SECOND AMENDMENT TO SUBORDINATED LOAN AGREEMENT
THIS SECOND AMENDMENT TO SUBORDINATED LOAN AGREEMENT (this "Second Amendment")
is dated as of November 30, 1998 among SNAKE RIVER SUGAR COMPANY, an Oregon
cooperative (the "Company"), and VALHI, INC., a Delaware corporation ("Valhi"),
and is made with reference to that certain Subordinated Loan Agreement dated
January 3, 1997, as amended and restated May 14, 1997 (the "Existing Agreement"
and as further amended by this Second Amendment the "Subordinated Loan
Agreement"), pursuant to which the Company issued and sold to Valhi certain
Senior Subordinated Notes due April 30, 2010 (the "Subordinated Debt").
Capitalized terms used herein without definition shall have the meanings
assigned to such terms in the Amended Note Agreements, as defined below.
WHEREAS, the Company has entered into those certain separate and several Note
Purchase Agreements (collectively, the "Original Note Agreements") dated May 14,
1997, with each of the holders of the Notes (the "Noteholders") issued pursuant
thereto; and
WHEREAS, the Company, Valhi, the Noteholders and First Security Bank, National
Association, as Collateral Agent for the Noteholders, have entered into that
certain Subordination Agreement dated as of May 14, 1997 (the Subordination
Agreement"), pursuant to which payments on the Subordinated Debt were made
expressly subordinate to payments to the Noteholders under the Original Note
Agreements; and
WHEREAS, the Original Note Agreements have been amended by the parties thereto
by means of a First Amendment to Note Purchase Agreements (the "First Amendment
to Note Purchase Agreement") dated as of the date hereof (as so amended, the
"Amended Note Agreements"), and Company and Valhi desire to make certain
corresponding amendments to, and enter into certain agreements with respect to,
the terms and provisions of the Subordinated Loan Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Acknowledgement: The parties hereto acknowledge that, were it
not for the terms of the First Amendment to Note Purchase Agreement, an Event of
Default would exist under the terms of the Original Note Agreements, which Event
of Default would constitute a Specified Default under the Subordination
Agreement.
2. Waiver of Certain Events of Default: Valhi hereby waives all
rights and remedies otherwise available to it pursuant to Section 12 of the
Subordinated Loan Agreement as a result of the Company's failure to comply with
the payment provisions set forth in subsection 8.1(b) thereof with respect to
(a) amounts that are not permitted by the terms of the Amended Note Agreements
to be paid by the Company, and (b) amounts not paid as a result of the operation
of Section 3 below. Valhi hereby waives the breach by the Company of Sections
10.8(a), 10.8(b), 10.8(c), 10.8(d) and 10.8(g) of the Existing Agreement for all
periods to and including November 29, 1998, provided that the Company would have
been in compliance with such Sections, as amended by this Amendment, during the
relevant period(s).
3. No Further Payments on Subordinated Debt:
3.1. Valhi and the Company hereby agree, and
Noteholders hereby acknowledge, that, notwithstanding the absence of a Default
or an Event of Default under the Amended Note Agreements which would constitute
a Specified Default under the Subordination Agreement, and notwithstanding the
provisions of Section 8.1(b) of the Subordinated Loan Agreement, Valhi shall not
be entitled to receive, and the Company shall not make, any further payments on
the Subordinated Debt except as permitted by Section 10.5 of the Amended Note
Agreements, unless and until (a) the Company achieves full compliance with the
Original Covenants (as defined in the First Amendment to Note Purchase
Agreement) for a period of four consecutive fiscal quarters ending on the last
day of a fiscal year of the Company, (b) such compliance is evidenced by audited
financial statements and an Officer's Certificate delivered by the Company to
the Noteholders in accordance with Sections 7.1 and 7.2(a), respectively, of the
Amended Note Agreements and (c) the Company makes the election set forth in
clause (i) of the fourth full paragraph of Section 1.2(b) of the First Amendment
to Note Purchase Agreement; provided that Valhi shall be entitled to receive,
and the Company may pay to Valhi, the amount of $2,864,844 representing interest
accrued on the Subordinated Debt through December 31, 1997; and provided,
further, that any and all payments on the Subordinated Debt which are made
following satisfaction of the conditions set forth in clauses (a) through (c)
above may be made only in accordance with the Original Covenants and all other
covenants and conditions set forth in the Transaction Documents.
3.2. Upon satisfaction of all conditions set forth in
subsections 3.1(a), 3.1(b) and 3.1(c) above, the Company shall promptly pay to
Valhi within five Business Days all amounts which the Company would otherwise
have been obligated to pay to Valhi absent this Second Amendment; provided that
no Default or Event of Default under the Amended Note Agreements shall exist or
result from such payments.
4. Amendments to the Existing Agreement:
4.1. Section 10.8(a) of the Existing Agreement shall be and
is hereby amended in its entirety to read as follows:
"(a) The Company will not permit, as at the end of each fiscal quarter of the
Company, the ratio of Consolidated Senior Debt to Distributable Cash for the
period of four LLC fiscal quarters ending on or closest (but prior) to such date
to exceed (i) 11.25:1.00 from the date of the Closing to and including November
30, 1997; (ii) 12.00:1.00 from December 1, 1997 to and including May 30, 1999;
(iii) 10.50:1.00 from June 1, 1999 to and including November 30, 1999;
(iv) 7.75:1.00 from December 1, 1999 to and including February 29, 2000; (v)
6.50:1.00 from March 1, 2000 to and including August 31, 2000; (vi) 5.50:1.00
from September 1, 2000 to and including February 28, 2001; (vii) 5.00:1.00 from
March 1, 2001 to and including November 30, 2003; (viii) 4.50:1.00 from
December 1, 2003 to and including November 30, 2006; and (ix) 3.50:1.00
thereafter.
4.2. Section 10.8(b) of the Existing Agreement shall be and
is hereby amended in its entirety to read as follows:
"(b) The Company will not permit, as at the end of each fiscal quarter of the
Company, the ratio of Consolidated Total Debt to Distributable Cash for the
period of four LLC fiscal quarters ending on or closest (but prior) to such date
to exceed (i) 8.00:1.00 from the date of the Closing to and including November
30, 1997; (ii)18.00:1.00 from December 1, 1997 to and including May 30, 1999;
(iii) 16.00:1.00 from June 1, 1999 to and including November 30, 1999;
(iv) 12.00:1.00 from December 1, 1999 to and including February 29, 2000; (v)
11.25:1.00 from March 1, 2000 to and including August 31, 2000; (vi) 11.50:1.00
from September 1, 2000 to and including February 28, 2001; (vii) 7.00:1.00 from
March 1, 2001 to and including November 30, 2003; (viii) 6.00:1.00 from
December 1, 2003 to and including November 30, 2006; and (ix) 5.00:1.00
thereafter."
4.3. Section 10.8(c) of the Existing Agreement shall be and
is hereby amended in its entirety to read as follows:
"(c) The Company will not permit, as at the end of any fiscal quarter of the
Company, the ratio of (x) the sum of Distributable Cash for the period of four
LLC fiscal quarters ending on or closest (but prior) to such date and
Consolidated operating lease and rent payments of the Company and its
Subsidiaries for the period of four fiscal quarters ending on such date to (y)
Consolidated Fixed Charges to be less than (i) 1.50:1.00 from the date of the
Closing to and including November 30, 1997; (ii) 0.50:1.00 from December 1, 1997
to and including May 30, 1999; (iii) 0.60:1.00 from June 1, 1999 to and
including November 30, 1999; (iv) 0.85:1.00 from December 1, 1999 to and
including February 29, 2000; (v) 1.20:1.00 from March 1, 2000 to and including
August 31, 2000; (vi) 1.25:1.00 from September 1, 2000 to and including February
28, 2001; and (vii) 1.75:1.00 at all times thereafter."
4.4. The ratio appearing in Section 10.8(d) of the Existing
Agreement shall be and is hereby amended to read 1.55:1.00.
4.5. The amount "$35,000" appearing in Section 10.8(g) of
the Existing Agreement shall be and is hereby amended to read "$105,000 plus
fees due and payable in connection with this Amendment."
4.6. The definition of "Consolidated Fixed Charges" set
forth in Schedule A of the Existing Agreement shall be and is hereby amended by
adding the following proviso to the end thereof:
"; provided, that for purposes of Section 10.8(c) of this Agreement,
Consolidated Fixed Charges shall not include operating lease payments under
leases (the "Operating Leases") of (a) two beet storage buildings constructed
subsequent to February 28, 1998 at the Mini-Cassia facility and (b) beet
processing equipment related to the beet slice enhancement of the Mini-Cassia
facility, so long as such payments (X) are permanently deducted from amounts
otherwise payable to members of the Company under Grower Contracts and (Y) do
not exceed $3.2 million during any period of twelve consecutive calendar months
or $29.0 million in the aggregate."
4.7. The definition of "Distributable Cash" set forth in
Schedule A of the Existing Agreement shall be and is hereby amended by adding
the following proviso to the end thereof:
"; provided that, to the extent that all or any portion of the lease rental
payments in respect of the Operating Leases (as defined in the proviso to the
definition of Consolidated Fixed Charges) are offset by a permanent reduction in
amounts otherwise payable to members of the Company under Grower Contracts,
then, for purposes of this definition, Consolidated Net Income of LLC shall be
calculated using the Beet Payment (as defined in the Company Agreement, after
giving effect to the Second Amendment to Company Agreement; hereafter, as so
amended, the "Amended Company Agreement") for the applicable period, rather than
the actual lesser payment by the Company for sugarbeets during such period;
provided further that, if LLC, pursuant to the Amended Company Agreement, is
required to use for any period such actual lesser payment rather than the Beet
Payment in calculating Distributable Cash for purposes of the Amended Company
Agreement, then, for purposes of this definition, Consolidated Net Income of LLC
shall also be calculated in such manner for such period."
4.8. The definition of "Permitted Operating Expenses"
appearing in Schedule A of the Existing Agreement shall be and is hereby amended
in its entirety to read as follows:
"Permitted Operating Expenses" means, with respect to any period, miscellaneous
operating expenses of the Company, less the amount of any interest income earned
by the Company on Investments permitted under Section 10.9.
4.9 If the Company elects, pursuant to Section 10.5 of the
Amended Note Agreements, to have the Original Covenants (as defined in the First
Amendment to the Note Purchase Agreement) apply, then all covenants contained in
the Existing Agreement shall apply for all purposes of the Subordinated Loan
Agreement, from and after the last day of the previous fiscal year (after giving
effect to the amendments to set forth in Sections 4.5, 4.6, 4.7 and 4.8 of this
Second Amendment but not to the amendments set forth in Sections 4.1, 4.2, 4.3
and 4.4 of this Second Amendment, provided that the date "December 1, 2001" set
forth in Section 10.8(a)(ii) and in Section 10.8(b)(iii) shall be deemed changed
to "December 1, 2000," the date "December 1, 2004" set forth in Section
10.8(a)(iii) and in Section 10.8(b)(iv) shall be deemed changed to "December 1,
2003," and the date "December 1, 2002" set forth in Section 10.8(c)(ii) shall be
deemed changed to "December 1, 2001").
5. Representation and Warranties:
5.1. Valhi Representations and Warranties. Valhi hereby
represents and warrants as follows:
(a) Organization and Authority. Valhi is an organization
duly and validly incorporated and existing and in good standing under the laws
of the State of Delaware and has full corporate power to enter into and perform
its obligations under this Second Amendment.
(b) Authorization; Enforceability. The execution, delivery
and performance of this Second Amendment by Valhi are within the corporate power
of Valhi and have been duly authorized by all necessary corporate action on the
part of Valhi. This Second Amendment is the legally valid and binding agreement
of Valhi, enforceable against Valhi in accordance with its terms.
(c) No Violation or Conflict. The execution, delivery and
performance of this Second Amendment by Valhi do not and will not violate any
law or the Certificate of Incorporation or Bylaws of Valhi, or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any contract, agreement, instrument, order, judgment or decree to which Valhi is
a party or by which Valhi is bound, which violation, conflict, breach or default
would have a material adverse effect on Valhi's ability to consummate the
transactions contemplated hereby.
5.2. Company Representations and Warranties. The Company hereby
represents and warrants as follows:
(a) Organization and Authority. The Company is a
cooperative corporation duly and validly organized and existing and in good
standing under the laws of the State of Oregon and has full power to enter into
and perform its obligations under this Second Amendment.
(b) Authorization; Enforceability. The execution, delivery
and performance of this Second Amendment by the Company are within the power of
the Company and have been duly authorized by all necessary action on the part of
the Company. This Second Amendment is the legally valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms.
(c) No Violation or Conflict. The execution, delivery and
performance of this Second Amendment by the Company do not and will not violate
any law or the organizational documents of the Company, or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
contract, agreement, instrument, order, judgment or decree to which the Company
is a party or by which the Company is bound, which violation, conflict, breach
or default would have a material adverse effect on the Company's ability to
consummate the transactions contemplated hereby.
6. Miscellaneous.
6.1. Enforceability; Validity. Each party hereto expressly
agrees that this Second Amendment shall be specifically enforceable in any court
of competent jurisdiction in accordance with its terms and against each of the
parties hereto.
6.2. Successors and Assigns. All of the covenants and agreements
contained in this Second Amendment shall be binding upon, and inure to the
benefit of, the respective parties and their successors, assigns, heirs,
executors, administrators and other legal representatives, as the case may be.
6.3. Governing Law. This Second Amendment, and the rights of the
parties hereto, shall be governed by and construed in accordance with the laws
of the State of Delaware.
6.4. Counterparts. This Second Amendment may be executed in one
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
6.5. Amendment; Waiver. No amendment, modification, termination
or waiver of any provision of this Second Amendment, and no consent to any
departure by any party therefrom, shall in any event be effective unless the
same shall be in writing and signed by the parties hereto. Any such amendment,
modification, termination, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.
6.6. Severability. If any provision of this Second Amendment
shall be declared void or unenforceable by any court or administrative board of
competent jurisdiction, such provision shall be deemed to have been severed from
the remainder of this Second Amendment, and this Second Amendment shall continue
in all other respects to be valid and enforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
SNAKE RIVER SUGAR COMPANY
By /s/ Allan Lipman
Its President
VALHI, INC.
By /s/ Bobby D. O'Brien
Its Vice President
Acknowledged and Agreed:
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By /s/ Stephen Martin
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: CIGNA INVESTMENTS, INC.
By /s/ Denise Duffee
LIFE INSURANCE COMPANY OF NORTH AMERICA
By: CIGNA INVESTMENTS, INC.
By /s/ Denise Duffee
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
By /s/ Marilyn Froelich
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By /s/ Timothy Powell
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
By /s/ Timothy Powell