended, supplemented or otherwise modified from time to time),
accrued prior to a Snake Loan Default and actually paid or distributed to ASC by
the Resident Trustee (as defined in the Deposit Trust Agreement) of the Trust
pursuant to the terms of the Deposit Trust Agreement prior to a Snake Loan
Default and (ii) any other cash distributions on account of the Collateral
actually paid or distributed to ASC by the Resident Trustee of the Trust
pursuant to the Deposit Trust Agreement prior to a Snake Loan Default. The
Company shall not encumber or dispose, or attempt to encumber or dispose, of the
Collateral except in accordance with the provisions of this Agreement. The term
"SNAKE LOAN DEFAULT" means any default under the Snake River Loan Notes
permitting or resulting in acceleration of the Snake River Loan Notes.
Notwithstanding anything else contained in this Agreement, ASC agrees and
acknowledges that the terms of the Deposit Trust Agreement require the Resident
Trustee to segregate certain distributions and other amounts received by the
Trust which were paid by the LLC in respect of the AGM Interest held by the
Trust (the "DESIGNATED DISTRIBUTIONS"), including without limitation any
distribution paid by the LLC in respect of Retained Amounts, and that such
Designated Distributions are to be paid, on behalf of the Company, to the Agent
(as defined below) for the Senior Notes (as defined below) for the benefit of
the holders of such Senior Notes, regardless of whether or not a Snake Loan
Default or any acceleration of the Snake River Loan Notes has occurred or
exists.
I 2. Voting and Other Rights. During the term of this Agreement, and
subject to any limitation contained in the Company Agreement of LLC or the
Deposit Trust Agreement, each as amended or restated through the date of this
Agreement, so long as the maturity dates of the Snake River Loan Notes have not
been accelerated as provided therein, ASC shall have the right to vote the
Collateral on all questions. Following acceleration of the maturity date of the
Subordinated Promissory Note or the Limited Recourse Promissory Note pursuant to
Section 7 or Section 6 thereof, respectively, ASC's right to vote the Collateral
shall terminate (provided that in the case of a partial acceleration of either
Snake River Loan Note, ASC's right to vote the Collateral shall terminate only
with respect to a portion of the Collateral equal to the portion of the Snake
River Loan Note(s) so accelerated).
3. Representations. ASC warrants and represents (i) that there are no
restrictions on the transfer of any of the Collateral, other than as set forth
in the Deposit Trust Agreement, and (ii) this Agreement constitutes the valid
and legally binding obligation of ASC, enforceable in accordance with its terms
and conditions, as enforceability may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditor rights generally, and subject to general principles of equity and
public policy considerations. ASC shall, at the request of the Agent, promptly
deliver all reasonable further instruments and documents, and take all
reasonable further actions, in order to perfect the Security Interest granted
herein and to otherwise give effect to the provisions of this Agreement. ASC
shall not grant any security interest in the Collateral, other than pursuant to
(i) liens for taxes, assessments or other governmental charges not yet due and
payable, (ii) 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
and (iii) liens 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). ASC expects to derive benefit, directly or indirectly, from the funds
advanced to Valhi by Snake River in exchange for the Snake River Loan Notes
because, among other reasons, (a) ASC, as an indirectly, wholly-owned subsidiary
of Valhi, may from time to time receive capital contributions from Valhi to
support its operations, and (b) Valhi has centralized certain management,
financial, accounting, administrative, income tax, legal and risk management
functions in one central office, and Valhi directly and indirectly provides such
services to ASC, from which ASC derives benefit.
4. Adjustments. In the event that, during the term of this Agreement, any
reclassification, readjustment or other change is declared or made in the
capital structure of the issuer of the Collateral, all new, substituted and
additional interests or securities issued in respect of the Collateral by reason
of any such change shall be delivered to the Agent and held by it under the
terms of this Agreement in the same manner as the Collateral originally pledged
hereunder.
5. Payment of the Snake River Loan Notes. Upon payment of all principal of
and other amounts due on the Snake River Loan Notes, the Security Interest shall
be canceled and the Company and the Agent shall convey to ASC all certificates,
documents and other instruments representing the Collateral.
6. Rights of the Agent. ASC hereby appoints the Agent as ASC's
attorney-in-fact to do any act which ASC is obligated by this Agreement to do
and to do all things deemed necessary by the Agent (or the Company, after
payment in full in cash of the Senior Notes (as defined below)) to perfect the
Security Interest and collect, preserve and enforce the Collateral, all at ASC's
cost and without any obligation on the Agent or the Company so to act.
7. Default. If, pursuant to the terms and provisions of the Subordinated
Promissory Note or the Limited Recourse Promissory Note, the maturity date
thereof has been accelerated pursuant to Section 7 or Section 6 thereof,
respectively, the Agent may proceed to enforce payment of such Snake River Loan
Note or any part thereof and to exercise any and all rights and remedies in
connection with the Collateral provided by the Uniform Commercial Code in force
in the state of any applicable jurisdiction (the "CODE"), whether or not the
Code applies to the affected Collateral, as well as other rights and remedies in
connection with the Collateral possessed by the Agent (or the Company, after
payment in full in cash of the Senior Notes (as defined below)) under this
Agreement. For purposes of the notice requirements of the Code, the Company and
ASC agree that notice given at least five (5) business days prior to the taking
of any action with respect to which notice is required is reasonable. Except as
otherwise provided, all rights and remedies of the Company and Agent hereunder
are cumulative and may be exercised singly or concurrently, and the exercise of
any right or remedy shall not be a waiver of any other. Notwithstanding anything
in this Agreement to the contrary, ASC shall not be liable to the Company or the
Agent for any deficiency or other amount constituting the Obligations which the
Company or the Agent does not recover or obtain from the Collateral, except to
the extent of any funds distributed to ASC by the Resident Trustee of the Trust
in violation of the terms and provisions of this Agreement, the Deposit Trust
Agreement or the Company Agreement of LLC, as such Deposit Trust Agreement and
Company Agreement of LLC have been amended or restated as of the date of this
Agreement. If the amount received by the Company or the Agent upon sale of the
Collateral is less than the amount of the Obligations, neither the Company nor
the Agent shall have further recourse to any assets or property of ASC.
8. Acknowledgment. ASC hereby acknowledges and agrees that the Company will
assign and grant a security interest in all of the Company's rights in, to and
under this Agreement and the Collateral to Northwest Farm Credit Services, FLCA,
as agent (the " AGENT") for the benefit of the holders of the 7.61% Senior Notes
due September 30, 2012 (the "SENIOR NOTES") issued by the Company pursuant to
the Note Purchase Agreement, each dated October 17, 2005, among the Company, the
Agent and the purchasers referred to therein (the "NOTE PURCHASE AGREEMENT"), as
the same may be amended, supplemented or otherwise modified from time to time,
as security for the Company's obligations under the Senior Notes and the Note
Purchase Agreement, and thereafter the Agent shall have all of the rights
granted to the Company hereunder. So long as the Agent has any security interest
in this Agreement or the Collateral, the term "Company" shall include the Agent
for all purposes under this Agreement. The Certificate and all other
certificates and other instruments which may constitute the Collateral shall be
endorsed in blank for transfer, or be accompanied by proper instruments of
assignment and transfer properly endorsed in blank, and delivered to the Agent.
After the payment in full in cash of the Senior Notes, all references herein to
the Agent shall be deemed references to the Company.
9. Miscellaneous.
(A) Parties Bound. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors, receivers, trustees and
assigns where permitted by this Agreement.
(B) Governing Law. This Agreement shall be construed in accordance
with the Code and other applicable laws of the State of Washington.
(C) Modification. This Agreement shall not be amended in any way
except by a written agreement signed by the parties hereto.
(D) Severability. The unenforceability of any provision of this
Agreement shall not affect the enforceability or validity of any other provision
hereof.
(E) Notice. Any notice required to be given under this Agreement or
under the Code shall be personally delivered (including by overnight courier
service) or deposited with the United States Postal Service, postage prepaid,
certified with return receipt requested and addressed as follows:
If to the Company:
Snake River Sugar Company
3184 Elder Street
Boise, Idaho, 83705
Attn: General Counsel
with a copy to:
Northwest Farm Credit Services, FLCA
1700 South Assembly Street
Spokane, Washington 99224
Attn: Mr. Stacy Lavin
and a copy to:
Northwest Farm Credit Services, FLCA
815 North College Road
Twin Falls, Idaho 83303
Attn: Mr. Jack Hetherington
If to ASC:
ASC Holdings, Inc.
Three Lincoln Centre
Suite 1700
5430 LBJ Freeway
Dallas, Texas 75240
Attn: General Counsel
Any party hereto may change the address to which notices to such party are
required to be sent by giving notice of such change in the manner provided in
this Section 9E. All notices will be deemed to have been received on the date of
personal delivery or on the third business day after mailing in accordance with
this Section 9E, except that any notice of a change of address will be effective
only upon actual receipt.
(F) Waiver of ASC. ASC hereby waives presentment, demand, notice of
dishonor, protest, notice of protest and all other notices with respect to
collection of the Collateral and the Snake River Loan Notes.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
ASC HOLDINGS, INC.
By: /s/Gregory M. Swalwell
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Gregory M. Swalwell
Vice President
SNAKE RIVER SUGAR COMPANY
By: /s/Dave Budge
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Dave Budge
Vice President