SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. 45)*
KEYSTONE CONSOLIDATED INDUSTRIES, INC.
(Name of Issuer)
Common Stock, $1.00 par value
(Title of Class of Securities)
49342210900
(CUSIP Number)
STEVEN L. WATSON
THREE LINCOLN CENTRE
SUITE 1700
5430 LBJ FREEWAY
DALLAS, TEXAS 75240-2694
(972) 233-1700
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 29, 1997
(Date of Event which requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
Check the following box if a fee is being paid with the statement. [ ] (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.
See Rule 13d-7.)
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
(Continued on following pages)
CUSIP No. 49342210900
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Contran Corporation
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE
INSTRUCTIONS)
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
WC
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 3,939,809
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH -0-
10 SHARED DISPOSITIVE POWER
3,939,809
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
3,939,809
12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (SEE INSTRUCTIONS) [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
42.4%
14 TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
CO
CUSIP No. 49342210900
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Harold C. Simmons
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP(SEE
INSTRUCTIONS)
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS(SEE INSTRUCTIONS)
Not applicable
5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
USA
7 SOLE VOTING POWER
-0-
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 4,230,309
EACH
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON
WITH -0-
10 SHARED DISPOSITIVE POWER
4,230,309
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON
-0-
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES (SEE INSTRUCTIONS) [ X ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
-0-
14 TYPE OF REPORTING PERSON(SEE INSTRUCTIONS)
IN
AMENDMENT NO. 45
TO SCHEDULE 13D
This amended statement on Schedule 13D (this "Statement") relates to the
common stock, $1.00 par value per share (the "Shares"), of Keystone Consolidated
Industries, Inc., a Delaware corporation (the "Company"). Items 2, 3, 4, 5, 6
and 7 of this Statement are hereby amended as set forth below.
Item 2. Identity and Background
No change except for the following:
(a) This Statement is filed by Contran Corporation, a Delaware corporation
("Contran"), and, by virtue of the positions reported below, Harold C. Simmons
(collectively, the "Reporting Persons"). By signing this Statement, each
Reporting Person agrees that this Statement is filed on its or his behalf.
Contran, NL Industries, Inc. ("NL") and Valhi, Inc. ("Valhi") are the
direct holders of approximately 38.7%, 3.5% and 0.2%, respectively, of the
9,297,533 Shares outstanding as of November 10, 1997 according to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (the
"Outstanding Shares"). Valhi and Tremont Corporation ("Tremont") are the direct
holders of approximately 57.9% and 17.7%, respectively, of the outstanding
common stock of NL and together may be deemed to control NL. Valhi Group, Inc.
("VGI"), National City Lines, Inc. ("National"), the Harold Simmons Foundation,
Inc. (the "Foundation"), the Contran Deferred Compensation Trust No. 2 (the
"CDCT No. 2"), NL and Valmont Insurance Company ("Valmont") are the direct
holders of approximately 35.1%, 5.2%, 3.7%, 3.5%, 0.5% and 0.5%, respectively,
of the outstanding common stock of Tremont. Together, VGI and National may be
deemed to control Tremont. Valhi is the holder of 100% of the outstanding
common stock of Valmont and may be deemed to control Valmont. VGI, National and
Contran are the direct holders of approximately 74.7%, 10.0%, and 7.6%,
respectively, of the outstanding common stock of Valhi. Together, VGI, National
and Contran may be deemed to control Valhi. National, NOA, Inc. ("NOA") and
Dixie Holding Company ("Dixie Holding") are the direct holders of approximately
73.3%, 11.4% and 15.3%, respectively, of the outstanding common stock of VGI.
Together, National, NOA and Dixie Holding may be deemed to control VGI. Contran
and NOA are the direct holders of approximately 85.7% and 14.3%, respectively,
of the outstanding common stock of National and together may be deemed to
control National. Contran and Southwest Louisiana Land Company, Inc.
("Southwest") are the direct holders of approximately 49.9% and 50.1%,
respectively, of the outstanding common stock of NOA and together may be deemed
to control NOA. Dixie Rice Agricultural Corporation, Inc. ("Dixie Rice") is the
holder of 100% of the outstanding common stock of Dixie Holding and may be
deemed to control Dixie Holding. Contran is the holder of approximately 88.7%
and 54.3% of the outstanding common stock of Southwest and Dixie Rice,
respectively, and may be deemed to control Southwest and Dixie Rice.
Mr. Harold C. Simmons is chairman of the board, president and chief
executive officer of Valhi, VGI, National, NOA, Dixie Holding and Contran. Mr.
Simmons is also chairman of the board and chief executive officer of Dixie Rice
and Southwest. Additionally, Mr. Simmons is chairman of the board of NL and is a
director of Tremont.
Substantially all of Contran's outstanding voting stock is held by two
trusts, the Harold C. Simmons Family Trust No. 1 dated January 1, 1964 and the
Harold C. Simmons Family Trust No. 2 dated January 1, 1964 (together, the
"Trusts"), established for the benefit of Mr. Simmons' children and
grandchildren, of which Mr. Simmons is the sole trustee. As sole trustee of
each of the Trusts, Mr. Simmons has the power to vote and direct the disposition
of the shares of Contran stock held by each of the Trusts. Mr. Simmons,
however, disclaims beneficial ownership of such shares.
The CDCT No. 2 directly holds approximately 0.2% and 3.5% of the
outstanding shares of Valhi and Tremont common stock, respectively. Boston Safe
Deposit and Trust Company serves as trustee of the CDCT No. 2 (the "Trustee").
Contran established the CDCT No. 2 as an irrevocable "rabbi trust" to assist
Contran in meeting certain deferred compensation obligations that it owes to
Harold C. Simmons. If the CDCT No. 2 assets are insufficient to satisfy such
obligations, Contran must satisfy the balance of such obligations. Pursuant to
the terms of the CDCT No. 2, Contran (i) retains the power to vote the shares
that Contran contributed to the CDCT No. 2, (ii) retains dispositive power over
such shares and (iii) may be deemed the indirect beneficial owner of such
shares.
The Foundation directly holds approximately 2.7% of the Outstanding Shares.
The Foundation is a tax-exempt foundation organized for charitable purposes.
Harold C. Simmons is the chairman of the board and chief executive officer of
the Foundation and may be deemed to control the Foundation. Mr. Simmons,
however, disclaims beneficial ownership of any Shares held by the Foundation.
The Combined Master Retirement Trust (the "CMRT") directly holds less than
1.0% of the Outstanding Shares and the outstanding shares of Tremont and Valhi
common stock, respectively. The CMRT is a trust formed by Valhi to permit the
collective investment by trusts that maintain the assets of certain employee
benefit plans adopted by Valhi and related companies. Mr. Simmons is the sole
trustee of the CMRT and the sole member of the trust investment committee for
the CMRT. Mr. Simmons is a participant in one or more of the employee benefit
plans that invest through the CMRT. Mr. Simmons, however, disclaims beneficial
ownership of any shares held by the CMRT, except to the extent of his vested
beneficial interest therein.
By virtue of the holding of such offices, the stock ownership and his
service as trustee, all as described above, (a) Mr. Simmons may be deemed to
control such entities and (b) Mr. Simmons and certain of such entities may be
deemed to possess indirect beneficial ownership of Shares directly held by
certain of such other entities. However, Mr. Simmons and the Trusts disclaim
such beneficial ownership of the Shares beneficially owned, directly or
indirectly, by any of such entities.
Harold C. Simmons' spouse is the direct beneficial owner of 10,500 Shares,
or approximately 0.1% of the Outstanding Shares. Mr. Simmons may be deemed to
share indirect beneficial ownership of such Shares. Mr. Simmons disclaims all
such beneficial ownership.
The Reporting Persons understand that Valmont and NL beneficially owned
1,000,000 shares and 1,186,200 shares, respectively, of Valhi common stock as of
the date of this report. The Reporting Persons further understand that the
shares of Valhi common stock owned by Valmont and NL are treated as treasury
stock by Valhi for voting purposes and for the purposes of this Statement.
Certain information concerning the directors and executive officers of
Contran, including offices held by Mr. Simmons is set forth on Schedule A
attached hereto and incorporated herein by reference.
(c) Contran is a diversified holding company engaged through its
subsidiaries in the production of, among other things, chemicals, titanium
metals, component products and steel fabricated wire products, industrial wire
and carbon steel rod products and in waste management, land management,
agriculture and oil and gas activities.
(d) Neither of the Reporting Persons nor, to the best knowledge of such
persons, any of the persons named in Schedule A to this Statement has been
convicted in a criminal proceeding in the past five years (excluding traffic
violations or similar misdemeanors).
(e) Neither of the Reporting Persons nor, to the best knowledge of such
persons, any person named in Schedule A to this Statement, was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
as a result of which such person was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
(f) Contran is Delaware corporation. Harold C. Simmons and all persons
named on Schedule A to this Statement are citizens of the United States of
America.
Item 3. Source and Amount of Funds or Other Consideration
No change except for the following:
The total amount of funds required by Contran to acquire the Shares
reported in Item 5(c) was $1,618,660.00 (including commissions). Such funds
were or will be provided by Contran's cash on hand and no funds were borrowed
for such purpose.
The Reporting Persons understand that the funds required by each person
named in Schedule A to this Statement to acquire Shares were from such person's
personal funds.
Item 4. Purpose of Transaction
No change except for the following:
Contran purchased the additional Shares reported in Item 5(c) of this
Statement in order to increase its equity interest in the Company. Depending
upon their evaluation of the Company's business and prospects, and upon future
developments (including, but not limited to, performance of the Shares in the
market, availability of funds, alternative uses of funds, and money, stock
market and general economic conditions), any of the Reporting Persons or other
entities that may be deemed to be affiliated with Contran may from time to time
purchase Shares, and any of the Reporting Persons, or other entities that may be
deemed to be affiliated with Contran may from time to time dispose of all or a
portion of the Shares held by such person, or cease buying or selling Shares.
Any such additional purchases or sales of the Shares may be in open market or
privately negotiated transactions or otherwise.
Harold C. Simmons, through Contran, may be deemed to control the Company.
The Reporting Persons understand that prior purchases of Shares by each of the
persons named in Schedule A to this Statement and Mr. Simmons' spouse were made
for the purpose of such person's personal investment.
Except as described in this Item 4, none of the Reporting Persons nor, to
the best knowledge of such persons, any other person named in Schedule A to the
this Statement has formulated any plans or proposals that relate to or would
result in any matter required to be disclosed in response to paragraphs (a)
through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
No change except for the following:
(a) Contran, NL, the Foundation, the CMRT, Valhi and Harold C. Simmons'
spouse are the direct beneficial owners of 3,599,759, 326,050, 250,000, 30,000,
14,000 and 10,500 of the Shares, respectively.
By virtue of the relationships described under Item 2 of this Statement:
(1) Contran may each be deemed to be the beneficial owner of the
3,939,809 Shares (approximately 42.4% of the Outstanding Shares) directly
held by Contran, NL and Valhi; and
(2) While Harold C. Simmons does not directly own any Shares, he may
be deemed to be the beneficial owner of the 4,230,309 Shares (approximately
45.5% of the Outstanding Shares) directly held by Contran, NL, the
Foundation, the CMRT, Valhi and Mr. Simmons' spouse.
Except to the extent of his vested beneficial interest in Shares directly
held by the CMRT, Mr. Simmons disclaims beneficial ownership of all Shares.
The Reporting Persons understand, based on ownership filings with the
Securities and Exchange Commission or upon information provided by persons named
in Schedule A to this Statement, that the following persons may be deemed to own
personally and beneficially Shares, as indicated below.
NUMBER OF SHARES
NAME BENEFICIALLY OWNED
- ------------------------- -------------------
Eugene K. Anderson 200
Glenn R. Simmons 110,675 (1)
Harold C. Simmons 10,500 (2)
Robert W. Singer 32,500 (3)
Steven L. Watson 2,250
- -----------
(1) Includes 69,125 Shares issuable upon the
exercise of stock options within 60 days of
the date of this Statement. Also includes
18,300 Shares held in his individual
retirement account. In addition, includes
150 Shares held by his wife and 300 shares
held in his wife's retirement account, all of
which beneficial ownership Mr. Glenn Simmons
disclaims.
(2) Shares held by Mr. Harold Simmons' spouse of
which he disclaims beneficial ownership. See
also the disclosure elsewhere in this
Statement as to other Shares that Mr. Simmons
may be deemed to own beneficially and
indirectly.
(3) Includes 10,000 Shares issuable upon the
exercise of stock options within 60 days of
the date of this Statement. Also includes
2,500 Shares held in his individual
retirement account, 2,893 Shares held in his
account in a deferred contribution plan. In
addition, includes 600 Shares held by his
wife and 6,500 held by a trust of which Mr.
Singer is the trustee, all of which
beneficial ownership Mr. Singer disclaims.
(b) Contran has the direct power to vote and direct the disposition of the
3,599,759 Shares directly held by it and the indirect power to vote and direct
the disposition of the 326,050 Shares directly held by NL and the 14,000 Shares
directly held by Valhi. By virtue of the relationships described in Item 2,
Harold C. Simmons may be deemed to have the power to vote and direct the
disposition of the Shares directly held by Contran, NL, the Foundation, the
CMRT, Valhi and his spouse.
(c) The table below sets forth additional purchases of the Shares by the
Reporting Persons during the 60 days prior to December 29, 1997 and subsequently
to the date of the filing of this Statement. All of such purchases were
effected by the purchaser indicated on the New York Stock Exchange.
Approximate Price
Per Share ($)
Amount of (exclusive of
Date Shares commissions) Purchaser
- -------------- --------------- ----------------- ------------
12/12/97 2,000 $11.3750 Contran
12/12/97 4,000 $11.6250 Contran
12/12/97 700 $11.8750 Contran
12/15/97 300 $11.8750 Contran
12/15/97 1,400 $12.0000 Contran
12/15/97 9,000 $12.2500 Contran
12/16/97 800 $12.0000 Contran
12/16/97 5,000 $12.1875 Contran
12/17/97 5,000 $12.0000 Contran
12/18/97 1,000 $12.0000 Contran
12/22/97 200 $11.7500 Contran
12/22/97 6,800 $11.8750 Contran
12/23/97 4,000 $11.8750 Contran
12/24/97 2,000 $11.7500 Contran
12/24/97 2,000 $11.8750 Contran
12/26/97 4,000 $11.7500 Contran
12/26/97 12,000 $11.8750 Contran
12/29/97 17,500 $11.7500 Contran
12/29/97 5,000 $11.8125 Contran
12/29/97 25,000 $11.8750 Contran
12/30/97 14,000 $11.7500 Contran
12/31/97 12,000 $12.0000 Valhi
01/07/98 2,000 $11.8750 Valhi
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer.
No change except for the following:
The $20 million credit facility dated as of October 31, 1991, as amended
and supplemented through March 27, 1996 among Contran, Banque Paribas, Houston
Agency and Societe Generale, Southwest Agency (the "Paribas/Societe Facility")
was terminated as of October 28, 1997.
Contran is now a party to a $10 million credit facility dated as of
November 5, 1997 with Societe Generale, Southwest Agency (the "Societe
Facility"). Borrowings under the Societe Facility bear interest at the rate
announced publicly from time to time by the bank as its prime rate (or if
greater, 0.5% over the rate for overnight federal funds transactions for members
of the Federal Reserve System) or at a rate of 1.5% over LIBOR, are due
November 3, 1998 or such extended maturity date as may be mutually agreed to,
and are secured by certain Shares. On December 31, 1997, no money had been
borrowed under the Societe Facility. The foregoing summary of the Societe
Facility is qualified in its entirety by reference to Exhibit 1 to this
Statement, which is incorporated herein by this reference.
Other than set forth above, neither of the Reporting Persons nor, to the
best knowledge of such persons, any person named in Schedule A to this Statement
has any contract, arrangement, understanding or relationship (legal or
otherwise) with any person with respect to securities of the Company, including,
but not limited to, transfer or voting of any such securities, finder's fees,
joint ventures, loans or option arrangements, puts or calls, guarantees of
profits, division of profits or losses, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Item 7 is amended and restated in its entirety as follows:
Exhibit 1.* Credit Facility dated as of November 5, 1997 between Contran and
Societe Generale, Southwest Agency.
- ---------
* Filed herewith.
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Date: January 8, 1998
By: /s/ Harold C. Simmons
----------------------------
Harold C. Simmons
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Date: January 8, 1998
CONTRAN CORPORATION
By: /s/ Steven L. Watson
----------------------------
Steven L. Watson
Vice President
Exhibit A
The names of the directors and executive officers of Contran and their
present principal occupations are set forth below.
Name Present Principal Occupation
- ------------------------- -------------------------------------
Eugene K. Anderson Vice President of Contran, Dixie
Holding, National, NOA, Valhi and
VGI; and Treasurer of the Foundation.
J. Mark Hollingsworth General Counsel of Contran, Dixie
Rice, Dixie Holding, National, NOA,
Southwest, VGI, Valhi and the
Foundation.
William J. Lindquist Vice President and Tax Director of
Contran, Dixie Rice, Dixie Holding,
National, NOA, Southwest, VGI and
Valhi.
Bobby D. O'Brien Vice President and Treasurer of
Contran, Dixie Holding, National,
NOA, VGI and Valhi; Vice President of
Dixie Rice and Southwest.
Glenn R. Simmons Vice Chairman of the Board and
Director of Contran, Dixie Holding,
National, NOA, VGI and Valhi;
Director of NL and Tremont; Executive
Vice President and Director of Dixie
Rice and Southwest; Chairman of the
Board and Director of the Company.
Harold C. Simmons Chairman of the Board, President,
Chief Executive Officer and Director
of Contran, Dixie Holding, National,
NOA, VGI and Valhi; Chairman of the
Board and Director of NL; Director of
Tremont; Chairman of the Board, Chief
Executive Officer and Director of
Dixie Rice, Southwest and the
Foundation.
Robert W. Singer Vice President of Contran and Valhi;
President and Chief Executive Officer
of the Company.
Gregory M. Swalwell Controller of Contran, Dixie Holding,
National, NOA, Southwest, VGI and
Valhi.
Steven L. Watson Vice President and Secretary of
Contran, Dixie Rice, Dixie Holding,
National, NOA, Southwest, VGI and
Valhi; Vice President, Secretary and
Director of the Foundation.
EXHIBIT INDEX
Exhibit 1.* Credit Facility dated as of November 5, 1997 between Contran and
Societe Generale, Southwest Agency.
- ---------
* Filed herewith.
CREDIT AGREEMENT
This Credit Agreement dated as of November 5, 1997 is by and among Contran
Corporation, a Delaware corporation (the "Borrower"), and Societe Generale,
Southwest Agency (the "Bank").
In consideration of these premises and for other good and valuable
considerations, the receipt and sufficiency of which is hereby acknowledged, the
Borrower and the Bank hereby agree as follows:
ARTICLE I
CERTAIN DEFINED TERMS
Section 1.1 Definitions. As used herein, the following terms will have
the following meanings unless the context requires otherwise:
"Acceptable Lien" shall mean, with respect to the Collateral, a Lien on
the Collateral (i) which exists in favor of the Bank, (ii) which is superior to
all other Liens, (iii) which secures the Indebtedness, and (iv) which is
perfected and is enforceable against all Persons in preference to any rights of
any Person therein (including without limitation any right of offset).
"Adjusted Eurodollar Rate" shall mean, with respect to each Interest Period
applicable to an Advance, a rate per annum (determined by the Bank) equal to (a)
the rate per annum (rounded upwards, if necessary, to the next higher one-one-
hundredth of one percent (.01%)) at which deposits are offered to the Bank in
the London interbank market with respect to Dollars, at approximately 11:00 a.m.
London time two Business Days before the first day of such Interest Period in an
amount comparable to the principal amount of such Advance and for a period of
time comparable to such Interest Period, divided by (b) one (1) minus the
Eurodollar Reserve Percentage.
"Adjusted Prime Rate" shall mean, as of any day of determination thereof,
the higher of (a) the Prime Rate or (b) one-half percent (1/2%) plus the Federal
Funds Rate; provided that the Adjusted Prime Rate shall in no event exceed the
highest lawful rate.
"Advance" shall mean any advance made by the Bank to the Borrower under
this Agreement.
"Agreement" shall mean this Credit Agreement dated as of November 5, 1997
between the Borrower and the Bank, as it may be amended or otherwise modified
from time to time in accordance with its terms.
"Available Commitment" shall mean, as of any day, the Commitment on such
day less the Paribas LC Exposure.
"Borrowing Base" shall mean the sum of (a) the product of (i) 49% of the
Current Market Value of a Keystone Share, multiplied by (ii) the number of
Keystone Shares pledged to the Bank pursuant to the Pledge Agreement, plus (b)
in the event any security other than Keystone Shares are pledged as Collateral
pursuant to the terms of the Pledge Agreement, the product of (x) 49% of the
Current Market Value of such security, multiplied by (y) the number of shares of
such security pledged to the Bank pursuant to the terms of the Pledge Agreement.
"Business Day" shall mean a day other than a Saturday or Sunday or a legal
holiday on which the Bank is required or permitted by law to be closed for
business and in the case of Eurodollar Advances shall also mean a day on which
dealings in Dollar deposits are carried on in the London interbank market and on
which banks are open for trading in the New York interbank eurodollar market.
"Collateral" shall mean the Property of the Borrower described in the
Pledge Agreement or any other Loan Document which secures the Indebtedness.
"Collateral Value" shall mean, with respect to any Property (other than a
Keystone Share) which becomes Collateral after the date of this Agreement, (a)
if such Property is a marketable security, the Current Market Value thereof, and
(b) otherwise, the lower of book value or fair market value of such Property.
"Commitment" shall mean the obligation of the Bank to make Advances to the
Borrower and issue Letters of Credit for the account of the Borrower subject to
the terms herein, in an aggregate principal amount not to exceed $10,000,000, as
such amount may from time to time be reduced or terminated as provided for in
Section s 8.2 and 8.3.
"Current Market Value" means, (i) with respect to any security, the most
recent closing price of such security on the New York Stock Exchange or, if such
security is not listed on the New York Stock Exchange but is listed on another
recognized national securities exchange, the most recent closing price of such
security on such other exchange, or, if such security is not listed on a
national securities exchange, the closing price of such security as reported on
the National Association of Securities Dealers Automated Quotations System
("NASDAQ") National Market System or, if applicable, the average of the closing
bid and asked quotations for such security as reported on NASDAQ, and (ii) with
respect to any security other than a security described in clause (i) above and
with respect to any other Property, such value determined by the Bank in
accordance with any reputable valuation method.
"Debt" of any Person shall mean (a) all indebtedness of such Person for
borrowed money, (b) that portion of the obligations of such Person under capital
leases which is properly recorded as a liability on a balance sheet of that
Person prepared in accordance with GAAP, (c) any obligation of such Person that
is evidenced by a promissory note, bond, debenture or other instrument
representing an extension of credit to such Person, whether or not for borrowed
money, (d) any obligation of such Person for the deferred purchase price of
property or services, (e) all indebtedness of such Person that is secured by a
Lien on assets of such Person, whether or not that Person has assumed such
obligation or whether or not such obligation is nonrecourse to the credit of
such Person, but only to the extent of the lesser of (i) the fair market value
of the assets so subject to the Lien and (ii) the amount of the secured
indebtedness, (f) obligations (contingent or otherwise) to reimburse an issuing
bank in respect of letters of credit (except to the extent such obligations are
cash collateralized), (g) obligations of such Person arising under guaranties or
similar agreements and obligations (contingent or otherwise) to purchase or
otherwise assure a creditor against loss in respect of indebtedness or
obligations of others of the kind referred to in clauses (a) through (f), and
(h) liabilities in respect of unfunded vested benefits under Plans to the extent
shown as a liability on a balance sheet of such Person which has been prepared
in accordance with GAAP.
"Default" shall mean an event or condition which, with notice or lapse of
time or both would become an Event of Default.
"Default Rate" shall mean the lesser of (i) the maximum nonusurious rate
permitted by applicable law, and (ii) the following rates as appropriate: (a)
with respect to any overdue principal of an Advance, two percent (2%) per annum
above the interest rate otherwise applicable to such amount at the time it
became due, and (b) with respect to any overdue interest or other amounts
payable by the Borrower hereunder, two percent (2%) per annum above the Adjusted
Prime Rate.
"Effective Date" means the first date the conditions precedent set forth in
Section 4.1 have been satisfied, as certified by the Bank to the Borrower in
writing.
"Eurodollar Advance" shall mean any Advance bearing interest based on the
Adjusted Eurodollar Rate.
"Eurodollar Reserve Percentage" shall mean, with respect to each Interest
Period, that percentage (expressed as a decimal) which is the daily average of
the percentage or percentages in effect on each day of such Interest Period as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor), for determining the maximum reserve requirement (including any
marginal, supplemental and emergency reserves) applicable to the Bank in respect
of eurodollar fundings (currently referred to in Regulation "D" as "Eurodollar
liabilities"). If no such reserves are applicable, such percentage shall be
"zero".
"Event of Default" shall mean the occurrence of any one or more of the
events referred to in Section 8.1 of this Agreement that shall not be remedied
in the period, if any, provided for therein.
"Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for any such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System or any of its successors.
"Financial Statements" shall mean the financial statements of the Borrower
described in Section 5.3 hereof.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time, applied on a basis consistent with the requirements of
Section 1.2.
"Governmental Authority" means any foreign governmental authority, the
United States of America, any state of the United States of America and any
subdivision of any of the foregoing, and any agency, department, commission,
board, authority or instrumentality, bureau or court having jurisdiction over
the Bank or the Borrower or any of their respective assets or properties.
"Indebtedness" shall mean all sums owing to the Bank under or in connection
with this Agreement, the Note or any other Loan Document.
"Interest Payment Date" shall mean: (a) for any Prime Rate Advance, the
last Business Day of each calendar month, the day such Advance is converted to a
Eurodollar Advance, and the day such Advance is paid in full; and (b) for any
Eurodollar Advance, the last day of any Interest Period (and with respect to an
Interest Period of six Months, the day falling three months after the first day
of such Interest Period), the day such Advance is converted to a Prime Rate
Advance, and the day such Advance is paid in full.
"Interest Period" shall mean, with respect to each Eurodollar Advance:
(a) initially, the period commencing on the date of such Eurodollar Advance and
ending one, two, three or six Months thereafter as the Borrower may elect
pursuant to Section 2.1 or Section 2.2; and (b) thereafter, each period
commencing on the last day of the next preceding Interest Period applicable to
such Revolving Loan and ending one, two, three or six Months thereafter as the
Borrower may elect pursuant to Section 2.1 or Section 2.2(d); provided, however,
that (i) whenever the last day of any Interest Period would otherwise occur on a
day other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day, except that if such
extension would cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day; and (ii) any Interest Period which begins on
the last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month in which it
would have ended if there were a numerically corresponding day in such calendar
month.
"Keystone" means Keystone Consolidated Industries, Inc., a Delaware
corporation.
"Keystone Share" means a share of common stock of Keystone.
"Legal Requirement" means any law, statute, ordinance, decree,
requirement, order, judgment, rule, regulation (or official interpretation of
any of the foregoing) of, and the terms of any license or permit issued by, any
Governmental Authority, including, but not limited to, Regulation U and
Regulation X of the Federal Reserve Board, as the same are from time to time in
effect, and all official rulings and interpretations thereunder or thereof.
"Letters of Credit" means, collectively, all standby letters of credit
issued by the Bank hereunder for the account of the Borrower or for the joint
and several account of the Borrower and a Subsidiary or affiliate of the
Borrower, including but not limited to Valmont Insurance Company.
"Lien" shall mean any mortgage, lien, charge, security interest or
encumbrance of any kind thereon (including any conditional sale agreement or any
other title retention agreement) or any pledge thereof.
"Loan Documents" shall mean this Agreement, the Note, the Pledge Agreement,
and all other agreements, instruments or documents executed at any time in
connection herewith.
"Material Adverse Change" shall mean a material adverse change in the
business, financial condition, or results of operations of the Borrower.
"Months" shall mean, with respect to an Interest Period, a period
commencing on the first day of such Interest Period to and including the corre-
sponding day in the last of such number of succeeding calendar months from such
first day, exclusive of the calendar month in which such Interest Period
commences, provided, however, that if such last succeeding calendar month does
not contain such a corresponding day such period shall end on and include the
last day of such last succeeding calendar month.
"Note" shall mean the promissory note of the Borrower, payable to the order
of the Bank in substantially the forms of Exhibit A attached hereto.
"Notice of Borrowing" shall have the meaning given to such term in
Section 2.1.
"Other Instruments" as to any Person shall mean the certificate of
incorporation, by-laws of, or partnership agreement pertaining to, such Person
and all agreements, instruments, documents, judgments, orders, writs,
injunctions, decrees, determinations, awards, ordinances, laws, rules, statutes,
regulations, rulings, franchises, permits or the like to which such Person is a
party or by which such Person or any assets of such Person may be bound or
affected.
"Paribas LC Exposure" means, the aggregate principal amount of the
obligations of the Borrower held by the Bank in respect of outstanding letters
of credit issued by Banque Paribas for the account of the Borrower under the
Letter Agreement dated as of October 31, 1991, as amended prior to the date of
this Agreement, among the Borrower, the banks party thereto, and Banque Paribas
Houston Agency, as Agent.
"Person" includes, without limitation, any individual, corporation,
partnership, unincorporated association or organization, government or agency or
political subdivision thereof, trust, joint venture or any other entity or any
trustee, receiver, custodian or similar official.
"Pledge Agreement" shall mean the Pledge Agreement of the Borrower in favor
of the Bank in substantially the form of Exhibit B attached hereto, as it may be
amended from time to time.
"Prime Rate" shall mean the variable per annum rate of interest announced
by Societe Generale, New York Branch from time to time as its prime rate of
interest, whether or not the Borrower has notice thereof.
"Prime Rate Advance" shall mean any Advance bearing interest based on the
Adjusted Prime Rate.
"Property" of any Person shall mean any and all property or assets (real,
personal or mixed, tangible or intangible) of such Person.
"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Bank for the amount of any payment by the Bank in connection with
a drawing under a Letter of Credit.
"Subsidiary" of any Person shall mean any corporation, association,
partnership or other business entity of which more than 50% of the outstanding
shares of capital stock (or other equivalent interests) having by the terms
thereof ordinary voting power under ordinary circumstances to elect a majority
of the board of directors or Persons performing similar functions (or, if there
are no such directors or Persons, having general voting power) of such entity
(irrespective of whether at the time capital stock (or other equivalent
interests) of any other class or classes of such entity shall or might have
voting power upon the occurrence of any contingency) is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or more
Subsidiaries of such Person or by one or more Subsidiaries of such Person.
"Termination Date" shall mean November 3, 1998, or such earlier date the
Commitment is terminated pursuant to Section s 2.12, 8.2 or 8.3 hereof.
"$" or "United States Dollars" shall mean dollars in lawful currency of the
United States of America.
Section 1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP consistent with those
applied in the preparation of the Financial Statements referred to in
Section 5.3 hereof as with any changes in GAAP subsequent to the date of this
Agreement occur, and all financial data submitted pursuant to this Agreement
shall, unless expressly qualified to the contrary, be prepared in accordance
with such principles.
Section 1.3 Miscellaneous. The words "hereof", "herein" and "hereunder"
and words of similar import, when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Article, Section and Exhibit references are to Articles, Section s and Exhibits
to this Agreement, unless otherwise specified.
ARTICLE II
TERMS AND CONDITIONS
Section 2.1 Advances and Letters of Credit.
(a) Subject to the terms and conditions contained in this Agreement, the
Bank agrees to make available to the Borrower a revolving credit facility, under
which the Borrower may borrow Advances from the Bank and request the Bank to
issue Letters of Credit at any time and from time to time, on or before the
earlier of the Termination Date or the date as of which the Commitment has
terminated pursuant to the terms of Section 2.12, 8.2 or 8.3 hereof, in such
amounts as the Borrower may request; provided, however, that (i) the aggregate
outstanding principal balance of all outstanding Advances plus the aggregate
unpaid Reimbursement Obligations plus the aggregate undrawn face amount of all
outstanding Letters of Credit shall not exceed at any time an amount equal to
the lesser of the Available Commitment or the Borrowing Base, and (ii) each
request for a Prime Rate Advance hereunder shall be in the minimum amount of
$500,000 and an integral multiple of $100,000, and (iv) each request for a
Eurodollar Advance hereunder shall be in the minimum amount of $1,000,000 and an
integral multiple of $100,000. At any time prior to the Termination Date,
subject to the terms and conditions hereof, the Borrower may borrow, repay and
reborrow Advances hereunder.
(b) Each request for an Advance shall be made on notice given by the
Borrower not later than 11:00 A.M. (Dallas time) (i) on the third Business Day
prior to the date of a proposed Eurodollar Advance, or (ii) on the Business Day
of a proposed Prime Rate Advance. Each such notice from the Borrower of a
request for Advance (a "Notice of Borrowing") shall be in writing and shall be
in substantially the form of Exhibit "C" hereto, specifying (i) the requested
date of such Advance, (ii) whether the Advance is to be a Prime Rate Advance or
a Eurodollar Advance, (iii) the aggregate Dollar amount of such Advance, and
(iv) in the case of a Eurodollar Advance, the initial Interest Period for such
Advance. Each Notice of Borrowing shall be irrevocable and binding on the
Borrower.
(c) Each request for a Letter of Credit shall be made on notice given by
the Borrower not later than 11:00 A.M. (Dallas time) at least three Business
Days prior to the date a proposed Letter of Credit is to be issued, in the form
of Exhibit "D" attached hereto, specifying (i) the requested date of issuance of
such proposed Letter of Credit, (ii) the face amount of such proposed Letter of
Credit, (iii) the form of such proposed Letter of Credit, which must be a
standby Letter of Credit in form acceptable to the Bank, and (iv) the expiry
date of such proposed Letter of Credit, which expiry date shall in no event be
(A) more than one year from the date of issuance or, if renewed, one year from
any date of such renewal, or (B) later than the Termination Date (unless the
Bank consents to such a later date and the Borrower agrees to provide cash
collateral at the Termination Date to fully secure the undrawn portion of any
such Letter of Credit on and after the Termination Date as set forth in
Section 3.3 hereof or on terms otherwise satisfactory to the Bank).
(d) All Advances, together with accrued interest thereon as provided in
Section 2.2, shall be evidenced by the Note, and shall be due and payable in
full on the Termination Date.
(e) The amount paid by the Bank in connection with any drawing under a
Letter of Credit shall be reimbursed by the Borrower to the Bank on the same day
as such payment by the Bank, provided, however, that in the event the conditions
precedent for a Prime Rate Advance are satisfied on the date of such payment by
the Bank (other than the delivery of a Notice of Borrowing) and the Borrower has
not otherwise notified the Bank that it intends to repay such Reimbursment
Obligations with its own funds on such day, such Reimbursment Obligation shall
be automatically deemed to be a Prime Rate Advance by the Bank for the account
of the Borrower made as of the date of such payment by the Bank.
Section 2.2 Interest.
(a) Interest shall accrue on the unpaid principal amount of each
Eurodollar Advance at a rate per annum equal at all times to the lesser of (i)
the Adjusted Eurodollar Rate plus one and one half percent (1 1/2%), and (ii)
the Maximum Rate; provided that any amount of principal which is not paid when
due (whether at stated maturity, by acceleration or otherwise) shall bear
interest from the date on which such amount is due until such amount is paid in
full, payable on demand, at a rate per annum equal at all times to the lesser of
(i) the greater of (A) the Adjusted Prime Rate in effect from time to time plus
two percent (2%) and (B) the rate required to be paid on such Advance
immediately prior to the date on which such amount became due plus two percent
(2%) and (ii) the Maximum Rate.
(b) Interest shall accrue on the unpaid amount of each Prime Rate Advance
at a rate per annum equal at all times to the lesser of (i) the Adjusted Prime
Rate, and (ii) the Maximum Rate; provided, that any amount of principal which is
not paid when due (whether at stated maturity, by acceleration or otherwise)
shall bear interest from the date on which such amount is due until such amount
is paid in full, payable on demand, at a rate per annum equal at all times to
the lesser of (i) the rate required to be paid on such Advance immediately prior
to the date on which such amount becomes due plus two percent (2%) and (ii) the
Maximum Rate.
(c) Accrued interest for each Advance shall be due and payable on each
Interest Payment Date for such Advance. There shall be no more than three (3)
Interest Periods applicable to Eurodollar Advances hereunder at any one time.
(d) At least three Business Days prior to the end of any Interest Period
applicable to an outstanding Eurodollar Advance, the Borrower shall, by notice
to the Bank, select a new Interest Period to be applicable to such Advance or
request that such Advance be converted to a Prime Rate Advance at the end of the
Interest Period then applicable thereto. If the Bank does not receive such
notice it will automatically convert such Eurodollar Advance to a Prime Rate
Advance at the end of the Interest Period then applicable thereto. At any time
upon three Business Days prior notice to the Bank, the Borrower may convert all
or any portion of a Prime Rate Advance (but not less than $1,000,000 and an
integral multiple of $100,000) into a Eurodollar Advance having an Interest
Period as selected by the Borrower.
(e) If at any time the Bank determines that Dollars are not available to
the Bank in the London interbank market for any Interest Period requested by the
Borrower, or it is otherwise impossible to have Eurodollar Advances, then, the
Borrower agrees that (i) the obligation of the Bank to make or maintain
Eurodollar Advances shall be suspended until such time as the Bank gives notice
to the Borrower that the circumstances giving rise to such suspension no longer
exist, (ii) each requested Advance thereafter shall be a Prime Rate Advance, and
(iii) each outstanding Eurodollar Advance shall be converted to a Prime Rate
Advance on the last day of the then applicable Interest Period.
(f) In the event the rate of interest chargeable under this Agreement or
the Note at any time is greater than the Maximum Rate, the unpaid principal
amount of the Note shall bear interest at the Maximum Rate until the total
amount of interest paid or accrued on the Note equals the amount of interest
which would have been paid or accrued on the Note if the stated rates of
interest set forth in this Agreement had at all times been in effect. In the
event, upon payment in full of the Note, the total amount of interest paid or
accrued under the terms of this Agreement and the Note is less than the total
amount of interest which would have been paid or accrued if the rates of inter-
est set forth in this Agreement had, at all times, been in effect, then the
Borrower shall, to the extent permitted by applicable law, pay the Bank an
amount equal to the difference between (i) the lesser of (A) the amount of
interest which would have been charged on the Note if the Maximum Rate had, at
all times, been in effect and (B) the amount of interest which would have
accrued on the Note if the rates of interest set forth in this Agreement had at
all times been in effect and (ii) the amount of interest actually paid or
accrued under this Agreement on the Note. In the event the Bank ever receives,
collects or applies as interest any sum in excess of the Maximum Rate, such
excess amount shall, to the extent permitted by law, be applied to the reduction
of the principal balance of the Note, and if no such principal is then outstand-
ing, such excess or part thereof remaining shall be paid to the Borrower.
Section 2.3 Fees.
(a) On the last day of each March, June, September and December thereafter
and on the Termination Date, the Borrower shall pay to the Bank a commitment fee
of one half of one percent (1/2%) of the average daily unborrowed portion of the
Commitment (borrowings to include for this purpose both outstanding Advances and
the undrawn face amount of outstanding Letters of Credit) during the preceding
quarter (or in the case of the first such payment, during the period from the
Effective Date to the date such payment is due, and in the case of the last such
payment, during the period from the immediately preceding payment of such fee to
the Termination Date), calculated on the basis of a 360-day year.
(b) The Borrower shall pay to the Bank a letter of credit fee in
connection with each Letter of Credit equal to one and one half of one percent
(1 1/2%) per annum of the amount available for drawing under such Letter of
Credit, from and including the issuance date thereof to but excluding the date
such Letter of Credit expires or is terminated, such fee to be payable quarterly
in arrears on the last date of each March, June, September and December and on
the Termination Date, calculated on the basis of a 360-day year for the number
of days elapsed.
Section 2.4 Payments and Computations.
(a) All payments hereunder or under the Note shall be made to the Bank at
its offices at 4800 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas,
75201, or at such other address or addresses as the Bank may designate for such
purpose from time to time by written notice to the Borrower, without any
presentment thereof. The Borrower shall make all payments hereunder or under
the Note not later than 12:00 noon (Dallas time) on the day when due to the Bank
in Dollars in immediately available funds.
(b) Whenever any payment hereunder or under the Note shall be stated to be
due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest at the rate then effective.
(c) Interest hereunder shall be computed on the basis of a 360-day year,
in the case of the Eurodollar Rate, and on the basis of a 365 or 366-day year,
as applicable, in the case of the Adjusted Prime Rate, for the actual number of
days elapsed, including the first day but excluding the last day.
Section 2.5 Illegality. Notwithstanding any other provision of this
Agreement, if the introduction of or any change in or in the interpretation of
any law or regulation shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for the Bank to make or
maintain Eurodollar Advances or to perform its obligations hereunder, the
Borrower agrees that upon notice to the Borrower by the Bank, (a) the obligation
of the Bank to make or maintain Eurodollar Advances shall be suspended while
such unlawfulness exists or is asserted, (b) the Borrower shall forthwith pay
interest on such Advances at the Adjusted Prime Rate, and (c) the Borrower shall
indemnify the Bank for all losses, expenses and liabilities as provided in
Section 2.11 hereof.
Section 2.6 Increased Costs. If the enactment or adoption of any Legal
Requirement or if any change in any Legal Requirement or in the interpretation
thereof by any court or regulatory body or other Governmental Authority charged
with the administration thereof or compliance by the Bank with any request or
directive (whether or not having the force of law) or any such court, or
governmental or regulatory authority or central bank shall either (i) impose,
modify or deem applicable any reserve, special deposit, capital or similar
requirement against any extension of credit by, or assets of, or any deposits or
other liabilities of, the Bank or (ii) impose on the Bank any tax, duty or other
charge with respect to this Agreement or any condition regarding this Agreement,
and the result of any event referred to in clauses (i) or (ii) above shall be to
increase the cost to the Bank of maintaining Eurodollar Advances or issuing or
maintaining Letters of Credit or to reduce the amounts receivable by the Bank
hereunder in connection with Eurodollar Advances or Letters of Credit (which
increase in cost or reduction in amounts receivable shall be the result of the
Bank's reasonable allocation of the aggregate of such cost increases or
reductions resulting from such events), then, within ten days of demand by the
Bank, the Borrower shall pay to the Bank from time to time as specified by the
Bank, additional amounts which shall be sufficient to compensate the Bank for
the portion of such increased cost or reduction allocable to the Borrower,
together with interest on each such amount accruing from the date five days
after the date payment of such amount was demanded until payment of such amount
in full at the Adjusted Prime Rate. A certificate setting forth in reasonable
detail such increased cost or reduction incurred by the Bank as a result of any
event mentioned in clause (i) or (ii) above, submitted by the Bank to the
Borrower, shall be conclusive, absent manifest error, as to the amount thereof,
provided that the Borrower shall not be obligated to pay such cost or reduction
unless the Bank shall have similar terms as its general policy applicable to
similar borrowers electing to borrow funds subject to Eurodollar Rate interest
provisions or requesting letters of credit. The protection of this paragraph
(a) shall be available to the Bank regardless of any possible contention of
invalidity or inapplicability of the Legal Requirement which has been imposed,
unless such Legal Requirement is ultimately determined to be invalid or
inapplicable and the result of such determination is to retroactively eliminate
the increase in cost or reduction of amounts receivable resulting from such
Legal Requirement.
Section 2.7 Taxes/Net Payments.
(a) Any and all payments by the Borrower hereunder or under the Note shall
be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding, however, income, capital and
franchise taxes imposed by the United States or a state or other political
subdivision thereof (all taxes, levies, imposts, deductions, charges,
withholdings and liabilities referred to in this sentence (other than such
excluded income, capital and franchise taxes imposed by the United States or a
state or other political subdivision thereof) are herein referred to as
"Taxes"). If the Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under the Note, (i) the sum payable
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.7) the Bank receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable law
and in a manner such that the Bank shall not be required to make any deduction
or payment of any Taxes.
(b) If the Bank shall be required by law to make any deduction or payment
with respect to any payment made by the Borrower for any present or future
taxes, levies, imposts, deductions, charges, withholdings or liabilities with
respect thereto, excluding, however, income, capital and franchise taxes imposed
by the United States or a state or other political subdivision thereof (all
taxes, levies, imposts, deductions, charges, withholdings and liabilities
referred to in this sentence (other than such excluded income, capital and
franchise taxes imposed by the United States or a state or other political
subdivision thereof) are herein referred to as "Other Taxes"), (i) the Borrower
agrees to pay such Other Taxes to the relevant taxation authority or other
authority in accordance with applicable law and in a manner such that the Bank
shall not be required to make any such deduction or payment of any Other Taxes,
and (ii) the Bank may, at its option upon notice to the Borrower, pay such Other
Taxes, and the Borrower agrees to reimburse immediately the Bank for the amount
so paid plus interest thereon from the date so paid until reimbursed at the
Adjusted Prime Rate.
(c) The Borrower will indemnify, and does hereby indemnify, the Bank for
the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes and Other Taxes imposed by any jurisdiction on amounts payable by the
Borrower or the Bank under this Section 2.7) paid by the Bank and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. Payment under such indemnification shall be made within 30 days from
the date the Bank makes written demand therefor from time to time, provided that
such indemnification shall only be required if the Bank shall have similar terms
as its general policy applicable to similar borrowers.
Section 2.8 Interest on Overdue Amounts. In the event that any Advances
are not paid when due or any interest thereon or other amount payable by the
Borrower hereunder is not paid when due the Borrower shall pay interest on any
such overdue amount, to the extent permitted by law, from and including the date
such amount becomes due to but excluding the date paid (calculated on the basis
of a 360-day year), at the Default Rate, such interest to be due and payable on
demand by the Bank.
Section 2.9 Mandatory Prepayments. If at any time (a) the sum of the
aggregate amount of outstanding Advances plus the aggregate amount of unpaid
Reimbursement Obligations plus the aggregate undrawn face amount of all
outstanding Letters of Credit exceeds (b) the Borrowing Base, the Borrower
shall, within one Business Day of the notice thereof from the Bank, either (i)
prepay Advances in an amount equal to such excess, such prepayment to be applied
first to outstanding Prime Rate Advances and then to outstanding Eurodollar
Advances, and, if necessary thereafter, will provide cash collateral for
outstanding Letters of Credit in an amount equal to such remaining excess,
and/or (ii) provide an Acceptable Lien on such additional Collateral
satisfactory to the Bank in its sole discretion with a Current Market Value such
that after giving effect thereto and any amendments deemed necessary in the sole
discretion of the Bank to reflect such additional Collateral and its inclusion
in the Borrowing Base, and after recalculating the Borrowing Base, there remains
no such excess which is not dollar for dollar cash collateralized. Provided
that the Borrower has first pledged to the Bank all unencumbered Keystone Shares
owned by the Borrower, the Bank agrees that shares of common stock of Valhi,
Inc., a Delaware corporation, owned by the Borrower shall be acceptable
additional Collateral with a Borrowing Base value equal to 49% of the Current
Market Value for each such share of Valhi, Inc. pledged.
Section 2.10 Optional Prepayments. The Borrower may prepay any Advance in
full or in part upon at least (i) three Business Days' notice to the Bank in the
case of Eurodollar Advances, or (ii) one Business Day notice to the Bank in the
case of Prime Rate Advances, in each case stating the proposed date and
principal amount of the prepayment, and if such notice is given, the Borrower
shall prepay such principal amount with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however, that any such
prepayment in connection with any Eurodollar Advance shall be made only on the
last day of the then current Interest Period applicable thereto; and provided,
further, that all prepayments shall be in integral multiples of $100,000 and no
Eurodollar Advance remaining outstanding shall be an amount less than
$1,000,000.
Section 2.11 Compensation. The Borrower shall compensate the Bank, upon
written request by the Bank, for all losses, expenses and liabilities (i) if any
prepayment or conversion of any Eurodollar Advance occurs on a date which is not
the last day of the Interest Period for such Advance being prepaid or converted,
(ii) if any prepayment or conversion of any Eurodollar Advance is not made on
any date specified in a notice of prepayment given by the Borrower pursuant to
Section 2.10 hereof or notice of conversion given by the Borrower pursuant to
Section 2.2 hereof, (iii) as a result of any failure to borrow any Eurodollar
Advance requested pursuant to a Notice of Borrowing, whether due to failure by
the Borrower to fulfill on or before the date specified for such Eurodollar
Advance the applicable conditions specified in Article IV or otherwise, or
(iv) as a consequence of the timing of any acceleration of the Eurodollar
Advances pursuant to Section s 9.2 or 9.3 hereof, or conversion of the
Eurodollar Advances to the alternative interest rate calculation as provided in
Section 2.5 hereof, including (without limitation) any loss or expense incurred
in liquidating or employing deposits from third parties and loss of interest or
other profit for the period after such prepayment, acceleration or conversion;
provided that the Bank shall have delivered to the Borrower a certification in
reasonable detail as to the amount of such loss or expense, which certification
shall be binding on the Borrower in the absence of manifest error; and provided
further that the Bank shall have similar terms as its general policy applicable
to similar borrowers electing to borrow funds subject to Eurodollar Rate
interest provisions.
Section 2.12 Termination or Reduction of Commitment. The Borrower may at
any time terminate or reduce the unused amount of the Commitment, upon three
days prior written notice to the Bank, in integral multiples of $1,000,000;
provided, however, that any such termination or reduction shall be permanent,
and the Borrower shall not be entitled to reinstate or increase the amount of
the Commitment.
Section 2.13 Obligations Absolute. To the fullest extent permitted by
applicable law, the obligations of the Borrower under this Agreement in
connection with Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be paid or performed strictly in accordance with the
terms of this Agreement, under all circumstances whatsoever, including, without
limitation, the following circumstances:
(a) any lack of validity or enforceability of this Agreement, the Pledge
Agreement, or any Letter of Credit;
(b) any amendment or waiver of or any consent to depart from the terms of
this Agreement, the Pledge Agreement, or any Letter of Credit (with the consent
of the Borrower and any beneficiary of such Letter of Credit);
(c) the existence of any claim, set-off, defense or other right that the
Borrower may have at any time against any beneficiary or any transferee of any
Letter of Credit, the Bank or any other Person, whether in connection with this
Agreement, or any transactions contemplated hereby or thereby or any unrelated
transaction;
(d) any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect whatsoever,
provided that payment by the Bank under any Letter of Credit shall not have
constituted gross negligence or willful misconduct of the Bank;
(e) any nonapplication or misapplication by the beneficiary of any Letter
of Credit or otherwise of the proceeds of any drawing under any Letter of
Credit;
(f) payment by the Bank under any Letter of Credit against presentation of
a draft or certificate that does not comply with the terms of such Letter of
Credit, provided that payment by the Bank under such Letter of Credit shall not
have constituted gross negligence or willful misconduct of the Bank;
(g) the failure by the Bank to honor any drawing under any Letter of
Credit or to make any payment demanded under any Letter of Credit on the ground
that the demand for such payment does not conform to the terms and conditions
such Letter of Credit, provided that such failure shall not have constituted
gross negligence or willful misconduct of the Bank; and
(h) any other circumstance or happening whatsoever, including the
circumstances described in Section 2.14, whether or not similar to any of the
foregoing, provided that such circumstances or happening shall not have
constituted gross negligence or willful misconduct of the Bank.
Section 2.14 Limited Liability of the Bank.
(a) Notice of Bank's Duties. As between the Bank and the Borrower, the
Borrower assumes all risk of the acts or omissions of any beneficiary of a
Letter of Credit with respect to its use of such Letter of Credit. Neither the
Bank, its correspondents, its affiliates nor any of their officers or directors
shall be liable or responsible for:
(i) the use which may be made of any Letter of Credit or for any actions
or omissions of any beneficiary of any Letter of Credit;
(ii) the existence or nonexistence of a default under any instrument
secured or supported by any Letter of Credit or any other event which
gives rise to a right to call upon any Letter of Credit;
(iii) the failure of any instrument to bear any reference or adequate
reference to any Letter of Credit;
(iv) the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted in connection with the application for and
issuance of, or the making of a drawing under, any Letter of Credit,
even if it should in fact prove to be in any or all respect invalid,
insufficient, inaccurate, fraudulent or forged;
(v) the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason;
(vi) the failure of the beneficiary of any Letter of Credit to comply fully
with all conditions required in order to effect a drawing;
(vii) errors, omissions, interruptions, losses, or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex, telecopier
or otherwise;
(viii) any consequences arising from causes beyond the control of the Bank;
and
(ix) any act, error, neglect or default, omissions, insolvency or failure
in the business of any of the Bank's correspondents, for any refusal
by the Bank or any of the Bank's correspondents to pay or honor drafts
drawn under any Letter of Credit because of any applicable law, now or
hereafter enforced, or for any matter beyond the control of the Bank
and its affiliates;
except only that the Borrower shall have a claim against the Bank for acts or
events described in the immediately preceding clauses (ii) through (ix), and the
Bank shall be liable to the Borrower, to the extent, but only to the extent, of
any direct, as opposed to consequential, damages suffered by the Borrower which
the Borrower proves were caused by (A) the Bank's willful misconduct or gross
negligence in determining whether documents were presented under any Letter of
Credit comply with the terms of any Letter of Credit or (B) the Bank's willful
failure or gross negligence in failing to pay under such Letter of Credit after
the presentation to it by the beneficiary of a sight draft and any required
document strictly complying with the terms and conditions of the such Letter of
Credit.
(b) No Duty to Inquire. The Borrower agrees that the Bank is authorized
and instructed to accept and pay drawings under any Letter of Credit without
requiring, and without responsibility for, the determination as to the existence
of any event giving rise to such drawing, either at the time of acceptance of
documents presented in connection with such drawing, upon payment of such
drawing by the Bank or thereafter. The Borrower agrees that the Bank is under
no duty to determine the proper identity of anyone presenting documents under
any Letter of Credit in connection with a drawing or otherwise (whether by
tested telex or otherwise) as the officer, representative or agent of any
beneficiary under the such Letter of Credit and payment by the Bank to any such
beneficiary when requested by any such purported officer, representative or
agent is hereby authorized and approved by the Borrower. In furtherance and not
in limitation hereof, the Bank may accept documents that appear on their face to
be in order, without responsibility for further investigation, regardless of any
notice or information to the contrary.
ARTICLE III
SECURITY
Section 3.1 Collateral. As security for the Indebtedness and the perfor-
mance of all other obligations of the Borrower to the Bank pursuant to this
Agreement and the other Loan Documents, the Borrower agrees that at all times
the Bank shall have an Acceptable Lien on all Collateral. In connection
therewith, the Bank agrees that the Borrower may, at any time prior to the
Termination Date when no Default has occurred and is continuing, withdraw or
substitute Collateral if (i) the substitute Collateral is margin stock
acceptable to the Bank in its sole discretion and any changes deemed necessary
in the sole discretion of the Bank to the Loan Documents are made to reflect
such substitution of Collateral, and (ii) the Borrowing Base is redetermined to
give effect to such withdrawal or substitution, and the sum of the aggregate
outstanding amount of Advances plus the aggregate amount of unpaid Reimbursement
Obligations plus the aggregate amount available to be drawn under outstanding
Letters of Credit does not exceed such redetermined Borrowing Base.
Section 3.2 Further Assurances. The Borrower agrees to execute or to
cause the execution of such further financing statements, instruments or
documents as may be necessary from time to time in the opinion of the Bank to
effect the intent of this Article III.
Section 3.3 Collateral After the Termination Date. Except as otherwise
set forth in this Section , if any Letters of Credit remain outstanding on or
after the Termination Date, but all other non-contingent obligations of the
Borrower hereunder have been paid in full and no Default has occurred and is
continuing, the Borrower shall provide cash collateral to the Bank on or before
sixty days after the Termination Date having an aggregate fair market value
equal to the aggregate undrawn amount of such outstanding Letters of Credit for
deposit in the Collateral Account (as defined in the Pledge Agreement), and such
cash collateral shall secure the Borrower's continuing obligations in respect of
such outstanding Letters of Credit subject to the terms of the Pledge Agreement.
In the event the Bank receives such cash collateral on or prior to the date
required, the Bank shall release the Pledged Shares to the Borrower and any
other Collateral subject to the terms of the Pledge Agreement (other than the
cash collateral just received by the Bank from the Borrower); provided, however,
that such Pledged Shares and the lien of the Bank on such other Collateral shall
not be released, and the Borrower shall not be obligated to provide such cash
collateral if, on or before the earlier of the date sixty days after the
Termination Date or the date of the proposed release any Default specified in
Section 8.1(f) or Section 8.1(g) shall have occurred. In the event that, for
whatever reason, the Borrower fails to provide cash collateral as required
pursuant to this Section , then notwithstanding anything to the contrary in the
Pledge Agreement, the Bank may, at its discretion, sell, transfer, dispose of or
otherwise liquidate all or any portion of the Pledged Shares or such other
Collateral and hold the proceeds thereof in the Collateral Account as cash
collateral to secure the Borrower's contingent obligations in respect of the
outstanding Letters of Credit.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Conditions to Initial Advance and Letter of Credit. The
obligation of the Bank to make the initial Advance and Letter of Credit is
subject to the conditions precedent that the matters set forth in Section 4.2
are true and correct and the Bank shall have received all of the following in
form and substance satisfactory to the Bank:
(a) this Agreement, the Note, the Pledge Agreement and any related UCC
financing statements, and a Federal Reserve Form U-1, each duly and validly
authorized and executed by the Borrower;
(b) certified copies of (i) the resolutions of the Board of Directors of
the Borrower authorizing the execution of the Loan Documents and the
consummation of the transactions contemplated thereby, (ii) the Certificate of
Incorporation and the Bylaws of the Borrower, and (iii) the names and true
signatures of the officers of the Borrower authorized to sign this Agreement,
the Notices of Borrowing, Letter of Credit Applications and the other Loan
Documents;
(c) a certificate of existence and good standing with respect to the
Borrower from the State of Delaware and a certificate of good standing from the
State of Texas;
(d) the written opinion or opinions of counsel for the Borrower with
respect to this Agreement, the other Loan Documents to be executed by the
Borrower, and the transactions contemplated hereby, which opinions shall cover
the matters set forth in Exhibit "E" attached hereto; and
(f) all certificates evidencing the Pledged Securities (as defined in the
Pledge Agreement) and related stock powers in favor of the Bank, duly executed
on behalf of the Borrower.
Section 4.2 Conditions Precedent for each Advance or Letter of
Credit. The obligation of the Bank to make any Advance or to issue, amend or
extend any Letter of Credit is subject to the following conditions precedent:
(a) All representations and warranties of the Borrower contained herein or
in any other Loan Document shall be true and correct in all material respects.
(b) There shall exist no Default or Event of Default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Bank as follows:
Section 5.1 Organization and Authority. The Borrower is a corporation
duly and validly organized and in good standing under the laws of the state or
country of its incorporation, and is authorized to do business and is in good
standing in all jurisdictions in which such qualification or authorization is
necessary. The Borrower has all requisite corporate power and authority to
conduct its business, own its properties, and to enter into and deliver the Loan
Documents and all other documents and agreements contemplated by this Agreement
to which the Borrower is a party and to perform all of its obligations pursuant
to each of them. The Loan Documents and all other documents and agreements
contemplated hereby to which the Borrower is a party have been duly authorized,
executed and delivered by the Borrower and constitute legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms, except as enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws at the time in effect affecting the rights of creditors generally.
Section 5.2 Other Instruments. The Borrower is not in material violation
of any provisions of any Other Instruments, and the execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby, the
execution and delivery of the instruments contemplated hereby, and fulfillment
of the terms and compliance with the provisions hereof and thereof do not and
will not result in a material violation or breach of, or constitute a default
under or result in any Lien (other than in favor of the Bank) upon any
Collateral under any of the Other Instruments. The Borrower is not a party to
or bound by any contract or subject to any restriction which could reasonably be
expected to cause a Material Adverse Change. The Borrower is not required to
obtain any consent, approval or authorization of, or to make any registration,
declaration or filing with, any government or government entity as a condition
precedent to the valid execution and delivery of this Agreement or any other
instrument or agreement contemplated hereby and the valid issue and delivery of
the Note as contemplated hereby, except for such consent, approval,
authorization, registration, declaration or filing, the failure to so obtain or
make would not cause a Material Adverse Change.
Section 5.3 Financial Condition. The Borrower has delivered to the Bank
its financial statements dated as of December 31, 1996 (such statements are
collectively referred to herein as "the Financial Statements"). The Financial
Statements have been prepared in accordance with GAAP consistently applied, and
fairly present the financial condition of the Borrower as of December 31, 1996.
No Material Adverse Change has occurred since December 31, 1996.
Section 5.4 Litigation. There are no actions, suits or proceedings
pending against the Borrower at law, in equity or in admiralty or by or before
any Governmental Authority, and, to the best knowledge of the Borrower, there
are no actions, suits or proceedings threatened against the Borrower, except for
such actions, suits or proceedings which could not reasonably be expected to
cause a Material Adverse Change.
Section 5.5 Title to Collateral; Liens.
(a) The Borrower has good and indefeasible title to all Collateral. All
Keystone Shares constituting part of the Collateral, and all Keystone Shares or
other securities which may subsequently be pledged as Collateral (i) are not
subject to any restrictions on sale or transfer except for any restrictions
regarding compliance with applicable securities laws and (ii) either (A) are
not, and will not be, "restricted securities" as such term is used or defined in
paragraph (a)(3) of Rule 144, or (B) if and to the extent such shares are or
will be "restricted securities" as so defined, such shares have been held by the
Borrower for greater than two (2) years within the meaning of and as calculated
pursuant to the holding period provisions of paragraph (d) of Rule 144. The
Borrower fully paid the purchase price of all Keystone Shares constituting part
of the Collateral at the time it acquired such Keystone Shares, and did not give
a promissory note or enter into any installment purchase contract or other
obligation to or with respect to the transferor of such Keystone Shares as any
part of its payment of the purchase price of such Keystone Shares. As of the
date of this Agreement, the Borrower is an "affiliate" of Keystone, as such term
is defined in the rules and regulations of the Securities and Exchange
Commission.
(b) Except for the Liens contemplated by this Agreement, all of the
Collateral is free and clear of any and all Liens. The execution and delivery
of the Loan Documents and the delivery of certificates evidencing the Pledged
Shares, together with executed stock powers relating thereto, to the Bank will
create Acceptable Lien in favor of the Bank on all of the Collateral.
Section 5.6 Tax Returns. Except as previously disclosed to the Bank in
writing and except in connection with taxes being diligently contested in good
faith and for which reserves in accordance with GAAP are maintained, the
Borrower has filed or caused to be filed all tax returns (or extensions) which
it was required to file, paid and discharged or caused to be paid and discharged
all taxes as shown on such returns (or extensions) or on any assessment received
by it to the extent that such taxes have become due, and does not know of any
actual or proposed assessments for additional governmental or other taxes for
any fiscal period. The charges, accruals and reserves on its respective books
with respect to governmental and other taxes for all fiscal periods are
adequate.
Section 5.7 Investment Company Act. The Borrower is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
ARTICLE VI
AFFIRMATIVE COVENANTS
Until the Commitment has terminated and all Letters of Credit have expired
or been terminated and the Bank has received full payment of the Indebtedness,
the Borrower covenants and agrees as follows:
Section 6.1 Information. The Borrower will deliver or cause to be
delivered to the Bank all of the following:
(a) as soon as reasonably possible, but in any event within one hundred
twenty (120) days after the close of each fiscal year of the Borrower, the
audited consolidated financial statements of the Borrower and its consolidated
Subsidiaries, containing a balance sheet, statement of income and retained
earnings and cash flows (such financial statements to be prepared in accordance
with GAAP consistently applied and duly certified by independent public
accountants of recognized standing reasonably acceptable to the Bank);
(b) as soon as reasonably possible, but in any event within sixty (60)
days after the close of each quarter of each fiscal year of the Borrower, the
unaudited consolidated financial statements of the Borrower and its consolidated
Subsidiaries for such quarter, containing a balance sheet, statement of income
and retained earnings and cash flows (such quarterly financial statements shall
be prepared in accordance with GAAP consistently applied and shall be duly
certified as accurate in all material respects by the Chief Financial Officer of
the Borrower);
(c) such other information concerning the Borrower and the Collateral as
the Bank may from time to time reasonably request.
Section 6.2 Taxes. The Borrower will pay and discharge to pay and
discharge all taxes, assessments and governmental and other charges and claims
levied or imposed on or which, if unpaid when due, might become a lien or charge
upon its assets, earnings or business; except such taxes as are being contested
in good faith and against which adequate reserves have been provided in
accordance with GAAP.
Section 6.3 Conduct of Business. The Borrower will take or cause to be
taken all such actions as from time to time may be necessary to preserve and
keep in full force and effect the Borrower's corporate existence under the laws
of its state of incorporation and franchises in every jurisdiction in which the
nature of its business requires it to be qualified, if the failure to so qualify
could reasonably be expected to cause a Material Adverse Change, and to continue
to conduct and operate its business and financial affairs substantially as such
affairs have been conducted and operated. The Borrower will maintain, preserve,
protect, and keep all of its assets material to the operation of its business in
good condition, reasonable wear and tear excepted.
Section 6.4 Use of Proceeds. The Borrower shall use the proceeds of the
Advances solely for working capital and other general corporate purposes,
including without limitation, to refinance debt and to purchase margin stock.
The Borrower shall request Letters of Credit solely to support contingent
obligations of the Borrower (other than obligations in respect of borrowed
money) and, in the case of Letters of Credit issued for the joint and several
account of the Borrower and a Subsidiary or affiliate of the Borrower, to
support contingent obligations of such Subsidiary or affiliate (other than
obligations in respect of borrowed money).
Section 6.5 Notification of Adverse Events. The Borrower will give the
Bank prompt and full written notice of:
(a) the occurrence of any Default or Event of Default; and
(b) any other event or occurrence which could reasonably be expected to
cause a Material Adverse Change.
Section 6.6 Costs. The Borrower will reimburse the Bank on demand for all
reasonable out-of-pocket costs and expenses of the Bank, including without
limitation charges and disbursements of legal counsel for the Bank, in
connection with the transactions contemplated by this Agreement and all other
Loan Documents and the preparation of, amendment to, or waiver of any provision
in this Agreement and such other Loan Documents, or arising in connection with
the enforcement of the Loan Documents.
Section 6.7 Compliance with Legal Requirements. The Borrower will comply
at all times in all material respects with all Legal Requirements of any
Governmental Authority having jurisdiction over it or its business.
Section 6.8 Maintenance of Insurance. The Borrower will maintain insurance
with responsible and reputable insurance companies or associations in such
amounts and covering such risks as are usually carried by companies engaged in
similar businesses and owning similar properties in the same general areas in
which the Borrower, operates, except where failure to maintain any such
insurance could not reasonably be expected to cause a Material Adverse Change;
provided that the Borrower may self-insure to the extent and in the manner
normal for similarly situated companies of like size, type and financial condi-
tion that are part of a group of companies under common control.
Section 6.9 Inspection. From time-to-time upon reasonable notice or after
an Event of Default has occurred, permit any Persons designated by the Bank to
visit, audit, and inspect any of the properties of the Borrower, including its
financial and accounting records, and to make copies and take extracts
therefrom, and to discuss its affairs, finances, and accounts with its officers
and independent public accountants with respect to any matters concerning or
relating to this Agreement or the transactions contemplated herein, all upon
reasonable notice during normal business hours and as often as may be reasonably
requested while such Default exists. All reasonable costs and expenses incurred
by the Bank in connection therewith shall be borne by the Borrower.
ARTICLE VII
NEGATIVE COVENANTS
Until the Commitment has terminated and all Letters of Credit have expired
or been terminated and the Bank has received full payment of the Indebtedness,
the Borrower covenants and agrees that, without the prior written consent of the
Bank:
Section 7.1 Corporate Transactions. The Borrower will not consolidate
with or merge with or into any other corporation or partnership unless the
Borrower shall be the survivor of such consolidation or merger, and the Borrower
will not sell, lease, transfer or otherwise dispose of all or substantially all
of its Property.
Section 7.2 Sale of Collateral. The Borrower will not sell or otherwise
transfer any Property which is Collateral.
Section 7.3 Liens. The Borrower will not allow or permit to exist on or
with respect to any Collateral any lien, security interest or other encumbrance
except for the security interest in favor of the Bank hereunder.
Section 7.4 Debts, Guaranties and Other Obligations. The Borrower will
not incur, create, assume, suffer to exist or in any manner become or be liable
in respect of any Debt except:
(a) Debt incurred pursuant to agreements or instruments existing as of the
date of this Agreement, including, without limitation, all renewals, extensions,
rearrangements or refinancings of any such Debt on terms and for amounts
substantially similar to the terms and amounts provided for in such agreements
or instruments as of the date of this Agreement;
(b) Debt of the Borrower hereunder to the Bank;
(c) Debt of the Borrower owing to any Subsidiary or affiliate of the
Borrower, provided such Debt is not secured by any Lien on any Property of the
Borrower; and
(d) Debt of the Borrower (other than Debt described in (a), (b) and (c)
above) not to exceed $10,000,000 in the aggregate.
ARTICLE VIII
REMEDIES
Section 8.1 Events of Default. Each of the following shall be an "Event
of Default" for purposes of this Agreement:
(a) The Borrower fails to pay when due any amount of principal or interest
under the Note, or any other amount payable pursuant to this Agreement or any
other Loan Document, and in the case of any such overdue amount other than in
respect of principal, such failure to pay continues for more than two Business
Days after the due date of such amount;
(b) Any representation or warranty made by the Borrower in the Loan
Documents proves to have been inaccurate at the time it was made or deemed made
in any material respect;
(c) The Borrower fails to perform any term, covenant (other than the
covenants contained in Section 6.5 and Article VII hereof) or condition in the
Loan Documents and such failure continues for a period of 30 days or more after
the earlier of (i) the Borrower's knowledge of such failure or (ii) notice of
such failure from the Bank;
(d) The Borrower either (i) violates its covenant in Section 7.4 and such
violation continues for a period of 5 days or more after the earlier of (x) the
Borrower's knowledge of such violation or (y) notice of such violation from the
Bank, or (ii) violates any covenant contained in Section 6.5 or Article VII
hereof (other than in Section 7.4);
(e) The Borrower or Keystone suffers a judgment against it which, within
30 days from the date such judgment is entered, shall not have been discharged
or execution thereof stayed pending appeal unless (i) such judgment is
adequately covered by insurance or (ii) adequate reserves with respect to such
judgment have been established and the aggregate amount of all such judgments
not adequately covered by insurance is not in excess of $10,000,000;
(f) The Borrower or Keystone or Valhi, Inc. (i) admits in writing its
inability to pay its debts generally as they become due or is generally not
paying its debts as they become due; (ii) files a petition in bankruptcy or a
petition to take advantage of any insolvency act or other act for the relief or
aid of debtors; (iii) makes an assignment for the benefit of its creditors; (iv)
consents to or acquiesces in the appointment of a receiver, liquidator, fiscal
agent or trustee of itself or of the whole or any substantial part of its
property and assets, or (v) files a petition or answer seeking for itself, or
consenting to or acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the Federal
bankruptcy laws or any other applicable law, or fails to deny the material
allegations of or to contest any such petition filed against it;
(g) A court of competent jurisdiction enters an order, judgment or decree
appointing a receiver, liquidator, fiscal agent or trustee of the Borrower or
Keystone or Valhi, Inc., or of the whole or any substantial part of its
Properties, or a petition is filed and not dismissed within sixty (60) days
against the Borrower or Keystone, seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under the
Federal bankruptcy laws or any other applicable law adjudicating the Borrower or
Keystone, a bankrupt without the consent or acquiescence of the Borrower or
Keystone;
(h) Default in the payment when due, whether by acceleration or otherwise,
of any other Debt of the Borrower or Keystone or Valhi, Inc. exceeding
$10,000,000 individually or in the aggregate, or default in the performance or
observance of any obligation or condition with respect to such other Debt, if
the effect of any such default is to accelerate or (with the giving of notice or
lapse of time or both) permit the acceleration of the maturity of any such other
Debt;
(i) the occurrence of a Material Adverse Change and the continuance
thereof for more than 5 days following the Borrower's receipt of notice thereof
from the Bank; or
(j) Any Person or group of Persons, other than the current holders,
hereafter directly or indirectly acquires control of the Borrower.
Section 8.2 Optional Acceleration of Maturity. Except as provided in
Section 8.3 hereof, upon the occurrence and during the continuance of an Event
of Default, the Bank shall have the right by notice to the Borrower to (i) ter-
minate the Commitment and (ii) accelerate the maturity of the Note and all
liabilities and obligations of the Borrower under the Loan Documents, and, at
the option of the Bank, to declare such obligations due and payable forthwith,
and all such liabilities and obligations (including without limitation all
contingent obligations of the Borrower in connection with Letters of Credit)
shall thereafter be due and payable in full by the Borrower to the Bank, without
presentment, demand, protest, notice of intent to accelerate, or any other
notice of any kind, all of which are hereby expressly waived by the Borrower.
Section 8.3 Automatic Acceleration of Maturity. Upon the occurrence of
any of the Events of Default specified in Section s 8.1(f) and 8.1(g) hereof
with respect to the Borrower, the Commitment shall automatically and immediately
terminate, and all liabilities and obligations of the Borrower under the Loan
Documents (including without limitation all contingent obligations of the
Borrower in connection with Letters of Credit) shall be automatically and
immediately due and payable in full, without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration, or any other notice of
any kind, all of which are hereby expressly waived by the Borrower.
Section 8.4 Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Bank may proceed to protect and enforce rights by suit
in equity or action at law, whether for the specific performance of any term
contained in this Agreement, the Note, or any other Loan Document, or for an
injunction against any breach of any such term or in aid of the exercise of any
power granted in this Agreement, the Note, or any other Loan Document, or may
proceed to enforce the payment of the Note or to enforce any other legal or
equitable right, or may take any one or more of such actions. No right, power
or remedy of the Bank conferred in the Loan Documents, or now or hereafter
existing at law, in equity or admiralty, by statute or otherwise, shall be
exclusive, and each such right, power or remedy shall, to the full extent
permitted by law, be cumulative and in addition to every other such right, power
or remedy.
Section 8.5 Collateral Account. The Borrower hereby agrees that any funds
collected under Section s 2.9, 8.2 and 8.3 hereof as a result of contingent
obligations of the Borrower under outstanding Letters of Credit shall be held by
the Bank in a deposit account as cash collateral securing the Indebtedness
(including without limitation such contingent obligations) and shall be subject
to withdrawal only by the Bank to satisfy such Indebtedness (including without
limitation such contingent obligations). The Borrower hereby grants to the Bank
a Lien upon, and right of set-off against the balance from time to time in such
account to secure the Indebtedness. In the event any outstanding Letter of
Credit expires undrawn, and provided no Default or Event of Default is then
existing, and, in the case of funds collected under Section 2.9 hereof, if no
Borrowing Base deficiency would result, the Bank shall release to the Borrower
proceeds of such account equal to the undrawn amount of such expired Letter of
Credit.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices and other communications provided for
herein shall be delivered or mailed and addressed as follows:
To the Borrower: Contran Corporation
Three Lincoln Centre
5430 LBJ Freeway, Suite 1700
Dallas, Texas 75240
Telephone: (972) 450-4261
Telecopy: (972) 239-0142
Attention: Bobby D. O'Brien, Vice President
To the Bank: Societe Generale,
Southwest Agency
4800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Telephone: (214) 979-2777
Telecopy: (214) 979-1104
Attention: Dave Oldani, Assistant Treasurer, and
Operations Department
or addressed to any party at such other address as such party shall hereafter
furnish to the other party in writing. Such notices or communications shall be
deemed to have been duly given when so delivered or, if mailed, five days after
deposited in the U.S. Mail, certified, first class, postage prepaid, or in the
case of notice by telecopy, when received in a clear and comprehensible fashion
addressed as set forth above; provided that all payments made to the Bank and
all requests for Advances under Article II hereof shall be deemed to have been
made at such time as such payments or requests are actually received by the
Bank.
Section 9.2 Amendments and Waivers. This Agreement may not be amended
except in writing executed by the Bank and the Borrower. Each waiver of any of
the terms or conditions hereunder shall be in writing and executed by the Bank.
Section 9.3 Participations. The Bank may sell participations to one or
more banks or other financial institutions (each, a "Participant") in or to all
or a portion of its rights and obligations under this Agreement, provided,
however, that the Bank's obligations under this Agreement (including, without
limitation, its Commitment to the Borrower hereunder) shall remain unchanged,
(ii) the Bank shall remain solely responsible to the Borrower hereto for the
performance of such obligations, (iii) the Bank shall remain the holder of the
Note for all purposes of this Agreement, and (iv) the Borrower shall continue to
deal solely and directly with the Bank in connection with the Bank's rights and
obligations under this Agreement. The Borrower hereby agrees that Participants
shall have the same rights under Section s 2.5, 2.6, 2.7, 2.11 and 9.9 hereof as
the Bank to the extent of their respective participations.
Section 9.4 Multiple Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
Section 9.5 Successors and Assigns. This Agreement and the other Loan
Documents shall inure to the benefit of the Bank and its successors and assigns
and shall be binding upon the Borrower and its successors and assigns. The
Borrower's obligations and rights under this Agreement and the other Loan
Documents may not be assigned by the Borrower.
Section 9.6 Severability. If any provision of this Agreement is rendered
or declared invalid, illegal or ineffective by reason of any existing or
subsequently enacted legislation or by decree of a court of competent
jurisdiction, such legislation or decree shall not impair, invalidate or nullify
the remainder of this Agreement which shall remain in full force and effect.
Section 9.7 Interpretations. In the event that any representations,
warranties, covenants or agreements contained in this Agreement directly
conflict with provisions relating to the same subject matter in any of the Loan
Documents, the provisions of this Agreement shall be controlling for all
purposes.
Section 9.8 Usury Not Intended. No provision of this Agreement, the Note
or any other Loan Document executed in connection herewith shall require or be
construed to require the payment or permit the charging or collection of
interest in an amount or at a rate in excess of the maximum non-usurious rate
under applicable law. If any excess of interest in such respect is hereby
provided for, or shall be adjudicated to be so provided, in the Note or
otherwise in connection with the Advances, the provisions of this Section 9.8
shall govern and prevail, and neither the Borrower nor the sureties, guarantors,
successors or assigns of the Borrower shall be obligated to pay the excess
amount of such interest, or any other excess sum paid for the use, forbearance
or detention of sums loaned pursuant hereto. In the event the Bank ever
receives, collects, or applies as interest any such sum, such amount which would
be in excess of the maximum non-usurious rate shall be applied as a payment and
reduction of the principal indebtedness evidenced by the Note; and, if the
principal amount of the Note has been paid in full, any remaining excess shall
forthwith be paid to the Borrower. All amounts paid in connection with this
Agreement and the Note which would under applicable laws be deemed to be
"interest" shall, to the extent permitted by such applicable laws, be amortized,
prorated, allocated and spread throughout the full term of this Agreement and
the Note.
Section 9.9 Indemnification. The Borrower hereby agrees to indemnify the
Bank, and each affiliate thereof and its directors, officers, employees, agents
and counsel ("Indemnified Persons") from, and discharge, release, and hold each
of them harmless against, any and all losses, liabilities, claims or damages to
which any of them may become subject, that arise out of, result from, or relate
to (i) any actual or proposed use by the Borrower of the proceeds of any
Advance, (ii) any breach by the Borrower of any representation, warranty,
covenant, or other provision of this Agreement or any other Loan Document,
(iii) any environmental claim, environmental permit, requirement of
environmental laws or regulations, or any release or threatened release of
hazardous substances, concerning or relating to the present or previously-owned
or operated properties, operations, or business of the Borrower, and (iv) any
investigation, litigation or other proceeding (including any threatened
investigation or proceeding) relating to the foregoing, and the Borrower shall
reimburse each Indemnified Person upon demand for any reasonable out-of-pocket
expenses (including legal fees) incurred in connection with any such
investigation, litigation or other proceeding, other than any such losses,
liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Indemnified Person.
Section 9.10 Confidentiality. The Bank may furnish any information
concerning the Borrower in the possession of the Bank from time to time to
participants (including prospective participants); provided that, prior to any
such disclosure, the participant or proposed participant shall agree in writing
to preserve the confidentiality of any confidential information relating to the
Borrower received by it from such Bank.
Section 9.11 Survival of Certain Provisions. Notwithstanding anything
herein or in any other Loan Document to the contrary, the provisions set forth
in Section s 2.5, 2.6, 2.7, 2.11 and 9.9 hereof shall survive the payment in
full of the Indebtedness and the termination of this Agreement.
Section 9.12 Governing Law. THIS AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF TEXAS. PURSUANT TO ARTICLE 15.10(b) of CHAPTER 15
("CHAPTER 15") OF THE TEXAS CREDIT CODE, THE PARTIES HERETO EXPRESSLY AGREE THAT
CHAPTER 15 SHALL NOT APPLY TO THIS AGREEMENT OR TO ANY ADVANCE, NOR SHALL THIS
AGREEMENT OR ANY ADVANCE BE GOVERNED BY OR BE SUBJECT TO THE PROVISIONS OF
CHAPTER 15 IN ANY MANNER WHATSOEVER.
PURSUANT TO SECTION 26.02 OF THE TEXAS BUSINESS AND COMMERCE CODE, A LOAN
AGREEMENT IN WHICH THE AMOUNT INVOLVED IN THE LOAN AGREEMENT EXCEEDS $50,000 IN
VALUE IS NOT ENFORCEABLE UNLESS THE LOAN AGREEMENT IS IN WRITING AND SIGNED BY
THE PARTY TO BE BOUND OR THAT PARTY'S AUTHORIZED REPRESENTATIVE.
THE RIGHTS AND OBLIGATIONS OF THE PARTIES TO AN AGREEMENT SUBJECT TO THE
PRECEDING PARAGRAPH SHALL BE DETERMINED SOLELY FROM THE WRITTEN LOAN AGREEMENT,
AND ANY PRIOR ORAL AGREEMENTS BETWEEN THE PARTIES ARE SUPERSEDED BY AND MERGED
INTO THE LOAN AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS, AS
DEFINED IN THIS AGREEMENT, REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
EXECUTED as of the 5th day of November, 1997.
CONTRAN CORPORATION
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By:
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Title:
---------------------------------
SOCIETE GENERALE, SOUTHWEST AGENCY
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Richard M. Lewis
Vice President
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David C. Oldani
Assistant Treasurer
EXHIBIT A
PROMISSORY NOTE
$10,000,000 November 5, 1997
For value received, the undersigned, CONTRAN CORPORATION, a Delaware
corporation ("Borrower"), promises to pay to the order of SOCIETE GENERALE,
SOUTHWEST AGENCY ("Bank"), at the offices of the Bank at 4800 Trammell Crow
Center, 2001 Ross Avenue, Dallas, Texas, 75201, in lawful money of the United
States of America, which shall be legal tender in payment of all debts and dues,
public and private, (i) the lesser of Ten Million Dollars ($10,000,000) or all
unpaid Advances (as defined in the Credit Agreement described herein) recorded
on the schedule attached hereto from time to time outstanding and (ii) interest
on the unpaid balance of each Advance from time to time outstanding from the
date such Advance is made until the maturity thereof as provided for under the
terms of the Credit Agreement ("Contract Rate"). The principal of and interest
accruing on this Promissory Note shall be due and payable as provided for in the
Credit Agreement.
The indebtedness evidenced by this Promissory Note is made pursuant to the
Credit Agreement between the Borrower and the Bank dated as of November 5, 1997,
as amended (as it may be further amended from time to time in accordance with
its terms, the "Credit Agreement") and is the "Note" described therein.
Accordingly, at all times the total principal amount of all Advances recorded on
the schedule attached hereto less all payments of principal recorded on the
schedule attached hereto shall not exceed Ten Million Dollars ($10,000,000).
The Credit Agreement (among other matters) contains provisions for optional
prepayment hereof and acceleration of the maturity hereof upon the terms and
conditions specified therein.
Notwithstanding anything herein or in the Credit Agreement to the contrary,
if as of any date the aggregate amount of interest which would have accrued
hereunder if interest had accrued on each day prior to such date at the Contract
Rate (without regard to any provision limiting such rate to the maximum
nonusurious rate under applicable law), then in lieu of the Contract Rate, the
unpaid principal of Advances hereunder shall bear interest for such date at the
maximum non-usurious rate under applicable law.
The Borrower consents to the recordation by the Bank of all Advances and
repayments thereof, as well as payments of interest thereon, on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided however that the failure of the Bank to make any such
recordation shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
The Borrower and each surety and endorser hereby waives grace, demand,
presentment for payment, notice of dishonor, diligence, and protest of any kind
and agrees and consents that this Promissory Note may be renewed and the time of
payment extended, without notice and without releasing any of the parties.
Except to the extent federal regulations or laws are applicable, this
Promissory Note shall be construed and enforced under and in accordance with and
shall be governed by the laws of the State of Texas (except that Tex. Rev. Civ.
Stat. Ann. Art. 5069, Ch. 15, which regulates certain revolving credit loan
accounts shall not apply to this Note).
Executed as of the 5th day of November, 1997.
CONTRAN CORPORATION
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By:
--------------------------------
Title:
-----------------------------
Schedule to $10,000,000
Promissory Note of
Contran Corporation
Amount of Amount of Payments Payments
Prime Rate Eurodollar of of
Date Advance Advances Principal Interest
- ---------- ---------- ---------- ---------- ----------
EXHIBIT B
PLEDGE AND SECURITY AGREEMENT
This Pledge and Security Agreement dated as of November 5, 1997 ("Pledge
Agreement"), is by and between Contran Corporation, a Delaware corporation (the
"Borrower"), and Societe Generale, Southwest Agency (the "Bank").
INTRODUCTION
The Borrower and the Bank are party to the Credit Agreement dated as of the
date hereof (as the same may be amended from time to time, the "Credit
Agreement"). In order to induce the Bank to enter into the Credit Agreement, the
Borrower is entering into this Pledge Agreement to secure its obligations under
the Credit Agreement. For good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions.
Terms defined in the Credit Agreement and not otherwise defined in this
Pledge Agreement have the meanings provided for in the Credit Agreement. The
following additional terms, have the following respective meanings:
"Approved Depositary" means The Depository Trust Company or any other
depository which has been approved by the Bank and as to which the Bank has
received an opinion of counsel to the Borrower reasonably satisfactory to the
Bank to the effect that the Bank will have valid and perfected security
interests in all Pledged Securities which may be deposited with such depositary.
"Collateral" means (a) the Pledged Securities, (b) the Collateral Account,
(c) all rights and privileges of the Borrower with respect to the Pledged
Securities (including without limitation all representations, warranties,
registration rights and other undertakings of any Person inuring to the benefit
of the Borrower in respect thereof) and the Collateral Account, (d) all non-cash
dividends and all other payments and distributions hereafter made on or with
respect to the Pledged Securities and, following the occurrence and during the
continuation of a Default, all cash dividends paid on the Pledged Securities and
all interest on the Collateral Account, and (e) all proceeds of any or all of
the foregoing (whether the same arise or are acquired before or after the
commencement of a Proceeding in which the Borrower is a debtor).
"Collateral Account" has the meaning set forth in Section 6 of this Pledge
Agreement.
"Pledged Securities" means the securities described on Annex A attached to
this Pledge Agreement, as such Annex may be amended from time to time by the
written agreement of the Borrower and the Bank.
"Proceeding" means a case under the federal Bankruptcy Code, as amended
from time to time, or any successor federal statute or any similar law of any
state or foreign country or political subdivision thereof.
"Qualified Investments" means
(a) readily marketable securities which are direct obligations of, or are
unconditionally guaranteed by, the United States of America and mature within
one year from the date on which they are acquired;
(b) commercial paper maturing within three months, rated A-2 or higher by
Standard & Poor's Ratings Service or Prime-2 or higher by Moody's Investors
Service;
(c) certificates of deposit issued by any bank doing business under the
laws of the United States of America or of any state thereof having a Standard &
Poor's Ratings Service investment grade rating of Single A or above and having a
combined capital and surplus of not less than $1,000,000,000; and
(d) repurchase obligations with a term of not more than ten days for
underlying securities of the types described in clauses (a), (b) and (c) above
entered into with any bank of the type described in clause (c) above.
"Secured Obligations" means (i) all principal of and interest on the Note,
(ii) all other amounts payable by the Borrower hereunder or under the Credit
Agreement or any other Loan Document, and (iii) any renewals or extensions of
any of the foregoing.
"UCC" means at any time the Uniform Commercial Code as in effect in the
State of Texas; provided that if by reason of mandatory provisions of law, the
perfection or the effect of perfection or non-perfection of the Acceptable Lien
on any Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than Texas, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or the effect or perfection or non-perfection (and for
purposes of definitions related to such provisions).
SECTION 2. Representations and Warranties.
The Borrower represents and warrants that:
(a) The Borrower is the record and beneficial owner of each item of
Collateral existing on the date of this Pledge Agreement free and clear of all
Liens except the Lien created hereunder. The Borrower will be the record and
beneficial owner of each item of Collateral hereafter acquired in addition to
any then existing Collateral free and clear of all Liens except the Lien created
hereunder. The Borrower is not and will not become a party to or otherwise
bound by any agreement, other than this Pledge Agreement, which restricts in any
manner the rights of any present or future holder of any of the Pledged
Securities with respect thereto.
(b) The capital stock of Keystone is duly authorized, validly issued and
fully paid and non-assessable. All of the initial Pledged Securities have been
beneficially owned by the Borrower for a period in excess of two years.
(c) Upon (i) delivery to the Bank of all Pledged Securities other than
Pledged Securities which have been deposited in an Approved Depositary, and (ii)
the making of appropriate entries under Section 8-320 of the UCC to the Bank's
account on the books of an Approved Depositary of all Pledged Securities which
have been deposited with such Approved Depositary, the Bank will have Acceptable
Lien on such Collateral. The Borrower has not performed any acts which might
prevent the Bank from enforcing any of the terms and conditions of this Pledge
Agreement or which would limit the Bank in any such enforcement.
(d) The principal place of business and chief executive office of the
Borrower, and the office where the Borrower keeps its books and records, is
located at the address of the Borrower designated in Section 9.1 of the Credit
Agreement. The Borrower does not do business and has not done business within
the past five years under a trade name or any name other than its legal name set
forth at the beginning of this Pledge Agreement.
SECTION 3. The Security Interests.
(a) In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the performance
of all the obligations of the Borrower hereunder and under the other Credit
Documents, the Borrower hereby grants to the Bank continuing security interests
in the Collateral, whether presently existing or owned or hereafter arising or
acquired.
(b) The security interests granted hereby are granted as security only and
shall not subject the Bank to, or transfer or in any way affect or modify, any
obligation or liability of the Borrower with respect to any of the Collateral or
any transaction in connection therewith.
SECTION 4. Perfection of Security Interests.
(a) Prior to the date the initial Advance is made, or the initial Letter
of Credit is issued under the Credit Agreement, and thereafter upon each
acquisition of any Pledged Securities and each investment or reinvestment of
funds deposited in the Collateral Account pursuant to Section 7 of this Pledge
Agreement, the Borrower shall (i) deliver or cause to be delivered to the Bank
all previously undelivered certificates and instruments evidencing Pledged
Securities other than Pledged Securities which have been deposited in an
Approved Depositary and (ii) give all notices and take such other action as may
be necessary to perfect the Bank's security interest in any Pledged Securities
which have been deposited with an Approved Depositary.
(b) All Pledged Securities other than Pledged Securities which have been
deposited with an Approved Depositary shall be delivered to the Bank in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, with signatures appropriately
guaranteed, and accompanied in each case by any required transfer tax stamps,
all in form and substance reasonably satisfactory to the Bank.
(c) The Borrower shall cause each Approved Depositary to make appropriate
entries to the Bank's account on the books of such Approved Depositary to
reflect the transfer of all Pledged Securities which have been deposited with
such Approved Depositary to the Bank and to deliver to the Bank a written
confirmation of the book-entry transfer of such Pledged Securities into such
account, to be held as Collateral under this Pledge Agreement.
(d) Promptly following the Borrower's acquisition of any Pledged Security
which constitutes an "uncertificated security" as defined in the UCC, the
Borrower and the Bank will effect such modifications to this Pledge Agreement as
the Bank in its discretion deems necessary or appropriate to ensure that the
security interests with respect to such portion of the Collateral are protected
to substantially the same extent as provided for herein with respect to other
Pledged Securities and the Borrower shall provide evidence satisfactory to the
Bank of compliance by the Borrower with Section 5 hereof with respect to such
portion of the Collateral.
(e) The Borrower shall notify the issuer of each of the Pledged Securities
of the Lien on the Pledged Securities provided hereby and shall cause such
issuer, within ten Business Days of the date of such notice from the Borrower,
to send written notice to the Bank acknowledging such Lien and expressly
agreeing to remit any and all dividends and distributions on account of the
Pledged Securities of such issuer (other than cash dividends) remitted after the
date of this Pledge Agreement directly to the Bank, and, upon receipt by such
issuer of any notice from the Bank that a Default has occurred and is
continuing, to remit all cash dividends and any and all other distributions on
account of the Pledged Securities directly to the Bank.
SECTION 5. Further Assurances.
The Borrower will, from time to time, at its expense and in such manner and
form as the Bank may reasonably require, execute and deliver any financing
statement, specific assignment, notice or other writing and take any other
action that may be necessary or desirable, or that the Bank may reasonably
request, in order to create, preserve, perfect or validate the security
interests granted hereby or to enable the Bank to exercise and enforce its
rights hereunder with respect to any of the Collateral. To the extent permitted
by applicable law, the Borrower hereby authorizes the Bank to execute and file,
in the name of the Borrower or otherwise, UCC financing statements which the
Bank in its sole discretion may deem necessary or appropriate to perfect the
security interests granted hereby. The Borrower agrees that a carbon,
photographic, photostatic or other reproduction of this Pledge Agreement or of a
financing statement is sufficient as a financing statement. The Borrower shall
pay the costs of, or incidental to, any recording or filing of any financing or
continuation statements concerning the Collateral.
SECTION 6. Collateral Account.
There shall be established and, at all times thereafter until this Pledge
Agreement shall have terminated, there shall be maintained with the Bank an
account designated "Collateral Account Societe Generale for Contran Corporation"
(the "Collateral Account"). All proceeds of dividends and other payments and
distributions on Pledged Securities (and following the occurrence and during
the continuation of a Default, all cash dividends paid on account of Pledged
Securities), and all cash collateral received by the Bank at any time pursuant
to the terms of the Credit Agreement, shall be deposited directly into the
Collateral Account and thereafter shall be held and applied by the Bank in
accordance with this Pledge Agreement. If any such proceeds, payments or
distributions in respect of the Pledged Securities are received by the Borrower
at any time after occurrence and during the continuance of a Default, they shall
be received in trust for the benefit of the Bank, and shall be deposited by the
Borrower forthwith into the Collateral Account in the same form as received
(with any necessary endorsement). No amount, including interest on funds in the
Collateral Account, shall be paid or released to or for the account of, or
withdrawn by or for the account of, the Borrower or any other Person from the
Collateral Account except as provided in this Pledge Agreement.
SECTION 7. Investment of Funds Deposited in the Collateral Account; Release of
Funds.
(a) So long as no Default shall have occurred and be continuing, the
Borrower may direct the investment and reinvestment by the Bank of all funds on
deposit in the Collateral Account in accordance with the following terms and
conditions:
(i) such funds will be invested solely in Qualified Investments;
and
(ii) prior to or contemporaneously with the making of any such
investment, the Borrower shall in accordance with Section 4 of this
Pledge Agreement take or cause to be taken such steps as may be
necessary to insure that the Bank will have an Acceptable Lien on such
investment.
(b) So long as no Default shall have occurred and be continuing, the
Borrower shall be entitled to receive from the Bank all interest or other income
with respect to all funds on deposit in the Collateral Account.
(c) Each request by the Borrower for investment or release of funds in or
from the Collateral Account shall be deemed to be a representation and warranty
by the Borrower that (i) such investment or withdrawal is in accordance with the
terms and conditions specified in subsection (a) of this Section or for the
purposes specified in subsection (b) of this Section, as applicable, (ii) the
representations and warranties set forth herein are true and correct on and as
of the date of such request as if made on and as of such date; and (iii) no
Default has occurred and is continuing on the date of such request.
SECTION 8. Record Ownership of Pledged Securities; Definitive Certificates.
The Bank may at any time following the occurrence and during the
continuation of a Default, from time to time, in its sole discretion, cause any
or all of the Pledged Securities to be transferred of record into the name of
the Bank or a nominee. The Borrower will promptly give to the Bank copies of
any notices and other communications received by it with respect to Pledged
Securities registered in the name of the Borrower, and the Bank will promptly
give the Borrower copies of any notices and other communications received by the
Bank with respect to Pledged Securities registered in the name of the Bank or a
nominee. The Bank shall at all times have the right to obtain definitive
certificates (in its name or in the name of a nominee) representing Pledged
Securities at any time deposited with an Approved Depositary, and all such
certificates shall be Collateral hereunder and be subject to the terms hereof.
SECTION 9. Right to Vote Pledged Securities; Receipt of Dividends, Etc.
(a) Unless a Default shall have occurred and be continuing, the Borrower
shall have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to the Pledged Securities, and the Bank
shall, upon receiving a written request from the Borrower, which request shall
be deemed to be a representation and warranty by the Borrower that no Default
has occurred and is continuing, deliver to the Borrower or, as specified in such
request, such proxies, powers of attorney, consents, ratifications and waivers
in respect of any Pledged Securities which are registered in the name of the
Bank or a nominee as shall be specified in such request and be in form and
substance satisfactory to the Bank.
(b) If a Default shall have occurred and be continuing, all rights of the
Borrower to exercise the voting and other consensual rights which it would
otherwise be entitled to exercise pursuant to Section 9(a) above shall end upon
thirty days' notice from the Bank to the Borrower and thereafter the Bank shall
have the right to the extent permitted by law for so long as such Default
continues, and the Borrower shall take all such action as may be necessary or
appropriate to give effect to such right, to vote and to give consents,
ratifications and waivers, and take any other action with respect to all Pledged
Securities with the same force and effect as if the Bank were the absolute and
sole owner thereof.
(c) The Bank shall be entitled to receive and retain as Collateral all
dividends and distributions (other than cash dividends or distributions) made in
respect of the Pledged Securities, whether so paid or made before or after any
Default has occurred; provided, however, that upon the occurrence and during the
continuance of a Default, the Bank shall be entitled to receive and deposit as
Collateral all cash dividends into the Collateral Account for so long as such
Default continues. Any such dividends or distributions on account of Pledged
Securities shall, if received by the Borrower, be received in trust for the
benefit of the Bank, be segregated from the other property or funds of the
Borrower, and be forthwith delivered to the Bank as Collateral in the same form
as so received (with any necessary endorsement).
SECTION 10. General Authority.
The Borrower hereby irrevocably appoints the Bank its true and lawful
attorney, with full power of substitution, in the name of the Borrower, for the
sole use and benefit of the Bank and the holders of the Secured Obligations, but
at the Borrower's expense, to the extent permitted by law to exercise, at any
time and from time to time, all or any of the following powers with respect to
all or any of the Collateral:
(a) to take such reasonable action as the Bank deems necessary to protect
or preserve the Collateral and to realize upon the Collateral in accordance with
this Pledge Agreement;
(b) if a Default shall have occurred and be continuing, to give notice
thereof to the Borrower, whereupon (i) funds on deposit in the Collateral
Account shall not be made available to the Borrower and (ii) the Bank may direct
the investment and reinvestment of all funds on deposit in the Collateral
Account pending application in accordance with Section 12 in Qualified
Investments; and
(c) so long as an Event of Default shall have occurred and be continuing:
(i) to demand, sue for, collect, receive and give acquittance
for any and all monies due or to become due upon or by virtue of the
Collateral,
(ii) to settle, compromise, compound, prosecute or defend any
action or proceeding with respect thereto, and
(iii) to sell, transfer, assign or otherwise deal in or with
the same or the proceeds thereof in accordance with Section 11.
SECTION 11. Remedies upon Event of Default
(a) If any Event of Default shall have occurred and be continuing, the
Bank may exercise all the rights of a secured party under the UCC (whether or
not in effect in the jurisdiction where such rights are exercised) and, in
addition, the Bank may without being required to give any notice, except as
herein provided or as may be required by mandatory provisions of law, (i) apply
the cash, if any, then held as Collateral as specified in Section 12 and (ii) if
there shall be no such cash or if such cash shall be insufficient to pay all the
Secured Obligations in full, sell the Collateral or any part thereof at public
or private sale or at any broker's board or on any securities exchange, for
cash, upon credit or for future delivery, and (subject to the requirements of
the UCC) at such price or prices as the Bank may deem satisfactory. The Bank may
be the purchaser of any or all of the Collateral so sold at any public sale (or,
if the Collateral is of a type customarily sold in a recognized market or is of
a type which is the subject of a widely distributed standard price quotations,
at any private sale) and thereafter hold the same, absolutely, free from any
right or claim of whatsoever kind. The Bank is authorized in connection with
any such sale (i) to restrict the prospective bidders on or purchasers of any of
the Collateral to a limited number of sophisticated investors who will represent
and agree that they are purchasing for their own account for investment and not
with a view to the distribution or sale of any of such Collateral, (ii) to
cause, if applicable, to be placed on certificates for any or all of the Pledged
Securities a legend to the effect that such security has not been registered
under the Securities Act of 1933 ("Securities Act") and may not be disposed of
in violation of the provisions of the Securities Act, and (iii) to impose such
other limitations or conditions in connection with any such sale as the Bank
reasonably deems necessary or advisable in order to comply with the Securities
Act or any other applicable law or regulation. The Borrower agrees that it will
execute and deliver such documents and take such other reasonable action as the
Bank deems necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale the Bank shall have the right to
deliver, assign and transfer to the purchaser thereof the Collateral so sold.
Each purchaser at any such sale shall hold the Collateral so sold to it
absolutely, free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Borrower which, to the extent permitted by
law, hereby specifically waives all rights of redemption, stay or appraisal
which it has or may have under any law now existing or hereafter adopted. The
Bank shall give the Borrower not less than ten days' prior written notice of the
time and place of any sale or other intended disposition of any of the
Collateral unless the Collateral threatens to decline speedily in value. The
Bank and the Borrower agree that such notice constitutes "reasonable
notification" within the meaning of UCC Section 9-504(3). Such notice (if any
is required) shall (i) in the case of a public sale, state the time and place
fixed for such sale, (ii) in the case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such sale is to be
made and the day on which the Collateral, or the portion thereof so being sold,
will first be offered to sale at such board or exchange, and (iii) in the case
of a private sale, state the day after which such sale may be consummated. Any
such public sale shall be held at such time or times within ordinary business
hours and at such place or places as the Bank shall deem to be commercially
reasonably, provided that the Bank shall not be obligated to make any such sale
pursuant to any such notice. The Bank may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be so adjourned. If all
or any part of the Collateral is sold on credit or for future delivery, the
Collateral so sold may be retained by the Bank until the selling price is paid
by the purchaser thereof, but the Bank shall not incur any liability in case of
the failure of such purchaser to take up and pay for the Collateral so sold and,
in case of any such failure, such Collateral may again be sold upon like notice.
The Bank, instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment or
decree of a court of courts of competent jurisdiction.
(b) If the Bank shall determine to exercise its right to sell all or any
of the Pledged Securities pursuant to Rule 144 of the General Rules and
Regulations of the Securities Act ("Rule 144"), at the request of the Bank, the
Borrower shall exercise reasonable best efforts to cause each issuer of any such
Pledged Securities to file, on a timely basis, all annual quarterly and other
reports required to be filed by it under Sections 13 and 15(d) of the Exchange
Act, and the rules and regulations of the SEC thereunder, as amended from time
to time. In addition, at the request of the Bank, the Borrower shall reasonable
exercise best efforts to cause each issuer of Pledged Securities to cooperate
with the Bank so as to enable such sales to be made in accordance with
applicable laws, rules, and regulations and the requirements of the broker
through which the sales are proposed to be executed, and shall, upon request and
assuming that the requirements of Rule 144 have been complied with, furnish at
the Borrower's expense an opinion of counsel to such issuer of Pledged
Securities that the proposed sale is in compliance with Rule 144.
(c) For the purpose of enforcing any and all rights and remedies under
this Pledge Agreement the Bank may (i) require the Borrower to, and the Borrower
agrees that it will, at its expense and upon the request of the Bank, forthwith
assemble all or any part of the Collateral not held by the Bank or an agent as
directed by the Bank and make it available at a place designated by the Bank
which is, in its opinion, reasonably convenient to the Collateral and the
Borrower, whether at the premises of the Borrower or otherwise, (ii) to the
extent permitted by applicable law, enter, with or without process of law and
without breach of the peace, any premises where any of such Collateral is or may
be located, and without charge or liability to it seize and remove such
Collateral from such premises, and (iii) have access to and use the Borrower's
books and records relating to such Collateral.
SECTION 12. Application of Proceeds.
The proceeds of any sale of, or other realization upon, all or any part of
the Collateral shall be applied by the Bank in the following order of
priorities:
first, to payment of the expenses of such sale or other realization,
including reasonable compensation to the Bank, and its agents and counsel,
and all reasonable expenses, liabilities and advances incurred or made by
the Bank in connection therewith, and any other unreimbursed reasonable
expenses or other reasonable amounts for which the Bank is to be reimbursed
pursuant to Section 13 hereof or is to be reimbursed pursuant to the Credit
Agreement;
second, to the ratable payment of accrued but unpaid interest and any
accrued but unpaid fees constituting part of the Secured Obligations in
accordance with the terms of the Credit Agreement;
third, to the ratable payment of unpaid principal of the Secured
Obligations;
fourth, to the ratable payment of all other Secured Obligations, until
all Secured Obligations (including without limitation all reasonable legal
fees and expenses payable by the Borrower pursuant to the terms of the
Credit Agreement) shall have been paid in full; and
finally, to payment to the Borrower or its successors or assigns, or
as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
SECTION 13. Expenses.
The Borrower will forthwith upon demand pay to the Bank:
(a) the amount of any taxes which the Bank may have been required to pay
by reason of the security interests granted hereby (including any applicable
transfer taxes) or to free any of the Collateral from any Lien thereon, and
(b) the amount of any and all reasonable out-of-pocket expenses, including
the reasonable fees and disbursements of counsel or any other agents or experts
which the Bank may incur in connection with (i) the administration of this
Pledge Agreement, (ii) the collection, sale or other disposition of any of the
Collateral, (iii) the exercise by the Bank of any of the rights conferred upon
it hereunder or (iv) any default on the part of the Borrower hereunder.
SECTION 14. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the termination
of the Commitment under the Credit Agreement, the security interests granted
hereby shall terminate and all rights to the Collateral shall revert to the
Borrower, and the Bank will promptly execute and deliver to the Borrower such
documents as the Borrower shall reasonably request to evidence such termination.
SECTION 15. Notices.
All notices, communications and distributions hereunder shall be given or
made to the parties hereto in the manner and at the locations set forth in the
Credit Agreement or at such other address or telex number as the addressee may
hereafter specify for the purpose of giving notice.
SECTION 16. Waivers, Non-Exclusive Remedies.
No failure on the part of the Bank to exercise, and no delay in exercising
and no course of dealing with respect to, any right under this Pledge Agreement
or any other Credit Document shall operate as a waiver thereof; nor shall any
single or partial exercise by the Bank of any right under this Pledge Agreement
preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies in the Credit Documents are cumulative and are
not exclusive of any other remedies provided by law.
SECTION 17. Successors and Assigns.
This Pledge Agreement is for the benefit of the Bank and its successors and
assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the indebtedness
so assigned, may be transferred with such indebtedness. The Bank agrees to give
the Borrower written notice of any such assignment. This Pledge Agreement shall
be binding on the Borrower and its successors and assigns.
SECTION 18. Changes in Writing.
Neither this Pledge Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only by a statement in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought.
SECTION 19. Choice of Law.
This Pledge Agreement shall be construed in accordance with and governed by
the laws of the State of Texas, except as otherwise required by mandatory
provisions of law and except to the extent that remedies provided by the laws of
any jurisdiction other than Texas are governed by the laws of such jurisdiction.
SECTION 20. Severability.
If any provision hereof is invalid and unenforceable in any jurisdiction,
then, to the fullest extent permitted by law, (a) the other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in favor of the Bank in order to carry out the intentions of
the parties hereto as nearly as may be possible; and (b) the invalidity or
unenforceability of an provisions hereof in any jurisdiction shall not affect
the validity or enforceability of such provision in any other jurisdiction.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
Executed as of the date first set forth above.
CONTRAN CORPORATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
SOCIETE GENERALE,
SOUTHWEST AGENCY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
ANNEX A TO
PLEDGE AND SECURITY AGREEMENT
PLEDGED SECURITIES
2,500,000 shares of common stock of Keystone Consolidated Industries, Inc.,
par value $1.00 per share, evidenced by the following certificate numbers:
Certificate No. Date Number of Shares
- -------------------- -------------------- --------------------
CU0384 09/15/88 500,000
CU0386 09/23/88 250,000
CU0387 09/23/88 250,000
CU0388 09/23/88 250,000
CU1129 06/08/90 100,000
CU1130 06/08/90 100,000
CU1131 06/08/90 100,000
CU1132 06/08/90 100,000
CU1133 06/08/90 100,000
CU1134 06/08/90 100,000
CU1135 06/08/90 100,000
CU0500 09/25/90 50,000
CU2945 12/07/94 250,000
CU2920 11/01/94 250,000
---------
2,500,000
EXHIBIT C
NOTICE OF BORROWING
[Date]
Societe Generale, Southwest Agency
4800 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attention: Mr. Richard M. Lewis
Ladies and Gentlemen:
The undersigned, Contran Corporation (the "Borrower"), refers to the Credit
Agreement dated as of November 5, 1997 (as the same may be amended or modified
from time to time, the "Credit Agreement," the defined terms of which are used
in this Notice of Borrowing unless otherwise defined in this Notice of
Borrowing) between the Borrower and Societe Generale, Southwest Agency (the
"Bank"), and hereby gives you irrevocable notice pursuant to Section 2.1(a) of
the Credit Agreement that the undersigned hereby requests an Advance, and in
connection with that request sets forth below the information relating to such
Advance (the "Proposed Advance") as required by Section 2.1 (b) of the Credit
Agreement:
(a) The Business Day of the Proposed Advance is , 19 .
------------- -----
(b) The Proposed Advance will be composed of a [Prime Rate Advance]
[Eurodollar Advance].
(c) The aggregate amount of the Proposed Advance is $ .
------------
(d) The Interest Period for the Eurodollar Advance is [ month[s]].
-----
The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the Proposed Advance:
(a) the representations and warranties contained in Article V and in
each other Loan Document are correct in all material respects on and as of
the date of the Proposed Advance before and after giving effect to such
Proposed Advance and to the application of the proceeds from such Proposed
Advance as though made on and as of such date; and
(b) no Default has occurred and is continuing or would result from
such Proposed Advance or from the application of the proceeds therefrom.
CONTRAN CORPORATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
EXHIBIT D
Application for Irrevocable Standby Letter of Credit
EXHIBIT E
FORM OF BORROWER'S COUNSEL OPINION
November 5, 1997
Societe Generale, Southwest Agency
1111 Bagby, Suite 2020
Houston, Texas 77002
Ladies and Gentlemen:
I am the general counsel for Contran Corporation, a Delaware corporation (the
"Borrower"), and I have acted as counsel to the Borrower in connection with (i)
the Credit Agreement dated as of November 4, 1997 (the "Credit Agreement")
between the Borrower and Societe Generale, Southwest Agency (the "Bank") and
(ii) the other Loan Documents (as defined in the Credit Agreement) to which the
Borrower is a party. I have been requested to render this opinion pursuant to
Section 4.1(e) of the Credit Agreement. Capitalized terms not otherwise defined
in this opinion shall have the meanings assigned to them in the Credit
Agreement.
In connection with this opinion letter, I have (a) examined copies of the Credit
Agreement, the Note, and the Pledge Agreement (collectively, the "Documents"),
(b) examined and relied upon the originals, or copies certified or otherwise
identified to my satisfaction, of such corporate documents and records of the
Borrower, and (c) received such information from officers and representatives of
the Borrower and the Subsidiaries as I have deemed necessary or appropriate to
enable us to give the opinions expressed below. I have also examined such other
documents as I have deemed necessary or appropriate to enable me to give the
opinions expressed below, and we have relied without independent investigation
on certificates of public officials and on certificates of officers of the
Borrower as to certain factual matters.
In rendering my opinion, I have assumed (a) the genuineness of all signatures of
the individuals signing all documents in connection with which this opinion is
rendered on behalf of the parties thereto (other than the signatures of the
individuals signing on behalf of the Borrower), (b) the authenticity of all
documents submitted to me as originals, (c) the conformity to authentic original
documents of all documents submitted to me as certified, conformed, or
photostatic copies, and (d) the due authorization, execution, and delivery of
all Credit Documents by the parties thereto other than the Borrower.
Based on the foregoing, and subject to further assumptions, qualifications, and
limitations set forth below, we are of the opinion that:
1. The Borrower (a) is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, (b) has the
corporate power and authority to own its assets and to transact its business as
now being conducted, and (c) is duly qualified to do business in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure to qualify could cause a Material
Adverse Change.
2. Keystone (a) is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, (b) has the corporate
power and authority to own its assets and to transact its business as now being
conducted, and (c) is duly qualified to do business in all jurisdictions in
which the nature of the business conducted by it makes such qualification
necessary and where failure to qualify could cause a Material Adverse Change.
3. (a) The execution, delivery or performance by the Borrower of each of
the Documents, (b) the granting of the Liens provided for in the Pledge
Agreement, and (c) the borrowing of advances by the Borrower, and the issuance
of Letters of Credit for the account of the Borrower under the Credit Agreement
(i) have been duly authorized by all necessary corporate action, (ii) do not and
will not violate any provision of any material law, statute, rule or regulation
applicable to the Borrower in effect on the date hereof or any provision of the
charter or bylaws of the Borrower as in effect on the date hereof, (iii) do not
and will not violate, to the best of my knowledge, any order, writ, injunction
or decree of any court or governmental instrumentality applicable to the
Borrower, or (iv) result in the breach of, or constitute a default or require a
consent under, or (except for the Liens created pursuant to the Pledge
Agreement) result in the creation of any Lien upon any of the properties,
revenues or assets of the Borrower pursuant to any indenture, mortgage, deed of
trust, credit agreement, loan agreement or any other material agreement,
contract, instrument or other agreement know to me after due inquiry to which
the Borrower or its properties may be bound.
4. Each of the Documents constitutes a legal, valid and binding
obligation of the Borrower, enforceable in accordance with their respective
terms, except as such enforceability may be limited by (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement or creditors' rights, and (b) the application of general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
5. No authorizations, approvals or consents of, or filings or
registrations with, any governmental or regulatory authority or agency are
necessary in connection with (a) the participation by the Borrower in the
transactions contemplated by the Credit Agreement or the other Documents and the
execution, delivery, or performance by the Borrower of the Documents or (b) the
grant of the Liens provided for in the Pledge Agreement and the validity,
perfection and enforceability thereof.
6. No authorizations, approvals or consents of, or filings or
registrations with, any governmental or regulatory authority or agency are
necessary in connection with the validity of the execution and delivery of any
of the Documents by the Borrower except such consents, approvals, exemptions,
waivers, licenses, or other authorizations, actions, filings or registrations as
(i) have been obtained, completed or made, (ii) are of a routine or
administrative nature or (ii) to which the failure to obtain or make could not
reasonably be expected to cause a Material Adverse Change.
7. To my knowledge after due inquiry, there are no legal or arbitral
proceedings, and no proceedings by or before any governmental or regulatory
authority or agency, pending or threatened against or affecting the Borrower or
properties or rights of the Borrower which, if adversely determined, (a) could
cause a Material Adverse Change, or (b) could impair the value of the security
granted to the Bank pursuant to the Pledge Agreement.
8. The Pledge Agreement creates as security for the Indebtedness in favor
of the Bank a valid security interest enforceable against the Borrower in all
right, title, and interest of the Borrower in the Pledged Securities (as defined
in the Pledge Agreement) to which Article 9 of the Uniform Commercial Code in
effect in the State of Texas ("U.C.C.") is applicable, assuming the Bank takes
and retain possession of the Pledged Securities, and no filing or recording is
necessary to perfect the Bank's security interest in such Pledged Securities.
Assuming the Bank is a "bona fide purchaser" (as defined in Section 8-302 of the
U.C.C.) of the Pledged Securities and assuming the Bank acquired its interest in
the Pledged Securities in good faith and without notice of any adverse claims
and that each Pledged Securities is either in bearer form or in registered form,
issued or endorsed in the name of the Bank or in blank, the Bank will acquire a
security interest in the Pledged Securities that is prior to any other security
interest therein under the U.C.C.
9. No other taxes and governmental fees and charges are required by any
Governmental Authority in connection with (a) the creation or perfection of the
liens purported to be created by the Pledge Agreement, (b) the execution and
delivery of the Documents, or (c) the obtaining of credit under the Credit
Agreement.
10. As of the date of this opinion, [ ] Keystone Shares are
----------------
authorized and [ ] Keystone Shares are issued and outstanding.
---------------
The Borrower beneficially owns a total of [ ] Keystone Shares.
---------------
Except as set forth on Annex A hereto, (i) there are no outstanding
subscriptions, warrants, options, calls or commitments of any character relating
to or entitling any Person to purchase or otherwise acquire any capital stock of
Keystone, (ii) there are no obligations or securities convertible into or
exchangeable for shares of any capital stock of Keystone or any commitments of
any character relating to or entitling any Person to purchase or otherwise
acquire any such obligations or securities, and (iii) there are no preemptive or
similar rights to subscribe for or to purchase any capital stock of Keystone.
11. The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock within the meaning of Regulation U or X of the Board of
Governors of the Federal Reserve System. The making of the Advances and the
application of the proceeds thereof by the Borrower, and the issuance of the
Letters of Credit as provided in the Credit Agreement do not violate Regulations
G, T, U or X of the Board of Governors of the Federal Reserve System.
12. The Borrower is not any "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
13. The Borrower is not a "holding company" or an "affiliate" of a
"holding company" or a "subsidiary company" of a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
The foregoing opinions are, with your concurrence, predicated upon and
qualified in their entirety by the following:
This opinion letter is solely for your benefit and the benefit of your
counsel and may not be relied upon by any Person other than you and your
counsel.
Very truly yours,
