LOAN AGREEMENT
This loan agreement (this "Agreement") is dated as of November 8, 1996, and is
among Contran Corporation, a Delaware corporation ("Contran"), the affiliated
corporations herein referred to as the "Contran Affiliates," United States
National Bank of Oregon ("USBO"), and Societe Generale, Southwest Agency
("SoGen").
Recitals
A. Contran, the Contran Affiliates, the Agent, and the Bank Group
desire to enter into the Loan Documents under which the members of the Bank
Group will severally make Advances to Contran aggregating no more than the
Maximum Availability at any one time.
B. The members of the Bank Group are prepared to severally make
Advances and extend credit to Contran aggregating no more than the Maximum
Availability at any one time under the terms and conditions of the Loan
Documents.
NOW, THEREFORE, for value, it is agreed that:
I. DEFINITIONS; CONSTRUCTION MATTERS.
A. Definitions. As used in the Loan Documents:
"Advance" means the substantially contemporaneous Advances or
extensions of credit made by the members of the Bank Group to Contran
under the Loan Documents for the benefit of one or more members of the
Contran Companies;
"Agent" means USBO or any successor or assignee when acting as the
administrative agent for the Bank Group under the Loan Documents;
"Allowed Uses" means the general corporate purposes of the Contran
Companies including the purchase of margin stock;
"Available" or "Availability" means the difference between the Maximum
Availability and the outstanding balance of the Advances at the time
that Availability is being determined;
"Average Availability" means the difference between the Maximum
Availability and the average outstanding principal balance of the
Advances during a Quarter;
"Bank Group" means USBO, SoGen, and any banks hereafter added to this
Agreement by modification agreement;
"Bank Group Majority" means USBO and SoGen;
"Banking Day" means a day when all members of the Bank Group are open
to the public at their main offices for carrying on substantially all
of its banking activities (except for a Saturday, Sunday, or a bank
holiday listed in '707.430 of the Oregon Revised Statutes) and, with
respect to LIBOR Advances, a day upon which banks transact business on
the London interbank market for Eurodollars;
"Commitment Fee" means a fee, which is payable quarterly in arrears as
of the last Banking Day of each Quarter for the Average Availability
in that Quarter and which will be calculated by the Agent by
multiplying the Average Availability in such Quarter by 37.5 basis
points per annum (365/366 day year) on a prorated basis;
"Contran Companies" means Contran and the Contran Affiliates and
"Contran Company" means any one of the Contran Companies;
"Contran Affiliates" means NCL and VGI and "Contran Affiliate" means
either NCL or VGI;
"Credit Line" means the revolving lines of credit being severally
extended by the members of the Bank Group to and for the benefit of
the Contran Companies under the terms and conditions of the Loan
Documents;
"Default Rate" means the rate of interest that is otherwise applicable
plus an additional 2% per annum;
"Eurodollars" means U.S. dollars to be deposited in a bank or other
financial institution located outside of the United States;
"Expiry Date" means the date which is 364 days following the date of
this Agreement, and any anniversary of such date as extended by mutual
agreement of the Contran Companies and the Bank Group;
"Guaranty" means the unconditional payment guaranty to be issued to
each member of the Bank Group by the Contran Affiliates in the form
attached as exhibit A;
"Hazardous Material" or "Hazmat" means any waste, substance, mixture,
pollutant or contaminant defined as hazardous, toxic or radioactive
under any federal, state, or local statutory laws, regulations, or
orders and includes, whether or not so defined, petroleum and natural
gas products, polychlorinated biphenyls and asbestos-containing
materials;
"Interest Period" means as of the end of each calendar month for Prime
Rate Advances and a period of 1 month, 2 months, 3 months or 6 months
as selected by Contran for each LIBOR Advance, and, if any Interest
Period would otherwise end on a day which is not a Banking Day, such
Interest Period will end on the next succeeding Banking Day unless
such day falls in the next calendar month in which case that Interest
Period will end on the last Banking Day in the immediately preceding
calendar month;
"LIBOR" means the London interbank offered rate of interest, as
determined and quoted by the Agent, for a deposit of Eurodollars in
the amount of the Advance requested by Contran, rounded up to the
nearest 1/16th of 1% and adjusted for any reserves, FDIC insurance
premiums or other charges which would be payable by any member of the
Bank Group in connection therewith, plus 1.75% per annum;
"LIBOR Advance" means an Advance to which the LIBOR applies;
"LTV" means the percentage resulting from dividing the outstanding
principal balance of the Advances on the date the LTV is being
determined by the published closing prices for the preceding trading
day, as published in the Wall Street Journal or, if the prices are not
published, as reasonably determined by the Agent, of the security
interest of the Bank Group (i.e., market value less the amount secured
by any prior liens and security interests or any offsets, defenses, or
counterclaims, such as unpaid subscription liability, asserted by the
issuer of any investment security) in the Pledged Securities;
"Loan Documents" means this Agreement, the Guaranties, the Notes, and
the Security Documents, as originally executed and as hereafter
extended and/or modified;
"Maximum Availability" means $40,000,000 until changed by mutual
agreement or reduced by Contran as provided in this Agreement.
"NCL" means National City Lines, Inc., a Delaware corporation;
"Note" means the note to be issued by Contran to each member of the
Bank Group in the form attached as exhibit B;
"Notice of Borrowing" means the notice of intention to borrow to be
given by Contran to the Agent in the form attached as exhibit C;
"Obligations" means the debts and obligations of the Contran Companies
to the Bank Group and the Agent under the Loan Documents, including
repayment of the Advances;
"Per annum" means, when referring to interest, the actual number of
days elapsed in an Interest Period over a denominator of 360 days;
"Percentage Interest" means the percentage interest of each member of
the Bank Group determined by dividing its commitment by the Maximum
Availability;
"Pledged Securities" means initially the 7,200,000 shares of common
stock that have been issued by Valhi and 3,042,467 shares of common
stock that have been issued by Tremont and any investment securities
that are pledged to the Bank Group under 'II.B.10 of this Agreement to
secure payment and performance of the Obligations;
"Prime Rate" means the rate of interest publicly-announced by the
Agent from time to time as its prime rate of interest for Advances to
commercial customers;
"Prime Rate Advance" means an Advance to which the Prime Rate is
applicable;
"Prospective Default" means an event of Default but for the giving of
any required notice, the passage of any applicable grace or notice
period, or both;
"Quarter" means a calendar quarter;
"Security Document" means the securities pledge agreement to be
executed by the Contran Affiliates in the form attached as exhibit D,
and the related stock powers and compliance forms, and any security
agreement and financing statements that any Contran Company hereafter
executes to secure performance of the Obligations;
"Tremont" means Tremont Corporation, a Delaware corporation;
"Valhi" means Valhi, Inc., a Delaware corporation; and
"VGI" means Valhi Group, Inc., a Delaware corporation.
B. Additional References.
1. Accounting Terms. Accounting terms which are not specifically
defined in the Loan Documents will be defined or interpreted and
all reporting practices will be performed, in accordance with
generally accepted accounting principles ("GAAP") unless the Bank
Group has given its prior written consent to a different
accounting definition, interpretation or practice. Without
thereby limiting the generality of the foregoing, all financial
statements and calculations which are based on financial
condition or results of operations as of specific dates or for
specific periods (including compliance with financial covenants)
will be calculated on a consolidated basis unless otherwise
specified. Whenever any Loan Document calls for a payment to be
made or an event to occur annually or quarterly, the reference is
to Contran's fiscal year and fiscal quarter. The term "financial
statements" means balance sheets and statements of income and
cash flows prepared in reasonable detail, on a comparative basis,
and in accordance with GAAP for the interim (quarterly)
accounting periods and balance sheets and statements of income,
cash flows, and equity, and related footnotes, for the annual
accounting periods.
2. Legal Terms. The definitions and substantive terms of the
Uniform Commercial Code, the Uniform Fraudulent Transfer Act, and
the Bankruptcy Code will be used as additional aids to
construction of the Loan Documents before resort to any other
source. The word "execute" means to subscribe and deliver a
document. The term "investment security" means the obligation of
an issuer, or a share, participation, or other interest in an
issuer or in property or an enterprise of an issuer, and any
related certificate and entitlement, including a warrant,
dividend, or other distribution in respect thereof.
3. Date/Time. Whenever a date or time is specified in the Loan
Documents, it means such date or time in Portland, Oregon.
4. Schedules/Exhibits. The schedules and exhibits, if any, that are
attached to this Agreement incorporated into this Agreement by
this reference.
5. Gender; Number. The Loan Documents are intended to be gender
neutral and the neuter pronoun can refer not only to an
organization but also to an individual. Use of the singular can
include the plural and vice versa. Where the singular refers to
several persons, the liability of such persons is joint and
several.
6. Conflicts. The terms and conditions of the Loan Documents are
intended to complement and supplement each other and are to be
construed so as to be consistent and complimentary. In the event
that a conflict of terms cannot be reconciled, the terms and
conditions of this Agreement will govern over any conflicting
terms or conditions in any other Loan Document.
7. Captions. Captions and headings are merely for convenience and
substantively are not a part of the Loan Documents.
8. Governing Law. Construction, performance, and enforcement of the
Loan Documents will be governed by the substantive provisions
(i.e., without regard to the rules for conflict of laws) of
Oregon law, but if the Bank Group has greater rights or remedies
under federal law, then such rights and remedies under federal
law also will be available to the Bank.
9. Complete Agreement. The Loan Documents are the complete, final,
and exclusive agreement of the parties. No term or condition can
or will be explained, supplement, waived, or modified by conduct
or oral agreement either before, at, or after signing and
delivery of the Loan Documents.
II. THE LINE OF CREDIT.
A. Advances.
1. Commitment. Upon satisfaction of the conditions precedent by the
Contran Affiliates or waiver thereof by the Bank Group, each
member of the Bank Group severally promises and agrees (commits)
to make Advances and/or extend credit (all such Advances and/or
extensions of credit at substantially the same time being an
"Advance") to the Contran Companies for the Allowed Uses until
the Expiry Date as long as at the time of such Advance (a)
Contran is not in Default or Prospective Default under the Loan
Documents, (b) the aggregate principal amount of all outstanding
Advances and the requested Advance does not exceed the Maximum
Availability, and (c) the LTV after such Advance will not exceed
40%.
2. Revolving Nature. The commitments of the Bank Group are
revolving in nature so the Contran Companies may borrow and repay
at any time and from time to time without penalty or premium
(except for breakage charges collectible in connection with full
or partial prepayment of LIBOR Advances) subject to the terms and
conditions of the Loan Documents. LIBOR Advances mature and must
be repaid or renewed at a new LIBOR or at the Prime Rate at the
end of the Interest Period applicable thereto. Prime Rate
Advances mature and must be repaid on the Expiry Date.
3. Notice of Borrowing. In order to borrow (obtain a LIBOR Advance
or a Prime Rate Advance), convert a Prime Rate Advance to a LIBOR
Advance or vice versa, or replace an LIBOR Advance with another
new LIBOR Advance at the end of an Interest Period, Contran must
submit a Notice of Borrowing to the Agent through an authorized
representative (a) not later than 10 a.m. on the date of any
requested Prime Rate Advance and (b) not later than 9 a.m. on the
third Banking Day before the effective date of a LIBOR Advance,
unless the Advance is requested orally and the Agent grants the
request, in which case either the Advance will be repaid or a
Notice of Borrowing will be submitted to the Agent in writing
within 48 hours following the oral request (including any
breakage charge related thereto).
The Notice of Borrowing will specify the date when the Advance is
to be funded, converted, or renewed, the amount thereof, the
applicable interest rate and, if the LIBOR has been selected, the
Interest Period. Each Notice of Borrowing and oral request will
be irrevocable and the Agent and the Bank Group will be entitled
to procure funds in reliance on such Notice of Borrowing and oral
request; provided, however, that Contran may withdraw any Notice
of Borrowing at any time prior to the funding of such Advance as
long as Contran pays all reasonable direct costs and expenses
(including breakage charges) incurred by any member(s) of the
Bank Group in reliance on such Notice of Borrowing. No LIBOR
Interest Period may be selected that extends beyond the Expiry
Date. The Prime Rate will be applicable to each Advance unless
Contran has properly selected the LIBOR.
4. Disbursement of Proceeds. All Advances will be funded by wiring
the proceeds thereof into Contran's general corporate checking
account.
5. Interest Rates. The rates of interest payable by Contran will be
(a) the Prime Rate on each Prime Rate Advance and (b) if selected
by Contran, the LIBOR plus a margin of 1.75% (175 basis points)
per annum for on each LIBOR Advance in the minimum amount of
$1,000,000 and increments of $500,000 in excess of the minimum
amount.
6. Principal Repayment. Contran will repay the Advances on or
before the Expiry Date.
B. General Matters.
1. Medium. All Advances will be made by, and all payments will be
made to, the Bank Group in immediately available U.S. dollars.
2. Interest Payments. Interest on Prime Rate Advances is due
monthly in arrears. Interest on LIBOR Advances is due in arrears
at the end of the Interest Period and, in the event of any 6-
month LIBOR Interest Period, at the end of the first 90 days of
the Interest Period.
3. Payments. Any payment received by the Agent after noon will be
deemed to have been made on the next following Banking Day and
interest will accrue to that day. In the event that the date
specified for payment is not a Banking Day, then interest will
accrue to and the payment will be made on the next following
Banking Day; provided, however, that if the next Banking Day
following the end of an Interest Period for a LIBOR Advance is in
the following calendar month, then payment or renewal of the
LIBOR Advance will be due on the last Banking Day which precedes
the end of that Interest Period. All payments will be applied,
to the extent amounts are due, first to costs (including breakage
charges), then to fees, then to accrued interest, and finally to
principal.
4. Breakage Charge. Contran may prepay a LIBOR Advance only upon
three days' advance written notice and upon payment of the
breakage charge specified in the Note.
5. Terminating LIBOR. The Bank Group is offering the LIBOR to
Contran on the assumption that there will continue to be an
active interbank market in Eurodollars. If that market ceases to
exist or if it otherwise becomes illegal or impractical for any
member of the Bank Group to fund an Advance with reference to
this source of funds, then the Bank Group member(s) so affected
will give notice of such illegality or impracticality to Contran
and any future loan from those members of the Bank Group will be
at the Prime Rate.
6. Increased Costs. If any member of the Bank Group is required to
increase its reserves, insurance premiums, or regulatory capital
or to pay additional taxes (other than income taxes) in order to
make Advances to Contran because of the future enactment,
promulgation, or amendment of any statute, regulation, or order
by a government or governmental subdivision or agency, then
Contran will reimburse such member(s) of the Bank Group on demand
for all such increased costs as estimated in writing with
reasonable particularity by such member.
7. Notes; Promise of Repayment. Contran promises and agrees to
issue a note to each member of the Bank Group in the amount of
such member's commitment and to repay all Advances, plus
interest, fees, costs and expenses, to the order of each member
of the Bank Group in accordance with such member's Percentage
Interest.
8. Guaranty; Promise of Repayment. The Contran Affiliates jointly
and severally promise and agree to issue the guaranty to each
member of the Bank Group and to repay each Bank Group member's
Percentage Interest of all Advances, plus interest, fees, costs
and expenses, to such member's order in accordance with the terms
hereof and of the note.
9. Nature of Liability. Contran, VGI, and NCL are jointly,
severally, and primarily liable for performance of the
Obligations.
10. Maintenance of Loan-to-Value Ratio: Mandatory Prepayment or
Pledge of Additional Pledged Securities. If the outstanding
principal balance of the Advances at any time results in an LTV
of more than 50%, the Contran Affiliates immediately will either
(a) make a prepayment of principal so as to reduce the LTV to 50%
or less and/or (b) pledge additional investment securities in
quality and quantity reasonably acceptable to the Bank Group so
as to reduce the LTV to 50% or less. For the purposes of this
paragraph, the Bank Group acknowledges and agrees that the
Contran Companies always may pledge additional shares of Valhi
common stock owned by a Contran Company in order to meet the LTV
requirement. Prepayments required under this section will be
applied first to Prime Rate Advances, because such Advances may
be prepaid without payment of the breakage charge, and then to
LIBOR Advances in an order which first pays the LIBOR Advance(s)
with the shortest remaining time until maturity, then the next
shortest period, etc. If additional investment securities are
pledged and the value of the pledged securities later increases,
the Agent will, upon the written request of the Contran
Affiliates, return to the Contran Affiliates any of the
additional pledged securities (but not the Valhi or Tremont
shares pledged initially) which are not then necessary to
maintain the LTV at 50% or less.
11. Waiver; Forbearance. Each Contran Affiliate waives acceptance,
presentment (including notice of dishonor) and all claims,
offsets, defenses, and counterclaims based on suretyship or
impairment of collateral. Without limiting the foregoing, each
Contran Affiliate consents to extension of due dates, material
modifications, and impairment of contribution rights and the
value of interests in collateral without prior notice or demand.
III. CONDITIONS PRECEDENT.
A. Conditions to First Borrowing. The following are conditions precedent
which must be satisfied by the Contran Affiliates or waived by the
Bank prior to the first Advance:
1. Loan Documents. Contran has duly executed (signed, acknowledged
where appropriate, and delivered) the Loan Documents;
2. Guaranties. The Contran Affiliates have executed the Guaranties
and the Security Documents;
3. Corporate Documents. Each Contran Company has delivered
certified true copies of currently effective (a) articles of
incorporation, bylaws, and similar governance documents (its
"organization documents"), (b) resolutions of its board of
directors authorizing it to execute each of the Loan Documents to
which such organization is a party and to perform the
Obligations, and specifying the representative(s) who will
execute the Loan Documents on its behalf (and, for Contran, who
may request Advances) (its "borrowing resolutions"), and (c) an
incumbency certificate executed by its corporate secretary
containing specimen signatures of the representatives who will
execute the Loan Documents and, in the case of Contran, request
Advances (its "incumbency certificate");
4. Representations and Warranties. The representations and
warranties made by the Contran Affiliates in the Loan Documents
are true, complete and correct in all material respects as of the
date upon which the Loan Documents are executed and the date upon
which the first loan is requested and a duly authorized
representative of each Contran Affiliate has executed a
certificate dated as of the date of the first Advance certifying
the continued accuracy and completeness of the representations
and warranties;
5. Legal Opinion. Contran's general counsel has rendered an opinion
to the Bank Group opining that as of the date of the Loan
Documents (a) each Contran Company is an existing Delaware
corporation that has been duly organized, (b) each Contran
Company has been duly authorized to execute each of the Loan
Documents to which such organization is a party and to perform
the Obligations, (c) each of the Loan Documents is the legally
valid and binding obligation of each Contran Company who is a
party thereto and is enforceable in accordance with its terms
except as enforcement may be limited by insolvency or other
similar laws affecting the rights and remedies of creditors
generally, general principles of equity, whether applied by a
court of law or equity, and other generally applicable rules of
law, and (d) the Security Documents are a form sufficient to
create a lien on or security interest in all right, title, and
interest of the Contran Companies in the Pledged Securities;
6. Perfection. The Contran Companies have delivered to the Agent
possession of the certificates evidencing the investments
securities which are part of the Pledged Securities with stock
powers signed in blank and related compliance certificates and
the Agent has perfected its security interest of the Bank Group
in any other types or items of the collateral;
7. Legal Matters. All matters pertaining to the Loan Documents and
the Advances are reasonably satisfactory to the Agent and the
Agent has received all certificates, insurance policies and
documents that it reasonably requires to establish compliance
with the terms and conditions of the Loan Documents.
B. Subsequent Advances. The following are conditions precedent which
must be satisfied by Contran or waived by the Bank Group prior to any
Advance subsequent to the first Advance:
1. No default. There is no Default or Prospective Default on the
date of such Advance after giving effect to such Advance;
2. Representations and Warranties. The representations and
warranties made by the Contran Companies in the Loan Documents
continue to be true, complete and correct in all material
respects; and
3. LTV Compliance. After giving effect to the requested Advance,
the LTV will be 40% or less.
IV. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties. Each Contran Company represents and
warrants to the Bank Group that:
1. Corporate Organization. Each Contran Company is a Delaware
corporation which is duly organized and is duly qualified to
transact business in all other states and countries where the
failure to be so qualified would have a material adverse impact
on its business operations or ownership of property;
2. Authorization. Each Contran Company has been duly authorized to
execute each of the Loan Documents to which such organization is
a party and to perform the Obligations;
3. Due Execution and Delivery. Each Loan Document to which such
organization is a party has been duly executed by a
representative of such organization who has been duly authorized
to perform such acts;
4. Legally Binding Documents. Each Loan Document is the legally
valid and binding obligation of each Contran Company who is a
party to such document and is enforceable against such
organization in accordance with its terms except as such
enforcement may be limited by insolvency or other similar laws
affecting the rights and remedies of creditors generally, general
principles of equity whether applied by a court of law or equity,
and generally applicable rules of law;
5. Accurate Financial Statements. The annual and interim financial
statements of the Contran Companies furnished to the Bank Group
present fairly the financial position of such Contran Companies
as of the date of such financial statements and the results of
the operations and changes in financial position for the annual
and interim periods then ending (1);
6. No Violations. Neither the execution of the Loan Documents nor
the performance of the Obligations by the Contran Companies is
prohibited by or will subject any Contran Company to any fine,
penalty or similar sanction under, any statute, regulation, or
order applicable to such organization;
7. No Proceedings. There are no civil, criminal, or administrative
proceeding now pending or overtly threatened in writing against
any Contran Company which has not been disclosed in the audited
financial statements which have been provided to the Bank or
[FN]
(1)
The financial statements for VGI and NCL may omit footnote disclosures which
would normally be required under GAAP.
separately in writing and which, if adversely determined, would
have a material adverse effect on the ability of the Contran
Companies to repay the Advances and perform their other
obligations to the Bank Group under the Loan Documents;
8. No Breach or default. No Contran Company is now, or by reason of
the execution of the Loan Documents or performance of the
Obligations will be, in breach of or in default under any
"employee pension benefit plans" or "employee benefit plans" (as
those terms are defined by Section 3 of the Employee Retirement
Income Security Act of 1974, as amended) to which such
organization is a party or sponsor in any material respect or any
other material agreement, instrument, undertaking, or other
contract to which such organization is a party or by which its
property is bound;
9. Tax Returns; Taxes. Each Contran Company has filed all material
tax returns that it is required by any statute, regulation, or
order to file and has paid when due all material taxes imposed on
it or its property;
10. Compliance with Law. Each Contran Company is in compliance in
all material respects with all statutory laws, regulations, and
orders that are applicable to such organizations and their
property specifically including, but not limited to,
environmental laws;
11. Hazardous Material. To the best knowledge of Contran, there is
no hazardous material being released, and no hazardous material
has been released, from or at any real property owned or operated
by any Contran Company in quantities which would trigger such
organization's obligation under applicable environmental laws to
report the existence of such waste or to remove and dispose of
such waste or to remediate the effects of a prior discharge
thereof except as disclosed to the Bank in writing before the
date of the Loan Documents;
12. Solvency. No Contran Company is insolvent or the subject of any
insolvency proceedings and each Contran Company has capital which
is reasonably adequate to conduct its business in the manner in
which it intends to conduct such business;
13. Investment Company Act. No Contran Company (which by definition
excludes Tremont) is an "investment company" as that term is
defined by Section 3(a) of the Investment Company Act of 1940;
14. No Material Adverse Change. There has been no material adverse
change in the business operations, financial position, or cash
flows of the Contran Companies since the date of the lastest
annual financial statement provided to the Bank Group before the
date of this Agreement; and
15. Ownership of Pledged Securities. Each Contran Company owns the
item or items of Pledged Securities that such organization
purports to own and such property is free and clear of all liens,
security interests, and claims except to the extent that a
security interest is granted to the Bank Group in the Loan
Documents.
B. Reaffirmation. The Contran Companies will be deemed to reaffirm the
accuracy and completeness of the foregoing representations and
warranties each time that an Advance is requested.
V. COVENANTS.
A. Affirmative Covenants. The Contran Companies promise and agree that
until the Advances are repaid and all other Obligations are discharged
by performance, each Contran Company will, unless the Agent otherwise
consents in writing:
1. Preserving Existence. Preserve its legal status and material
franchises and pay all material taxes and fees in connection
therewith;
2. Compliance with Laws and Orders. Comply in all material respects
with all statutory laws, regulations, and orders applicable to it
or its property specifically including, but not limited to,
environmental laws, if noncompliance would or is likely to have a
material adverse effect on the financial condition or business
prospects of such organization or its ability to perform the
Obligations;
3. Insurance. Obtain and maintain with responsible carriers or
through self-insurance such workers' compensation, fire with
extended coverage endorsement, public liability and property
damage and such other insurance in such coverage amounts,
deductibles and terms as may be consistent with industry
practices and will provide evidence of such insurance and payment
of premiums to the Agent as and when required by the Agent;
4. Payment and Performance of Debts, Liabilities and Obligations.
Pay and perform when due all material debts and obligations owed
to all third persons, specifically including, but not limited to,
its obligations under any "employee pension benefit plans" or
"employee benefit plans" (as those terms are defined by Section 3
of the Employee Retirement Income Security Act of 1974, as
amended) to which such person is a party or sponsor in any
material respect or any other material agreement, instrument,
undertaking, or other contract to which such person is a party or
by which its property is bound;
5. Books and Records. Keep accurate and complete books and records
relating to the Pledged Securities and its other assets and
liabilities, management and employees, production, marketing,
operations, performance and earnings;
6. Tax Returns. File all tax returns required by statute,
regulations, and orders to be filed and pay all material taxes
when due;
7. Financial Statements. Deliver to each member of the Bank Group
(a) unaudited interim consolidated financial statements of
Contran within 60 days following the end of each of the first
three quarterly reporting periods of each fiscal year, (b)
audited annual consolidated financial statements of Contran
within 120 days following the end of each fiscal year,
accompanied by a copy of an unqualified audit opinion issued by
certified public accountants reasonably satisfactory to the Bank
Group and, if issued, copies of such auditor's "management
letter," and (c) unaudited consolidating financial statements of
VGI and NCL within 60 days following the end of each of the first
three quarterly reporting periods and within 120 days of the end
of each fiscal year, which unaudited consolidating financial
statements of VGI and NCL may omit all footnote disclosures
normally required in financial statements prepared in accordance
with GAAP;
8. Auditor Certificates. Deliver to each member of the Bank Group
with the audited annual consolidated financial statements of
Contran the certificate of the auditors addressed to the Agent
and certifying, based only on review of the annual audited
financial statements and the Loan Documents, that the auditors
are not aware of any event of Default or Prospective Default or,
if such auditors are aware of such event, specifying such events
with reasonable particularity; provided, however, that in
connection therewith the auditors shall be under no obligation to
go beyond the bounds of generally accepted auditing standards for
the purpose of certifying such compliance or non-compliance;
9. Additional Information; Compliance Certificates. Provide to the
Agent:
a) A Notice of Borrowing when and as Contran requests Advances;
b) Such additional information as and when reasonably requested
by the Bank Group or the Agent as to the Pledged Securities
and the business operations and financial condition of any
one or more of the Contran Companies;
c) Notice of any material adverse change in the business
operation or financial condition of any Contran Company; and
d) Within 10 Banking Days after any Contran Company receives
written notice thereof, a report of each pending and overtly
threatened claim, litigation, and governmental proceeding
which, if adversely determined, probably would involve an
aggregate liability of $5,000,000 or more;
e) Quarterly and annual compliance certificates, to accompany
the quarterly and annual financial statements, signed by a
duly authorized representative of the Contran Companies
which either (A) certifies that there is no event of Default
or Prospective Default as of the date of the certificate to
the knowledge of the representative or (B) specifies with
reasonable particularity such events then existing and known
to the representative and outlines its plan for cure
thereof;
f) Copies of any filings or reports that any Contran Company
files or makes with any federal or state government
department, commission, or agency regulating investment
securities as and when such filings or reports are filed or
made to such government department, commission, or agency;
and
g) If Contran becomes aware of any material event of Default or
Prospective Default between quarterly and annual reporting
dates, written notice of such event of Default or
Prospective Default within 10 days after Contran's senior
management learns of such event of Default or Prospective
Default.
10. Inspection Rights. The Agent will have the right to discuss
financial statements and other books and records with accounting
employees and outside accountants of each Contran Company and the
Contran Companies will ensure that the Agent may exercise and
enjoy such rights subject to the obligation of the Agent to give
reasonable advance notice to the Contran Companies under the
circumstances. The Contran Companies will reimburse the Agent for
all reasonable costs and expenses incurred by the Agent in
connection with the foregoing. All employees and outside
accountants are hereby authorized to discuss such matters with
the Agent, to provide such additional books and records and
information as may be reasonably requested by the Agent in
connection therewith, and to xxxx the Contran Companies for such
services. The Agent also will give prior notice to the Contran
Companies of the intention to discuss such matters with the
outside accountants so as to provide the opportunity to the
management of the Contran Companies to be present at such
discussions.
11. Contest Rights. Notwithstanding the foregoing covenants, each
Contran Company will have the right to contest its obligations
under statutory laws, regulations, orders, and contracts (other
than the Obligations) and for payment of taxes as long as (a)
such contest is started and continued in good faith and by
appropriate means, (b) adequate reserves are maintained by the
Contran Company engaging in such contest for performance of the
obligation in the event of an outcome of such contest that is
adverse to the Contran Company involved and (c) the Bank Group is
notified of any such contest where an adverse outcome probably
would involve a payment of $5,000,000 or more.
B. Negative Covenants. Each Contran Company promises and agrees that
until the Advances are repaid and all other Obligations have been
discharged by performance, it will not, unless the Bank Group
otherwise consents in writing:
1. Additional Debt. Directly or indirectly (by borrowing, deferred
purchase, guarantee, or otherwise) incur more than $25,000,000 as
a group in funded debt in excess of that immediately available to
the Contran Companies on the date of this Agreement except for
loans occurring in the ordinary course of business from the
Contran Companies to each Contran Company and/or Valhi;
2. Asset Transfers. Transfer any material or essential part of or
interest in their property to any third party except for sales of
inventory and surplus or obsolete equipment, the collection of
accounts, and sales and exchanges of other assets in the ordinary
course of business;
3. Transactions with Affiliates. Engage in any material business
transaction with any affiliate or other third party on terms less
favorable to the Contran Company than those which could be
obtained at the time thereof in arm's-length dealings with a
nonaffiliated person;
4. Business Combinations. Engage in any merger, acquisition, or
exchange of equity securities unless the Contran Company is the
surviving corporation and the Contran Companies continue to be in
compliance with all of the terms and conditions of the Loan
Documents; or
5. Use of Proceeds. Use the proceeds of any loan for any purpose
not permitted by the Loan Documents.
VI. DEFAULT.
TIME IS OF THE ESSENCE. Contran will be in default under the Loan
Documents if:
A. Payment Failure. The Contran Companies fail to make any payment of
principal when due or fail to make any payment of interest, fees or
costs within three Banking Days following the due date;
B. LTV Compliance. The Contran Companies fail to prepay principal or
pledge additional Pledged Securities within three Banking Days
following receipt of written notice from the Agent that the LTV
exceeds 50% if and when required by the Agent under the terms of this
Agreement.
C. Misrepresentation. Any Contran Company knowingly misrepresents any
material fact to the Bank Group or the Agent or fails to disclose to
the Bank Group or the Agent a material fact which is necessary to make
the facts which have been disclosed not misleading in the
circumstances under which they are made;
D. Affirmative Covenants. The Contran Companies fail to comply with the
affirmative covenants contained in any of the Loan Documents within 30
days following the date such compliance is demanded by the Bank Group
or, if such compliance cannot be completed within that 30-day period,
fails to substantially commence compliance within that 30-day period
and then to complete such compliance as soon as possible thereafter
but in no event later than 60 days after such compliance is demanded;
E. Negative Covenants. Any Contran Company breaches any negative
covenant contained in the Loan Documents;
F. Debt Default. Any Contran Company breaches or is in default under any
agreement, instrument, or similar contractual undertaking for the
repayment of funded debt in excess of $5,000,000 or does not pay any
trade account payables which is material or essential to its business,
other than those where the amount or validity is being contested in
good faith and by appropriate means, in the ordinary course of
business;
G. Guaranty. Any Contran Affiliate repudiates, breaches, or is in
default under the Guaranty or the Security Documents;
H. Insolvency. Any Contran Company becomes insolvent, the subject of any
voluntary insolvency proceeding or, having become the subject of an
involuntary insolvency proceeding, fails to have the involuntary
proceeding dismissed within 90 days of commencement;
I. Judgments. Any Contran Company becomes a judgment debtor for more
than $5,000,000 if such liability is not either covered by insurance
or vacated, discharged, stayed, or bonded in connection with an appeal
within 30 days of entry of the judgment; or
J. Change in Control. Any person or group of persons, other than the
current holders, hereafter directly or indirectly acquires control of
any Contran Company and such change in control continues for 60 days.
VII. REMEDIES.
A. Suspending Commitment. The members of the Bank Group may suspend
their obligations to make Advances to Contran upon the occurrence of a
Prospective Default or when the LTV is more than 40%.
B. Canceling Commitments. The members of the Bank Group may cancel their
obligations to makes Advances to Contran and accelerate the due date
of the Notes (make payment of all principal, interest, fees and costs
immediately due and payable) without further notice or demand upon the
occurrence of an event of Default and Contran's failure to cure such
Default within applicable notice and grace periods.
C. Collecting Payments; Order of Exercise of Remedies. The Bank Group
may collect the overdue payments or the accelerated balance of the
Notes at such times and in such order as the Bank Group selects. All
rights and remedies provided by law, equity and contract are
cumulative.
D. Consent to Jurisdiction. Each Contran Company consents to the
jurisdiction and venue of the circuit court of the state of Oregon for
Multnomah County (Portland) and of any federal court located in the
state of Oregon for any proceeding arising out of the Loan Documents,
including offsets, defenses, and counterclaims arising in contract or
tort.
E. Offset. Without limiting the generality of the foregoing, each
Contran Company expressly grants to each member of the Bank Group the
right to offset the obligations of the Bank Group to the Contran
Companies against the Obligations without notice or demand upon the
occurrence and continuance of a Default.
F. JURY TRIAL WAIVER. ON ADVICE OF COUNSEL AND IN LIEU OF AN ARBITRATION
CLAUSE NORMALLY REQUIRED BY THE AGENT, EACH CONTRAN COMPANY WAIVES
TRIAL BY JURY IN ANY CONTROVERSY (CLAIM, OFFSET, DEFENSE,
COUNTERCLAIM, OR THIRD-PARTY CLAIM WHETHER ASSERTED IN TORT OR
CONTRACT) ARISING OUT OF OR IN ANY WAY RELATED TO CONSTRUCTION,
PERFORMANCE, AND/OR ENFORCEMENT OF THE LOAN DOCUMENTS.
G. Costs. The prevailing party in the trial or appeal of any civil
action or other proceeding relating to the Loan Documents (including
claims and adversary proceedings in the Bankruptcy Court) will be
entitled to the award of a reasonable attorney fee in addition to
costs and disbursements. If the Bank Group uses an attorney to
enforce performance of the Obligations, the Contran Companies will
reimburse the Bank Group for such costs reasonably incurred on demand
whether or not a civil action or other proceeding is commenced.
VIII.INDEMNITY.
A. Indemnity. The Contran Companies promise and agree to indemnify,
defend and hold harmless each member of the Bank Group from and
against all claims and causes of action (and any direct and reasonable
loss, damage, liability, cost, and expense, including penalties,
damages, liens and reasonable attorney fees and other defense costs
resulting therefrom) of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against any of such member in
connection with any investigation, litigation, or other proceeding,
that arises from or relates to the Loan Documents or the failure of
any of the Contran Companies to perform the Obligations, but the
Contran Companies will not be responsible for any portion of such
indemnified claims or causes of action that arise from or relate to
the negligence or willful misconduct of any member of the Bank Group,
any controversies or claims among the members of the Bank Group, or
the failure of a member of the Bank Group to comply with any statute,
regulation, or order applicable to such indemnified party.
B. Durable Nature. This indemnity will survive the satisfaction or
discharge of the Advances by payment, bankruptcy discharge, or
otherwise.
IX. AGENCY PROVISIONS.
A. Authorization and Action. Each member of the Bank Group hereby
irrevocably appoints the Agent as its agent for administration of the
Advances and Obligations and authorizes the Agent to take such action
and exercise such powers under this Agreement as are granted to the
Bank Group, subject to the voting/approval provisions of this Article,
by the terms of this Agreement together with such additional actions
and powers as are reasonably incidental thereto. The obligations of
the Agent are mechanical and administrative in nature. Accordingly,
the Agent is not by reason of its role under this Agreement a trustee
or fiduciary for any member of the Bank Group. The Agent will have no
obligations except those expressly stated in this Agreement. As to
any matters not expressly provided for in this Agreement (including,
but not limited to, enforcement or collection of the Notes), the Agent
will not be required to exercise any discretion or take any action,
but will be required to act or to refrain from acting upon the
instructions of the Bank Group Majority, and such instructions will be
binding on all members of the Bank Group; provided, however, that the
Agent will not be required to take any action which exposes the Agent
to personal liability or that is contrary to this Agreement or
applicable laws, regulations, or orders.
B. Liability of the Agent. The Agent (including its shareholders,
directors, officers, agents, and employees) will not be liable for any
action taken or inaction by it under or in connection with this
Agreement in the absence of its own gross negligence or willful
misconduct. Without thereby limiting the foregoing sentence, the
Agent:
1. May treat the payee of a Note as the holder thereof until the
Agent receives written notice of a transfer thereof signed by
such payee in a form reasonably satisfactory to the Agent;
2. May consult with legal counsel, independent public accountants,
and other experts selected by it and will not be liable for any
action taken or inaction by it in good faith in accordance with
the advice of such counsel, accountants, or experts;
3. Makes no warranty or representation to any Bank and will not be
liable or responsible for the statements, warranties, or
representations made by the Contran Companies or any other person
in connection with this Agreement,
4. Will not have any obligation to inquire as to the performance or
observance of any of the terms, covenants, or conditions of this
Agreement on the part of the Contran Companies or any other
person or to inspect any Pledged Securities, books and records,
or other property of the Contran Companies or any other person;
5. Will not be responsible to any member of the Bank Group for the
due execution, legality, validity, enforceability, genuineness,
perfection, sufficiency, or value of this Agreement, the Notes,
or any other certificate, instrument, or document furnished
pursuant to this Agreement, and
6. Will have no liability under this Agreement or otherwise by
acting upon any notice, consent, certificate, or other
instrument, document, or other writing (whether personally
delivered or sent by mail, messenger, telegram, telex, or
facsimile) believed by the Agent to be genuine and signed by the
proper person.
C. Rights of Agent as a Member of the Bank Group. With respect to its
individual commitment, the Advances made by it, and the Note and
Guaranty issued to it, the Agent will have the same rights, powers,
and obligations under this Agreement as any other member of the Bank
Group and may exercise and perform the same as though it were not also
the Agent. The Agent and its affiliates may accept deposits from,
lend money to, act as trustee for, and generally engage in any
business with or own securities of the Contran Companies as if the
Agent were not the Agent for the Bank Group and without any obligation
to account therefor to the Bank Group.
D. Independent Credit Decision. Each member of the Bank Group
acknowledges that it has made its own credit analysis and decision
before making its commitment on the basis of such documents and
information that it deemed appropriate and without reliance on any
information, analysis, or recommendation made by the Agent. Each
member of the Bank Group also acknowledges that it will continue to
make such independent credit analyses and decisions in taking or not
taking action under this Agreement. Except for the notices, reports,
and other documents and information that the Agent is specifically
required to furnish to the members of the Bank Group under this
Agreement, the Agent will have no obligation to provide to the members
of the Bank Group any additional information concerning the financial
condition, business operations, or property of the Contran Companies
that may come into the possession of the Agent or its affiliates.
E. Indemnification. Each member of the Bank Group agrees to indemnify
and hold harmless the Agent from and against such member's Percentage
Interest of all claims and causes of action (and any resulting loss,
damage, liability, cost, and expense, including penalties, damages,
liens and reasonable attorney fees and other defense costs) of any
kind or nature whatsoever that (i) may be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising from this
Agreement, (ii) are not reimbursed to the Agent by the Contran
Companies, and (iii) are not the result of the Agent's gross
negligence or willful misconduct. Without limiting the generality of
the foregoing, each member of the Bank Group agrees to reimburse the
Agent for its Percentage Interest of any reasonable out-of-pocket
expenses, including reasonable attorney fees, incurred by the Agent in
connection with the preparation, administration, enforcement, or legal
advice with respect to rights or duties under, the Loan Documents to
the extent that such expenses are not reimbursed by the Contran
Companies.
F. Successor Agent. The Agent may resign at any time by giving at least
60 days' prior written notice to the Bank Group and to the Contran
Companies. Upon resignation, the Bank Group Majority will appoint a
successor Agent. If no successor Agent has been appointed and
accepted its appointment within 30 days of receipt of the notice of
resignation of the Agent, then the Agent may appoint its successor
which shall be a national bank having combined capital and surplus of
at least $100 million. Upon acceptance by the successor of its
appointment, such successor will succeed to and become vested with all
of the rights, powers, privileges, and duties of the Agent and the
retiring or removed Agent will be discharged from its obligations as
the Agent under this Agreement.
G. Sharing of Payments and Recoveries. If any member of the Bank Group
obtains any payment (whether voluntary, involuntary, by way of offset,
or otherwise) on account of the Note held by it and such payment is in
excess of its Percentage Interest, such member will purchase from the
other members of the Bank Group such participation in the Notes held
by them as is necessary to cause such purchasing member of the Bank
Group to share the excess payment ratably with the other members of
the Bank Group. If such member is thereafter required to return all
or any part of the excess payment, then the purchase of participation
by such member of the Bank Group will be rescinded to the same extent
and the purchase price of such participation (or so much thereof as is
recovered) will be refunded.
H. Modifications, Consents, and Waivers. Except as allowed or limited
by the remainder of this section, the Bank Group Majority may in
specific instances modify the terms and conditions of this Agreement,
grant consents requested by the Contran Companies, waive compliance by
the Contran Companies with the terms and conditions of this Agreement
but any such modifications, consent, or waiver must be in writing to
be effective.
Notwithstanding any other term or conditions of the Loan Documents, no
modification, consent, or waiver may, unless such modification,
consent, waiver, release, or termination is in writing and is signed
by all members of the Bank Group:
1. Waive any of the conditions precedent specified in Article III of
this Agreement;
2. Increase or decrease the individual commitment of any member of
the Bank Group, or otherwise subject any member of the Bank Group
to any additional obligations without such bank's consent
3. Reduce the amount payable on any Note (including principal,
interest, or fees);
4. Extend the Expiry Date or the Maturity Date;
5. Change the definition of "Bank Group Majority" or modify this
section; or
6. Authorize the release or termination of any Guaranty or the
security interest of the Bank Group in any material or essential
part of or interest in the Pledged Securities.
Notwithstanding the foregoing, the Bank Group Majority will have the right
to authorize the Agent to release parts of and/or interests in Pledged
Securities from time to time to accommodate ordinary course of business
transactions by the Contran Companies and the Agent may release additional
pledged securities as provided in 'II.B.10 of this Agreement as long as the
LTV is maintained at or above 50%.
X. MISCELLANEOUS.
A. Binding Successors. The Loan Documents will bind the successors and
assigns of the Contran Companies and will bind and inure to the
benefit of the successors and assigns of each member of the Bank Group
and the Agent.
B. Participants and Assignees. Each member of the Bank Group will be
entitled to sell no more than 75% participation in its percentage
interest in the Loan Documents (including the Advances made
thereunder) and will be entitled to propose to the Contran Companies
partial assignment of its rights and delegation of its duties to no
more than two financial institutions. While the Contran Companies
will have the right prior to a Default or Prospective Default to
consent to any such assignment and delegation, each Contran Company
covenants that its consent will not be unreasonably withheld.
Upon the sale of a participation or a partial assignment, the
participant or assignee shall be entitled to receive directly from the
Contran Companies copies of all reports, certificates and other
information, including the financial statements, as and when such
information is provided to the member of the Bank Group participating
or assigning such interest.
C. Non-Waiver. No term or condition of the Loan Documents shall be
deemed waived nor shall the grounds for the claim of estoppel be
established by a course of performance, oral understanding or other
circumstances. Terms and conditions may be waived or amended only in
writing executed by the Bank Group or, in appropriate circumstances,
the Bank Group Majority.
D. Communications. Whenever any communication is required by the terms
of the Loan Documents or by law, it will be deemed delivered when
delivered personally or by facsimile machine or on the third Banking
Day after it is mailed in a postage prepaid envelope addressed to the
intended recipient at the address specified below or such other
address as a party may hereafter specify by written notice to the
other parties.
E. Costs. The Contran Companies will pay on demand all reasonable direct
costs and expenses, including reasonable attorney fees, incurred by
the Agent in drafting, negotiating, modifying and reviewing the Loan
Documents.
F. Counterparts. The Loan Documents may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all
of which, taken together shall constitute one and the same contract.
G. Statutory Statement. Under Oregon Law, most agreements, promises and
commitments made by a financial institution after October 3, 1989,
concerning Advances and other credit extensions which are not for
personal, family or household purposes or secured solely by the
borrower's residence must be in writing, express consideration and be
signed by the financial institution to be enforceable.
UNITED STATES NATIONAL BANK CONTRAN CORPORATION
OF OREGON, as the Agent
By /s/ Xxxxxx X. Xxxxx By /s/ Xxxxxx X. Xxxxxx
--------------------------- ---------------------------
Xxxxxx X. Xxxxx Xxxxxx X. Xxxxxx
Vice President Vice President
NATIONAL CITY LINES, INC.
By /s/ Xxxxxx X. Xxxxxx
---------------------------
Xxxxxx X. Xxxxxx
Vice President
VALHI GROUP, INC.
By /s/ Xxxxxx X. Xxxxxx
---------------------------
Xxxxxx X. Xxxxxx
Vice President
UNITED STATES NATIONAL BANK Commitment Amount $30,000,000
OF OREGON
By /s/ Xxxxxx X. Xxxxx
---------------------------
Xxxxxx X. Xxxxx
Vice President
SOCIETE GENERALE,
SOUTHWEST AGENCY Commitment Amount $10,000,000
By /s/ Xxxxxxx X. Xxxxx
---------------------------
Xxxxxxx X. Xxxxx
