LIMITED RECOURSE PROMISSORY NOTE
--------------------------------
$212,500,000.00 January 3, 1997 Ogden,
Utah
1. FOR VALUE RECEIVED, VALHI, INC., a Delaware corporation
(`Borrower''), promises to pay to Snake River Sugar Company, an Oregon
cooperative (`Lender'') at Lender's office at 525 Good Avenue, Nyssa, Oregon,
97913, or at such other place as Lender from time to time may designate, the
principal sum of Two Hundred Twelve Million Five Hundred Thousand Dollars
($215,500,000.00), plus interest as specified in this promissory note (the
`Note'').
2. This Note is secured by a pledge of the collateral described in a
Limited Recourse Pledge Agreement dated as of the date of this Note (the
`Pledge Agreement'').
3. The principal sum outstanding from time to time under this Note
shall bear interest at a rate equal to 91/2% per annum. Accrued interest shall
be payable in arrears on the last day of each calendar month commencing January
31, 1997. If on any date for payment of interest, less than all interest then
due is paid on this Note, then any interest paid on such date on the Borrower's
Subordinated Promissory Note dated as of the date of this Note in the initial
principal amount of $37,500,000 (the `Other Note'') shall be deemed to have
been paid on, and shall be applied to, this Note rather than the Other Note.
Notwithstanding the foregoing, if any interest is not paid in full when due,
then interest shall be computed by compounding such unpaid interest quarterly
from the date such unpaid interest was due until such unpaid interest is paid in
full.
4. All principal and all accrued and unpaid interest shall be due and
payable on January 3, 2027. Notwithstanding the foregoing, if Borrower directly
or indirectly (through its wholly owned subsidiary, Amcorp, Inc. (`Amcorp'') or
through Amcorp's wholly owned subsidiary, The Amalgamated Sugar Company
(`Amalgamated'')), receives the proceeds, as a result of redemption by The
Amalgamated Sugar Company LLC, a Delaware limited liability company (the
`Company''), of any of the AGM Interest of the Company which is pledged as
collateral for this Note, then, at the option of Lender exercised by written
notice to the Borrower, a portion of the outstanding principal amount of this
Note may be accelerated and shall become immediately due and payable. Such
accelerated portion of the principal, when added to any accrued and unpaid
interest on this Note, may be up to the amount of any proceeds received by
Borrower, directly or indirectly, in connection with such redemption.
5. Borrower may, at any time and from time to time, prepay some or all of
the principal and interest under this Note, without penalty or premium.
6. If Borrower fails to make any payment of within five (5) business days
(as defined section 8 below) in after it becomes due and payable, at Lender's
option upon written notice to Borrower, Lender may declare this Note in default
and the entire unpaid principal of and accrued interest on this Note shall
become immediately due and payable without presentment or demand for payment,
protest or notice of nonpayment or dishonor, or other notices or demands of any
kind or character. In addition, this Note shall be in default and all amounts
owing under this Note shall be automatically accelerated on the occurrence of
any of the following events:
(i) (A) a court enters a decree or order for relief with respect to
Borrower, Amcorp or Amalgamated in an involuntary case under the Bankruptcy Code
(defined for this purpose as Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time and all rules and regulations
promulgated thereunder) or any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, which decree or order is not stayed or
other similar relief is not granted under any applicable federal or state law;
or (B) the continuance of any of the following events for forty-five (45) days
unless dismissed, bonded or discharged: (1) an involuntary case commenced
against Borrower, Amcorp or Amalgamated under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or (2) a decree or
order of a court for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over Borrower, Amcorp
or Amalgamated, or over all or a substantial part of its property, is entered;
or (3) an interim receiver, trustee or other custodian is appointed without the
consent of Borrower, Amcorp or Amalgamated, for all or a substantial part of the
property of Borrower, Amcorp or Amalgamated; or
(ii) (A) the entry of an order for relief with respect to Borrower, Amcorp
or Amalgamated in a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
Borrower, Amcorp or Amalgamated consents to the entry of an order for relief in
an involuntary case or to the conversion of an involuntary case to a voluntary
case under any such law, (C) Borrower, Amcorp or Amalgamated consents to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; (D) Borrower, Amcorp or
Amalgamated makes any assignment for the benefit of creditors; or (E) Borrower,
Amcorp or Amalgamated adopts a resolution or otherwise authorizes any action to
approve any of the actions referred to in this clause (ii); or
(iii) the liquidation or dissolution of Borrower.
7. In the event of any default by the Borrower hereunder, Lender shall
have only those rights reserved herein or in the Pledge Agreement, and in any
other instrument given or granted for the purpose of securing the payment of the
Note, and shall have full recourse to the property pledged pursuant to the
Pledge Agreement or such other instrument for the payment of the indebtedness
evidenced by this Note, but shall have no other recourse to any other property
or assets of Borrower, Amcorp, Amalgamated or any affiliate of Borrower. Except
as provided in the foregoing sentence and the instruments referred to therein,
notwithstanding anything to the contrary in this Note, the Pledge Agreement or
any other instrument given or granted for the purpose of securing the payment of
the Note, Lender shall not seek or be allowed to obtain a personal judgment,
against the Borrower, Borrower's affiliates, officers, directors or stockholders
or Borrower's successors and assigns, on the Note, the Pledge Agreement or any
other instrument given or granted for the purpose of securing the payment of the
Note, nor shall Lender seek or be allowed to obtain a personal judgment against
the Borrower, Borrower's affiliates, officers, directors or stockholders or
Borrower's successors and assigns for any deficiency remaining after realization
by Lender against any property pledged as security for the payment of the Note.
8. All amounts payable under this Note are payable in lawful money of the
United States during normal business hours on a day other than a Saturday or
Sunday, on which banks are open for business in Dallas, Texas (`business
days').
9. This Note is governed by the laws of the State of Delaware, without
regard to the choice of law rules of that State.
10. Borrower agrees that the holder of this Note may accept additional or
substitute security for this Note, or release any security or any party liable
for this Note, or extend or renew this Note, all without notice to Borrower and
without affecting the liability of Borrower.
11. If Lender delays in exercising or fails to exercise any of its rights
under this Note, that delay or failure shall not constitute a waiver of any of
Lender's rights, or of any breach, default or failure of condition of or under
this Note. No waiver by Lender of any of its rights, or of any such breach,
default or failure of condition shall be effective, unless the waiver is
expressly stated in a writing signed by Lender.
12. This Note inures to and binds the heirs, personal representatives,
successors and assigns of Borrower and Lender. If Lender so requests, Borrower
shall sign and deliver a new note to be issued in exchange for this Note.
BORROWER:
VALHI, INC., Mail Address:
a Delaware corporation Three Lincoln Center
Suite 1700, 5430 LBJ Freeway
Dallas, Texas 75240
By:
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Name:Steven L. Watson
Its: Vice President
Acknowledge and Agreed:
SNAKE RIVER SUGAR COMPANY
an Oregon cooperative
By:
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Name:George Grant
Its: Chairman
19597
LIMITED RECOURSE PLEDGE AGREEMENT
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THIS LIMITED RECOURSE PLEDGE AGREEMENT is entered into this 3rd day of
January, to be effective for tax and accounting purposes as of December 31,
1996, between Snake River Sugar Company, an Oregon cooperative, as secured party
(`SR''), and The Amalgamated Sugar Company, a Utah corporation (``AGM''), as
debtor.
The parties agree:
1. Pledge. For value received, AGM grants to SR a security interest
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(`Security Interest'') in the limited liability company interest in The
Amalgamated Sugar Company LLC, a Delaware limited liability company (the
`Collateral''). The Security Interest is created to secure all obligations and
indebtedness arising pursuant to the Limited Recourse Promissory Note dated as
of the date of this Agreement by Valhi, Inc., the indirect holder of 100% of
AGM's outstanding stock, in favor of SR in the initial principal amount of
$212.5 million (the `Note''). Except as provided below, the Collateral
includes all proceeds, rights to receive future distributions, increases,
substitutions, accessions, attachments, securities, subscription rights or other
property or benefits which AGM receives or is entitled to receive on account of
the Collateral. SR shall not have a Security Interest in, and SR's Security
Interest shall terminate and be automatically released with respect to (i) any
cash distributions on account of the Collateral paid or distributed on the
Collateral prior to the date of any foreclosure by SR on the Collateral pursuant
to the provisions of this Agreement, and (ii) any Accrual, Deferral or Insurance
Deferral (as such terms are defined in the company agreement of The Amalgamated
Sugar Company LLC as in effect on the date of this Agreement (the `Company
Agreement')) arising prior to the date of any foreclosure by SR on the
Collateral pursuant to the provisions of this Agreement. Except to the extent
provided in the Other Pledge Agreements (as defined in paragraph 6 of this
Agreement), all 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 SR. SR shall hold the Collateral as security for the repayment of the Note
and shall not encumber or dispose of the Collateral except in accordance with
the provisions of paragraph 8 of this Agreement.
2. Voting and Other Rights. During the term of this Agreement, and
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so long as the maturity date of the Note has not been accelerated as provided in
the Note and except as otherwise provided in the Other Pledge Agreements, AGM
shall have the right to vote the Collateral on all questions. Following
acceleration of the maturity date of the Note pursuant to Section 6 of the Note,
AGM's right to vote the Collateral shall terminate (provided that in the case of
a partial acceleration of the Note, AGM's right to vote the Collateral shall
terminate only with respect to a portion of the Collateral equal to the portion
of the Note accelerated). Nothing in this Agreement is intended to restrict or
limit in any way AGM's power to require that all or part of the Collateral be
redeemed by the issuer of the Collateral or purchased by SR pursuant to the
terms of any Company Agreement. Upon any such redemption or purchase, AGM may
direct that such proceeds be applied to reduce the outstanding principal and any
interest due on the Note, and SR may exercise its option as provided in the Note
to accelerate a portion of the Note and apply such proceeds to reduce such
portion of the Note. To the extent such proceeds are not so applied, then (i)
AGM may retain a portion of such proceeds equal to the amount of federal and
state taxes payable as a result of such redemption and any proceeds so retained
shall cease to be Collateral hereunder, and (ii) AGM shall direct that the
remaining proceeds be placed in an escrow account, pursuant to an escrow
agreement with an escrow agent reasonably acceptable to SR, and SR shall
continue to have a security interest in such remaining proceeds. AGM may direct
the investment of all funds held in such escrow account until all outstanding
principal of the Note becomes due, in which case such funds shall be applied as
provided in this Agreement.
3. Representations. AGM warrants and represents (i) that there are
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no restrictions on the transfer of any of the Collateral, other than as set
forth in the Company Agreement and the Other Pledge Agreements, and that AGM has
the right to transfer the Collateral free of any encumbrances other than
pursuant to the Company Agreement and pledges of the Collateral pursuant to the
Other Pledge Agreements and (ii) this Agreement constitutes the valid and
legally binding obligation of AGM, enforceable in accordance with its terms and
conditions, as enforceabililty 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. AGM shall, at the request of SR, 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. AGM shall not grant
any security interest in the Collateral, other than pursuant to (i) the Other
Pledge Agreements; (ii) liens for taxes, assessments or other governmental
charges not yet due and payable; (iii) 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 (iv) 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).
4. Adjustments. In the event that, during the term of this
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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 SR and held by it
under the terms of this Agreement in the same manner as the Collateral
originally pledged hereunder, except as otherwise provided by the terms of any
Other Pledge Agreement.
5. Warrants and Rights. In the event that, during the term of this
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Agreement, subscription warrants or any other rights or options shall be issued
in connection with the Collateral, such warrants, rights and options shall be
immediately assigned by SR to AGM, and, if exercised by AGM, all new interests
or securities so acquired by AGM shall be immediately assigned to SR to be held
under the terms of this Agreement in the same manner as the Collateral
originally pledged hereunder.
6. Payment of Note. Upon payment of all principal of and other
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amounts due on the Note, the Security Interest shall be canceled and SR shall
convey to AGM all certificates, documents and other instruments representing the
Collateral, except to the extent the Collateral remains pledged to SR pursuant
to either (i) the Pledge Agreement between AGM and SR dated as of the date of
this Agreement in connection with Valhi, Inc.'s Subordinated Promissory Note
dated as of the date of this Agreement, or (ii) the Indemnification Pledge
Agreement between AGM and The Amalgamated Sugar Company LLC dated as of the date
of this Agreement in connection with the Indemnification and Post Closing
Agreement dated as of the date of this Agreement among AGM, The Amalgamated
Sugar Company LLC and certain other parties (collectively, the `Other Pledge
Agreements').
7. Rights of SR. AGM hereby appoints SR as AGM's attorney-in-fact
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to do any act which AGM is obligated by this Agreement to do and to do all
things deemed necessary by SR to perfect the Security Interest and collect,
preserve and enforce the Collateral, all at AGM's cost and without any
obligation on SR so to act.
8. Default. If, pursuant to the terms and provisions of the Note,
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the maturity date of the Note has been accelerated pursuant to Section 6 of the
Note, SR may proceed to enforce payment of the 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 Delaware (the
`Code''), as well as other rights and remedies in connection with the
Collateral possessed by SR under this Agreement or otherwise at law or equity.
For purposes of the notice requirements of the Code, SR and AGM agree that
notice given at least five business days prior to the taking of any action with
respect to which notice is required is reasonable. All rights and remedies of
SR in connection with the Collateral hereunder are cumulative and may be
exercised singly or concurrently. The exercise of any right or remedy shall not
be a waiver of any other. If the amount received by SR upon foreclosure on the
Collateral is less than the amount of principal and interest owing on the Note,
SR shall have no further recourse to any assets or property of AGM, Valhi, Inc.
or any of their respective affiliates.
9. Miscellaneous.
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A. Parties Bound. This Agreement shall be binding upon and
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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. Delaware Law to Apply. This Agreement shall be construed in
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accordance with the Code and other applicable laws of the State of Delaware.
C. Modification. This Agreement shall not be amended in any
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way except by a written agreement signed by the parties hereto.
D. Severability. The unenforceability of any provision of this
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Agreement shall not affect the enforceability or validity of any other provision
hereof.
E. Notice. Any notice required to be given under this
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Agreement or under the Code shall be deemed delivered when deposited with the
United States Postal Service, postage prepaid, certified with return receipt
requested and addressed as follows:
If to SR:
525 Good Avenue
Nyssa, Oregon 97913
If to AGM:
The Amalgamated Sugar Company
Three Lincoln Centre
Suite 1700
5430 LBJ Freeway
Dallas, Texas 75240
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 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 AGM. AGM hereby waives presentment, demand,
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notice of dishonor, protest, notice of protest and all other notices with
respect to collection of the Collateral and Note.
IN WITNESS WHEREOF, the parties have executed this Agreement.
THE AMALGAMATED SUGAR COMPANY
By:
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Name: Allan M. Lipman, Jr.
Title: President
SNAKE RIVER SUGAR COMPANY
By:
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Name: George Grant
Title: Chairman