EXECUTION COPY
EXHIBIT 10.6
OPTION AGREEMENT
This OPTION AGREEMENT is dated October 14, 2005 (this "Agreement"), by and
among Snake River Sugar Company, an Oregon cooperative corporation (the
"Company"), Valhi, Inc., a Delaware corporation ("Valhi") and the holders of the
Company's 7.61% Senior Notes due September 30, 2012, as the same may be amended
from time to time (the "Senior Notes") whose names are set forth on the
signature page of this Agreement (the "Noteholders").
RECITALS
FIn connection with the Noteholders' acquisition of certain Senior Notes from
the Company pursuant to the terms of a Note Purchase Agreement dated as of
October 17, 2005 among Northwest Farm Credit Services, FLCA, both as a purchaser
and as agent on behalf of all of the purchasers (the "Agent"), the other
purchasers named therein and the Company, as the same may be amended from time
to time (the "Note Purchase Agreement"), the Noteholders have collectively
agreed to grant Valhi the right to acquire the Senior Notes owned or held by the
Noteholders (the "Option Notes"), pursuant to and on the terms and conditions
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the effectiveness of the Note Purchase Agreement.
Now, therefore, in consideration of the foregoing and for other good and
sufficient consideration, receipt of which is hereby acknowledged, the parties
agree as follows:
1. Grant of Option. The Noteholders hereby collectively grant to Valhi an
irrevocable option (the "Option") to purchase all but not less than all of the
Option Notes (including any principal, interest or other amounts owing to
Noteholders from the Company in respect of the Option Notes). The exercise price
of the Option (the "Exercise Price") shall be an amount in cash equal to the sum
of (i) the principal outstanding on the Option Notes, (ii) all accrued interest
on the Option Notes, (iii) an amount equal to the sum of the Make Whole Amounts
and Cost Reimbursement Amounts (as each are defined in the Note Purchase
Agreement) related to the Option Notes and which would be required to be paid by
the Company upon a voluntary prepayment of the Option Notes, and (iv) an amount
equal to any other amounts which would be required to be paid by the Company
pursuant to Article III of the Note Purchase Agreement upon a voluntary
prepayment of the Option Notes , in each case as of the closing referred to in
Section 3.
2. Exercise of Option. The Option may be exercised by Valhi in whole and
not in part at any time after the date of this Agreement, subject to the
condition that, prior to or concurrently with such exercise, Valhi acquire all
Senior Notes issued by the Company pursuant to the Note Purchase Agreement. If
Valhi wishes to exercise the Option, Valhi shall send a written notice to the
Agent on behalf of the Noteholders and to the Company specifying the Exercise
Price and the place, date and time (but not earlier than 10 Business Days (as
defined in the Note Purchase Agreement) from the date such notice is given) for
the closing of such purchase. The parties' obligations in connection with the
exercise of the Option are subject to compliance with applicable legal
requirements. Upon request of Valhi, the Company shall promptly take all action
required to effect the exercise of the Option (including certifying to Valhi,
upon request, information concerning the outstanding principal, accrued interest
and applicable Make Whole Amount of the Option Notes, any defaults or events of
default under the Senior Notes and any other information requested).
3. Closing of the Option and Transfer of the Option Notes. At the closing
of the exercise of the Option pursuant to this Agreement, Noteholders shall
deliver to the Company the Option Notes, in proper form for transfer, and the
Company will issue a new Senior Note to Valhi in the principal amount of the
Senior Notes being purchased. At such closing, Valhi will purchase and pay for
the Option Notes being purchased from Noteholders by wire transfer to the Agent
on behalf of the Noteholders of cash in an amount equal to the Exercise Price.
4. Representations and Warranties of Valhi. Valhi represents and warrants
to Noteholders that (a) Valhi is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
requisite corporate power to enter into and perform this Agreement; (b) this
Agreement has been duly authorized by all necessary corporate action on the part
of Valhi; (c) Valhi is not subject to or obligated under any provision of (i)
its Certificate of Incorporation or By-Laws, (ii) any contract, (iii) any
license, franchise or permit or (iv) any law, regulation, order, judgment or
decree, which would be breached or violated by its execution, delivery and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby, other than any such breaches or violations which will not,
individually or in the aggregate, have a material adverse effect on the
consummation of the transactions contemplated hereby, and (d) any acquisition of
the Option Notes pursuant to the terms and conditions of this Agreement shall be
for Valhi's own account and not with a view to distribution of the Option Notes.
No authorization, consent or approval of, or filing with, any public body, court
or authority is necessary for the execution, delivery and performance by Valhi
of the transactions contemplated by this Agreement, except for such
authorizations, consents, approvals and filings as to which the failure to
obtain or make would not, individually or in the aggregate, have a material
adverse effect on the consummation of the transactions contemplated by this
Agreement.
5. Representations and Warranties of Noteholders. Each Noteholder
represents and warrants to Valhi that (a) such Noteholder is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the requisite power to enter into and
perform this Agreement; (b) this Agreement has been duly authorized by all
necessary corporate action on the part of such Noteholder; (c) such Noteholder
is not subject to or obligated under any provision of (i) its organizational
documents, (ii) any contract, (iii) any license, franchise or permit or (iv) any
law, regulation, order, judgment or decree, which would be breached or violated
by its execution, delivery and performance of this Agreement and the
consummation by it of the transactions contemplated hereby, other than any such
breaches or violations which will not, individually or in the aggregate, have a
material adverse effect on the consummation of the transactions contemplated
hereby; and (d) when its Option Note(s) are delivered by such Noteholder to
Valhi upon exercise of the Option and payment of the Exercise Price, such
Noteholder will deliver good, legal and valid title in and to its Option
Note(s), free and clear of any claims, liens, encumbrances, security interests
and charges of any nature whatsoever (other than any such claims, liens,
encumbrances, security interests and charges created by Valhi). Each Noteholder
further represents and warrants that as of the date of this Agreement, no
authorization, consent or approval of, or filing with, any public body, court or
authority is necessary for the execution, delivery and performance by such
Noteholder of this Agreement, except for such authorizations, consents,
approvals and filings as to which the failure to obtain or make would not,
individually or in the aggregate, have a material adverse effect on the
consummation of the transactions contemplated by this Agreement. Notwithstanding
the foregoing, each Noteholder makes no representation or warranty regarding the
applicability of any federal or state securities laws or regulations, or whether
the application of such laws or regulations would prohibit, place restrictions
on, or require authorization of any the transactions contemplated by this
Agreement.
6. Legend. Upon execution of this Agreement, the Company and Noteholders
shall place the following legend in a conspicuous place on the Option Notes:
"This Note is subject to the terms and conditions of that certain Option
Agreement dated October 14, 2005, by and between the issuer, Valhi, Inc. and the
holder of this Note."
7. Amendment; Assignment. This Agreement may not be modified, amended,
altered or supplemented except by a writing signed by Valhi and Noteholders.
Each of the provisions of this Agreement shall be binding upon Noteholders and
its successors and assigns. Valhi may not assign any of its rights or
obligations under this Agreement (other than to any affiliate of Valhi) without
the prior written consent of Noteholders.
8. Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and, except as otherwise
provided in this Agreement, shall be deemed to have been duly given if so given)
if delivered in person, by cable, telegram, facsimile, or sent by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties as follows:
If to Noteholders (at the addresses specified on Schedule I to this Agreement)
If to Valhi:
Valhi, Inc.
Three Lincoln Centre, Suite 1700,
5430 LBJ Freeway,
Dallas, Texas 75240
Attn: General Counsel
If to the Company:
Snake River Sugar Company
3184 Elder Street
Boise, Idaho 83705
Attn: General Counsel
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but each of which
together shall constitute one and the same document.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Washington, without giving
effect to the principles of conflicts of laws thereof.
11. Binding Effect. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by the heirs, personal representatives,
successors and assigns of the parties hereto. Nothing expressed or referred to
in this Agreement is intended or shall be construed to give any person other
than the parties to this Agreement, or their respective heirs, personal
representatives, successors or assigns, any legal or equitable right, remedy or
claim under or in respect of this Agreement or any provision contained herein.
12. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof.
13. Termination. This Agreement shall terminate upon the repayment in full
of the Option Notes.
14. Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
15. Further Assurances. The parties will execute and deliver such documents
and take such action reasonably deemed necessary or desirable to more
effectively complete and evidence the sale and transfer of the Option Notes
pursuant to this Agreement.
16. Miscellaneous. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections, subsections and
clauses refer to Sections, subsections and clauses of this Agreement unless
otherwise stated.
17. Notification. The Company agrees to provide a copy of any amendment,
modification, waiver or restatement of the Senior Notes or the Note Purchase
Agreements to Valhi within five (5) business days after execution of any such
amendment, modification, waiver or restatement. The Company and Valhi agree and
acknowledge that if any such amendment, modification, waiver or restatement of
the Senior Notes or the Note Purchase Agreement are not so provided to Valhi by
the Company within the time period required herein, then, at Valhi's sole
option, such amendment, modification, waiver or restatement shall retroactively
be null and void upon (but only upon) the closing of the purchase of the Option
Notes following the exercise by Valhi of all of its rights under this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
on the day and year first above written.
VALHI, 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
NORTHWEST FARM CREDIT SERVICES, FLCA
By: /s/Jack Hetherington
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Jack Hetherington
Vice President
U.S. BANK NATIONAL ASSOCIATION
By: /s/Jan Thede
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Jan Thede
Vice President
Schedule I - Address of Noteholder
Northwest Farm Credit Services, FLCA
815 North College Road
Twin Falls, Idaho 83301
Attn: Jack Hetherington
U.S. Bank National Association National Corporate Banking (PL-4) 555 S. W. Oak
Street
Portland, Oregon 97204
Attn: Janice T. Thede