LOAN AGREEMENT
This loan agreement (this "Agreement") is dated as of September 3, 1998, and is
among Contran Corporation, a Delaware corporation ("Contran"), National City
Lines, Inc. ("NCL"), a Delaware corporation, U.S. Bank National Association
("U.S. Bank"), and the Bank Group (as defined below).
Recitals
A. Contran, NCL, the Agent, and the Bank Group desire to enter into the
Loan Documents under which the members of the Bank Group will severally make
Advances to Contran aggregating no more than the Maximum Availability at any one
time.
B. The members of the Bank Group are prepared to severally make
Advances and extend credit to Contran aggregating no more than the Maximum
Availability at any one time under the terms and conditions of the Loan
Documents.
NOW, THEREFORE, for value, it is agreed that:
I. DEFINITIONS; CONSTRUCTION MATTERS.
A. Definitions. As used in the Loan Documents:
"Advance" means advances or extensions of credit made by the members of
the Bank Group to Contran under the Loan Documents for the
benefit of one or more members of the Contran Companies and
the issuance of letters of credit under the Letter of Credit
Subfacility;
"Agent" means U.S. Bank or any successor or assignee when acting as
the administrative agent for the Bank Group under the
Loan Documents;
"Allowed Uses" means the general corporate purposes of the Contran
Companies including the purchase of margin stock;
"Available" or "Availability" means the difference between the Maximum
Availability and the outstanding balance of the Advances at
the time that Availability is being determined;
"Average Availability" means the difference between the Maximum
Availability and the average outstanding principal balance of
the Advances during a Quarter;
"Bank Group" means U.S. Bank and any banks hereafter added to this
Agreement by modification agreement;
"Bank Group Majority" initially means U.S. Bank. If other banks join
the Bank Group following the date hereof, the term "Bank Group
Majority" shall mean members of the Bank Group holding at
least 51 percent of the total amount of Advances hereunder,
but in any event not less than two banks;
"Banking Day" means a day when all members of the Bank Group are open
to the public at their main offices for carrying on
substantially all of their banking activities (except for a
Saturday, Sunday, or a bank holiday and, with respect to LIBOR
Advances, a day upon which banks transact business on the
London interbank market for Eurodollars;
"Commitment Fee" means a fee, which is payable quarterly in arrears as
of the last Banking Day of each Quarter, equal to 37.5 basis
points per annum (365/366 day year) multiplied by the
difference between the Maximum Availability and the average
outstanding principal balance of the advances and extensions
of credit (excluding standby letters of credit) during the
Quarter, on a prorated basis;
"Contran Companies" means Contran and NCL and "Contran Company" means
any one of the Contran Companies;
"Credit Line" means the revolving lines of credit being severally
extended by the members of the Bank Group to and for the
benefit of the Contran Companies under the terms and
conditions of the Loan Documents;
"Default Rate" means the rate of interest that is otherwise applicable
plus an additional 2% per annum;
"Event of Default" means those events, occurrences, or other matters
identified in Section VI of this Agreement, that, if they
occur or exist, cause Contran to be in default under this
Agreement;
"Eurodollars" means U.S. dollars to be deposited in a bank or other
financial institution located outside of the United
States;
"Expiry Date" means the date which is 364 days following the date of
this Agreement, and any anniversary of such date as extended
by mutual agreement of the Contran Companies and the Bank
Group;
"Guaranty" means the unconditional payment guaranty in the form
satisfactory to the Bank Group to be issued to each member of
the Bank Group by NCL contemporaneously with the execution of
this Agreement;
"Hazardous Material" or "Hazmat" means any waste, substance, mixture,
pollutant or contaminant defined as hazardous, toxic or
radioactive under any federal, state, or local statutory laws,
regulations, or orders and includes, whether or not so
defined, petroleum and natural gas products, polychlorinated
biphenyls and asbestos-containing materials;
"Interest Period" means as of the end of each calendar month for Prime
Rate Advances and a period of 1 month, 2 months, 3 months or 6
months as selected by Contran for each LIBOR Advance, and, if
any Interest Period would otherwise end on a day which is not
a Banking Day, such Interest Period will end on the next
succeeding Banking Day unless such day falls in the next
calendar month in which case that Interest Period will end on
the last Banking Day in the immediately preceding calendar
month;
"Letter of Credit Fee" means a fee, which is payable quarterly in
arrears as of the 10th Banking Day of each Quarter, equal to
1.75% per annum (360 day year) multiplied by the undrawn
amount of outstanding letters of credit during the preceding
Quarter, on a prorated basis.
"Letter of Credit Subfacility" means the facility under which U.S.
Bank will issue one or more standby letters of credit to third
parties aggregating no more than $15,000,000 at any one time
when Contran requests a letter of credit by executing a
written application and reimbursement agreement in form
satisfactory to U.S. Bank. All letters of credit will be
subject to U.S. Bank's standard terms and conditions for
letters of credit.
"LIBOR" means the London interbank offered rate of interest, as
determined and quoted by the Agent, for a deposit of
Eurodollars in the amount of the Advance requested by Contran,
rounded up to the nearest 1/16th of 1% and adjusted for any
reserves, FDIC insurance premiums or other charges which would
be payable by any member of the Bank Group in connection
therewith;
"LIBOR Advance" means an Advance to which the LIBOR applies;
"LTV" means the percentage resulting from dividing the outstanding
principal balance of the Advances on the date the LTV is being
determined by the value of the Pledged Shares (as determined
by multiplying the number of Pledged Shares (initially
6,000,000) by the published closing price for the stock on the
preceding trading day, as published in the Wall Street Journal
or, if the prices are not published, as reasonably determined
by the Agent);
"Loan Documents" means this Agreement, the Guaranties, the Notes,
and the Security Documents, as originally executed and as
hereafter extended and/or modified;
"Maximum Availability" means $25,000,000 until changed by mutual
agreement or reduced by Contran as provided in this Agreement;
"NCL" means National City Lines, Inc., a Delaware corporation;
"Note" means the note to be issued by Contran to the Bank Group in a
form acceptable to the Bank Group;
"Notice of Borrowing" means the notice of intention to borrow to be
given by Contran to the Agent in a form acceptable to the
Agent;
"Obligations" means the debts and obligations of the Contran Companies
to the Bank Group and the Agent under the Loan Documents,
including repayment of the Advances;
"Per annum" means, when referring to interest, the actual number of
days elapsed in an Interest Period over a denominator of 360
days;
"Percentage Interest" means the percentage interest of each member of
the Bank Group determined by dividing its commitment by the
Maximum Availability;
"Pledged Securities" means initially the 6,000,000 shares of common
stock that have been issued by Valhi and any investment
securities that are pledged to the Bank Group under Section
II.B.10 of this Agreement to secure payment and performance of
the Obligations;
"Prime Rate" means the rate of interest publicly-announced by the
Agent from time to time as its prime rate of interest for
Advances to commercial customers;
"Prime Rate Advance" means an Advance to which the Prime Rate is
applicable;
"Prospective Default" means an Event of Default but for the giving of
any required notice, the passage of any applicable grace or
notice period, or both;
"Quarter" means a calendar quarter;
"Security Document" means the securities pledge agreement to be
executed by the Contran Companies in a form acceptable to the
Agent and the related stock powers and compliance forms, and
any security agreement and financing statements that any
Contran Company hereafter executes to secure performance of
the Obligations; and
"Valhi" means Valhi, Inc., a Delaware corporation.
B. Additional References.
1. Accounting Terms. Accounting terms which are not specifically defined
in the Loan Documents will be defined or interpreted and all reporting
practices will be performed, in accordance with generally accepted
accounting principles ("GAAP") unless the Bank Group has given its
prior written consent to a different accounting definition,
interpretation or practice. Without thereby limiting the generality of
the foregoing, all financial statements and calculations which are
based on financial condition or results of operations as of specific
dates or for specific periods (including compliance with financial
covenants) will be calculated on a consolidated basis unless otherwise
specified. Whenever any Loan Document calls for a payment to be made
or an event to occur annually or quarterly, the reference is to
Contran's fiscal year and fiscal quarter. The term "financial
statements" means balance sheets and statements of income and cash
flows prepared in reasonable detail, on a comparative basis, and in
accordance with GAAP for the interim (quarterly) accounting periods
and balance sheets and statements of income, cash flows, and equity,
and related footnotes, for the annual accounting periods.
2. Legal Terms. The definitions and substantive terms of the Uniform
Commercial Code, the Uniform Fraudulent Transfer Act, and the
Bankruptcy Code will be used as additional aids to construction of the
Loan Documents before resort to any other source. The word "execute"
means to subscribe and deliver a document. The term "investment
security" means the obligation of an issuer, or a share,
participation, or other interest in an issuer or in property or an
enterprise of an issuer, and any related certificate and entitlement,
including a warrant, dividend, or other distribution in respect
thereof.
3. Date/Time. Whenever a date or time is specified in the Loan Documents,
it means such date or time in Portland, Oregon.
4. Schedules/Exhibits. The schedules and exhibits, if any, that are
attached to this Agreement incorporated into this Agreement by this
reference.
5. Gender; Number. The Loan Documents are intended to be gender neutral
and the neuter pronoun can refer not only to an organization but also
to an individual. Use of the singular can include the plural and vice
versa. Where the singular refers to several persons, the liability of
such persons is joint and several.
6. Conflicts. The terms and conditions of the Loan Documents are intended
to complement and supplement each other and are to be construed so as
to be consistent and complimentary. In the event that a conflict of
terms cannot be reconciled, the terms and conditions of this Agreement
will govern over any conflicting terms or conditions in any other Loan
Document.
7. Captions. Captions and headings are merely for convenience and
substantively are not a part of the Loan Documents.
8. Governing Law. Construction, performance, and enforcement of the Loan
Documents will be governed by the substantive provisions (i.e.,
without regard to the rules for conflict of laws) of Oregon law, but
if the Bank Group has greater rights or remedies under federal law,
then such rights and remedies under federal law also will be available
to the Bank.
9. Complete Agreement. The Loan Documents are the complete, final, and
exclusive agreement of the parties. No term or condition can or will
be explained, supplemented, waived, or modified by conduct or oral
agreement either before, at, or after signing and delivery of the Loan
Documents.
II. THE LINE OF CREDIT.
A. Advances.
1. Commitment. Upon satisfaction of the conditions precedent by the
Contran
Companies or waiver thereof by the Bank Group, each member of the Bank
Group severally promises and agrees (commits) to make Advances and/or
extend credit (all such Advances and/or extensions of credit at
substantially the same time being an "Advance") to the Contran
Companies for the Allowed Uses until the Expiry Date as long as at the
time of such Advance (a) No Event of Default or Prospective Default
exists under the Loan Documents, (b) the aggregate principal amount of
all outstanding Advances and the requested Advance does not exceed the
Maximum Availability, and (c) the LTV after such Advance will not
exceed 40%.
2. Revolving Nature. The commitments of the Bank Group are revolving in
nature so the Contran Companies may borrow and repay at any time and
from time to time without penalty or premium (except for breakage
charges collectible in connection with full or partial prepayment of
LIBOR Advances) subject to the terms and conditions of the Loan
Documents. LIBOR Advances mature and must be repaid or renewed at a
new LIBOR or at the Prime Rate at the end of the Interest Period
applicable thereto. Prime Rate Advances mature and must be repaid on
the Expiry Date.
3. Notice of Borrowing. In order to borrow (obtain a LIBOR Advance or a
Prime Rate Advance), convert a Prime Rate Advance to a LIBOR Advance
or vice versa, or replace a LIBOR Advance with another new LIBOR
Advance at the end of an Interest Period, Contran must submit a Notice
of Borrowing to the Agent through an authorized representative (a) not
later than 10 a.m. on the date of any requested Prime Rate Advance and
(b) not later than 9 a.m. on the third Banking Day before the
effective date of a LIBOR Advance, unless the Advance is requested
orally and the Agent grants the request, in which case either the
Advance will be repaid or a Notice of Borrowing will be submitted to
the Agent in writing within 48 hours following the oral request
(including any breakage charge related thereto).
The Notice of Borrowing will specify the date when the Advance is to
be funded, converted, or renewed, the amount thereof, the applicable
interest rate and, if the LIBOR has been selected, the Interest
Period. Each Notice of Borrowing and oral request will be irrevocable
and the Agent and the Bank Group will be entitled to procure funds in
reliance on such Notice of Borrowing and oral request; provided,
however, that Contran may withdraw any Notice of Borrowing at any time
prior to the funding of such Advance as long as Contran pays all
reasonable direct costs and expenses (including breakage charges)
incurred by any member(s) of the Bank Group in reliance on such Notice
of Borrowing. No LIBOR Interest Period may be selected that extends
beyond the Expiry Date. The Prime Rate will be applicable to each
Advance unless Contran has properly selected the LIBOR.
4. Disbursement of Proceeds. All Advances will be funded by wiring the
proceeds thereof into Contran's general corporate checking account.
5. Interest Rates. The rates of interest payable by Contran will be (a)
the Prime Rate on each Prime Rate Advance and (b) if selected by
Contran, the LIBOR plus a margin of 1.75% (175 basis points) per annum
on each LIBOR Advance in the minimum amount of $1,000,000 and
increments of $500,000 in excess of the minimum amount.
6. Principal Repayment. Contran will repay the Advances on or before the
Expiry Date.
B. General Matters.
1. Medium. All Advances will be made by, and all payments will be made
to, the Bank Group in immediately available U.S. dollars.
2. Interest Payments. Interest on Prime Rate Advances is due monthly in
arrears. Interest on LIBOR Advances is due in arrears at the end of
the Interest Period and, in the event of any 6-month LIBOR Interest
Period, at the end of the first 90 days of the Interest Period.
3. Payments. Any payment received by the Agent after noon will be deemed
to have been made on the next following Banking Day and interest will
accrue to that day. In the event that the date specified for payment
is not a Banking Day, then interest will accrue to and the payment
will be made on the next following Banking Day; provided, however,
that if the next Banking Day following the end of an Interest Period
for a LIBOR Advance is in the following calendar month, then payment
or renewal of the LIBOR Advance will be due on the last Banking Day
which precedes the end of that Interest Period. All payments will be
applied, to the extent amounts are due, first to costs (including
breakage charges), then to fees, then to accrued interest, and finally
to principal.
4. Breakage Charge. Contran may prepay a LIBOR Advance only upon three
days' advance written notice and upon payment of the breakage charge
specified in the Note.
5. Terminating LIBOR. The Bank Group is offering the LIBOR to Contran on
the assumption that there will continue to be an active interbank
market in Eurodollars. If that market ceases to exist or if it
otherwise becomes illegal or impractical for any member of the Bank
Group to fund an Advance with reference to this source of funds, then
the Bank Group member(s) so affected will give notice of such
illegality or impracticality to Contran and any future loan from those
members of the Bank Group will be at the Prime Rate.
6. Increased Costs. If any member of the Bank Group is required to
increase its reserves, insurance premiums, or regulatory capital or to
pay additional taxes (other than income taxes) in order to make
Advances to Contran because of the future enactment, promulgation, or
amendment of any statute, regulation, or order by a government or
governmental subdivision or agency, then Contran will reimburse such
member(s) of the Bank Group on demand for all such increased costs as
estimated in writing with reasonable particularity by such member.
7. Notes; Promise of Repayment. Contran promises and agrees to issue a
note to each member of the Bank Group in the amount of such member's
commitment and to repay all Advances, plus interest, fees, costs and
expenses, to the order of each member of the Bank Group in accordance
with such member's Percentage Interest.
8. Guaranty; Promise of Repayment. NCL promises and agrees to issue the
Guaranty to each member of the Bank Group and to repay each Bank Group
member's Percentage Interest of all Advances, plus interest, fees,
costs and expenses, to such member's order in accordance with the
terms hereof and of the note.
9. Nature of Liability. Contran and NCL are jointly, severally, and
primarily liable for performance of the Obligations.
10. Maintenance of Loan-to-Value Ratio: Mandatory Prepayment or Pledge of
Additional Pledged Securities. If the outstanding principal balance of
the Advances at any time results in an LTV of more than 40%, the
Contran Companies immediately will either (a) make a prepayment of
principal so as to reduce the LTV to 40% or less and/or (b) pledge
additional investment securities in quality and quantity reasonably
acceptable to the Bank Group so as to reduce the LTV to 40% or less.
For the purposes of this paragraph, the Bank Group acknowledges and
agrees that the Contran Companies always may pledge additional shares
of Valhi common stock owned by a Contran Company in order to meet the
LTV requirement. Prepayments required under this section will be
applied first to Prime Rate Advances, because such Advances may be
prepaid without payment of the breakage charge, and then to LIBOR
Advances in an order which first pays the LIBOR Advance(s) with the
shortest remaining time until maturity, then the next shortest period,
etc. If additional investment securities are pledged and the value of
the pledged securities later increases, the Agent will, upon the
written request of the Contran Companies, return to the Contran
Companies any of the additional pledged securities (including the
Valhi shares pledged initially) which are not then necessary to
maintain the LTV at 40% or less.
11. Waiver; Forbearance. Each Contran Company waives acceptance,
presentment (including notice of dishonor) and all claims, offsets,
defenses, and counterclaims based on suretyship or impairment of
collateral. Without limiting the foregoing, each Contran Company
consents to extension of due dates, material modifications, and
impairment of contribution rights and the value of interests in
collateral without prior notice or demand.
C. Letters of Credit.
1. Commitment. Upon the written application of Contran and such terms and
conditions as U.S. Bank may reasonably require, U.S. Bank will issue,
until 30 days prior to the Expiry Date, standby letters of credit to
beneficiaries designated by Contran for terms that expire no later
than the Expiry Date. Contran will pay all Letter of Credit Fees
associated with issuance of the letters of credit and the
administrative charges normally charged by U.S. Bank in connection
with such letters of credit and drawings thereon.
2. Participation. Each member of the Bank Group will participate, in
accordance with its Percentage Interest, in U.S. Bank's risks and
obligations under such letters of credit and in Contran's obligations
for immediate reimbursement of the amount of any drawings made by the
beneficiaries (which includes successors and transferees) under any
letter of credit. This participation will be as a primary obligor to
U.S. Bank and not as a surety for Contran. Each of the members of the
Bank Group will pay to U.S. Bank such lender's Percentage Interest of
any drawing made under any letter of credit within 24 hours of receipt
of notice from U.S. Bank of such drawing regardless of the existence
of an Event of Default or Prospective Default, or any offset, defense,
or counterclaim of Contran.
3. Reduction in Availability. Upon issuance of a letter of credit under
this subfacility, the amount of Availability will be reduced in an
equivalent amount, but no interest or fees (except U.S. Bank's normal
issuance and usage fees and charges and the letter of credit fees)
will be payable on such amount until a drawing is made on such letter
of credit.
4. Reimbursement. Contran promises and agrees to immediately reimburse
U.S. Bank for the amount of any drawing made by any beneficiary under
any letter of credit issued by U.S. Bank upon the application
hereunder of Contran without offset, defense, or counterclaim against
U.S. Bank other than payment resulting from gross negligence of U.S.
Bank and without regard to any claims, offsets, defenses, or
counterclaims that Contran has or may claim to have against its
liability to the beneficiary of such letter of credit. If not
reimbursed on the same Banking Day and if Contran is not then
insolvent or the subject of any insolvency proceeding, the amount so
paid by U.S. Bank will be deemed to be an Advance under the Credit
Line in that amount to Contran as of the date when the draw is paid
and will bear interest at the Prime Rate until repaid or renewed as a
LIBOR loan.
III. CONDITIONS PRECEDENT.
A. Conditions to First Borrowing. The following are conditions precedent which
must be satisfied by the Contran Companies or waived by the Bank Group
Majority prior to the first Advance:
1. Loan Documents. Contran has duly executed (signed, acknowledged where
appropriate, and delivered) the Loan Documents;
2. Guaranties. NCL has executed the Guaranty and the Contran Companies
have executed the Security Documents;
3. Corporate Documents. Each Contran Company has delivered certified true
copies of currently effective (a) articles of incorporation, bylaws,
and similar governance documents (its "organization documents"), (b)
resolutions of its board of directors authorizing it to execute each
of the Loan Documents to which such organization is a party and to
perform the Obligations, and specifying the representative(s) who will
execute the Loan Documents on its behalf (and, for Contran, who may
request Advances) (its "borrowing resolutions"), and (c) an incumbency
certificate executed by its corporate secretary containing specimen
signatures of the representatives who will execute the Loan Documents
and, in the case of Contran, request Advances (its "incumbency
certificate");
4. Representations and Warranties. The representations and warranties
made by the Contran Companies in the Loan Documents are true, complete
and correct in all material respects as of the date upon which the
Loan Documents are executed and the date upon which the first loan is
requested and a duly authorized representative of each Contran Company
has executed a certificate dated as of the date of the first Advance
certifying the continued accuracy and completeness of the
representations and warranties;
5. Legal Opinion. Contran's general counsel has rendered an opinion to
the Bank Group opining that as of the date of the Loan Documents (a)
each Contran Company is a validly existing Delaware corporation, (b)
each Contran Company has been duly authorized to execute each of the
Loan Documents to which such organization is a party and to perform
the Obligations, (c) each of the Loan Documents is the legally valid
and binding obligation of each Contran Company who is a party thereto
and is enforceable in accordance with its terms except as enforcement
may be limited by insolvency or other similar laws affecting the
rights and remedies of creditors generally, general principles of
equity, whether applied by a court of law or equity, and other
generally applicable rules of law, and (d) the Security Documents are
a form sufficient to create a lien on or security interest in all
right, title, and interest of the Contran Companies in the Pledged
Securities;
6. Perfection. The Contran Companies have delivered to the Agent
possession of the certificates evidencing the investments securities
which are part of the Pledged Securities with stock powers signed in
blank and related compliance certificates and the Agent has perfected
its security interest of the Bank Group in any other types or items of
the collateral;
7. Legal Matters. All matters pertaining to the Loan Documents and the
Advances are reasonably satisfactory to the Agent and the Agent has
received all certificates, insurance policies and documents that it
reasonably requires to establish compliance with the terms and
conditions of the Loan Documents.
B. Subsequent Advances. The following are conditions precedent which must be
satisfied by Contran or waived by the Bank Group prior to any Advance
subsequent to the first Advance:
1. No default. No Event of Default or Prospective Default exists on the
date of such Advance after giving effect to such Advance;
2. Representations and Warranties. The representations and warranties
made by the Contran Companies in the Loan Documents continue to be
true, complete and correct in all material respects; and
3. LTV Compliance. After giving effect to the requested Advance, the LTV
will be 40% or less.
IV. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties. Each Contran Company represents and
warrants to the Bank Group that:
1. Corporate Organization. Each Contran Company is a Delaware corporation
which is duly organized and is duly qualified to transact business in
all other states and countries where the failure to be so qualified
would have a material adverse impact on its business operations or
ownership of property;
2. Authorization. Each Contran Company has been duly authorized to
execute each of the Loan Documents to which such organization is a
party and to perform the Obligations;
3. Due Execution and Delivery. Each Loan Document to which such
organization is a party has been duly executed by a representative of
such organization who has been duly authorized to perform such acts;
4. Legally Binding Documents. Each Loan Document is the legally valid and
binding obligation of each Contran Company who is a party to such
document and is enforceable against such organization in accordance
with its terms except as such enforcement may be limited by insolvency
or other similar laws affecting the rights and remedies of creditors
generally, general principles of equity whether applied by a court of
law or equity, and generally applicable rules of law;
5. Accurate Financial Statements. The annual and interim financial
statements of the Contran Companies furnished to the Bank Group
present fairly the financial position of such Contran Companies as of
the date of such financial statements and the results of the
operations and changes in financial position for the annual and
interim periods then ending /1/;
6. No Violations. Neither the execution of the Loan Documents nor the
performance of the Obligations by the Contran Companies is prohibited
by or will subject any Contran Company to any fine, penalty or similar
sanction under, any statute, regulation, or order applicable to such
organization;
7. No Proceedings. There are no civil, criminal, or administrative
proceedings now pending or overtly threatened in writing against any
Contran Company which has not been disclosed in the audited financial
statements which have been provided to the Bank or separately in
writing and which, if adversely determined, would have a material
adverse effect on the ability of the Contran Companies to repay the
Advances and perform their other obligations to the Bank Group under
the Loan Documents;
8. No Breach or Default. No Contran Company is now, or by reason of the
execution of the Loan Documents or performance of the Obligations will
be, in breach of or in default under any "employee pension benefit
plans" or "employee benefit plans" (as those terms are defined by
Section 3 of the Employee Retirement Income Security Act of 1974, as
amended) to which such organization is a party or sponsor in any
material respect or any other material agreement, instrument,
undertaking, or other contract to which such organization is a party
or by which its property is bound if such breach or default would have
a material adverse effect on the ability of the Contran Companies to
repay the Advances and perform their Obligations to the Bank Group
under the Loan Documents;
--------
/1/ The financial statements for NCL may omit footnote disclosures that
would normally be required under GAAP.
9. Tax Returns; Taxes. Each Contran Company has filed all material tax
returns that it is required by any statute, regulation, or order to
file and has paid when due all material taxes imposed on it or its
property;
10. Compliance with Law. Each Contran Company is in compliance in all
material respects with all statutory laws, regulations, and orders
that are applicable to such organizations and their property
specifically including, but not limited to, environmental laws;
11. Hazardous Material. To the best knowledge of Contran, there is no
hazardous material being released, and no hazardous material has been
released, from or at any real property owned or operated by any
Contran Company in quantities which would trigger such organization's
obligation under applicable environmental laws to report the existence
of such waste or to remove and dispose of such waste or to remediate
the effects of a prior discharge thereof except as disclosed to the
Bank in writing before the date of the Loan Documents;
12. Solvency. No Contran Company is insolvent or the subject of any
insolvency proceedings and each Contran Company has capital which is
reasonably adequate to conduct its business in the manner in which it
intends to conduct such business;
13. Investment Company Act. No Contran Company is an "investment company"
as that term is defined by Section 3(a) of the Investment Company Act
of 1940;
14. No Material Adverse Change. There has been no material adverse change
in the business operations, financial position, or cash flows of the
Contran Companies since the date of the latest annual financial
statement provided to the Bank Group before the date of this
Agreement;
15. Ownership of Pledged Securities. Each Contran Company owns the item or
items of Pledged Securities that such organization purports to own and
such property is free and clear of all liens, security interests, and
claims except to the extent that a security interest is granted to the
Bank Group in the Loan Documents; and
16. Year 2000. The Contran Companies have reviewed and assessed their
business operations and computer systems and applications to address
the "year 2000 problem" (that is, that computer applications and
equipment used by the Contran Companies, directly or indirectly
through third parties, may be unable to properly perform
date-sensitive functions before, during, and after January 1, 2000)
and reasonably believe that the year 2000 problem will not result in a
material adverse change in the Contran Companies' business condition
(financial or otherwise), operations, properties, or prospects, or the
Contran Companies' ability to repay the Advances and perform their
Obligations to the Bank Group under the Loan Documents.
B. Reaffirmation. The Contran Companies will be deemed to reaffirm the
accuracy and completeness of the foregoing representations and warranties
each time that an Advance is requested.
V. COVENANTS.
A. Affirmative Covenants. The Contran Companies promise and agree that until
the Advances are repaid and all other Obligations are discharged by
performance, each Contran Company will, unless the Agent otherwise consents
in writing:
1. Preserving Existence. Preserve its legal status and material
franchises and pay all material taxes and fees in connection
therewith;
2. Compliance with Laws and Orders. Comply in all material respects with
all statutory laws, regulations, and orders applicable to it or its
property specifically including, but not limited to, environmental
laws, if noncompliance would or is likely to have a material adverse
effect on the financial condition or business prospects of such
organization or its ability to perform the Obligations;
3. Insurance. Obtain and maintain with responsible carriers or through
self-insurance such workers' compensation, fire with extended coverage
endorsement, public liability and property damage and such other
insurance in such coverage amounts, deductibles and terms as may be
consistent with industry practices and will provide evidence of such
insurance and payment of premiums to the Agent as and when required by
the Agent;
4. Payment and Performance of Debts, Liabilities and Obligations. Pay and
perform when due all material debts and obligations owed to all third
persons, specifically including, but not limited to, its obligations
under any "employee pension benefit plans" or "employee benefit plans"
(as those terms are defined by Section 3 of the Employee Retirement
Income Security Act of 1974, as amended) to which such person is a
party or sponsor in any material respect or any other material
agreement, instrument, undertaking, or other contract to which such
person is a party or by which its property is bound;
5. Books and Records. Keep accurate and complete books and records
relating to the Pledged Securities and its other assets and
liabilities, management and employees, production, marketing,
operations, performance and earnings;
6. Tax Returns. File all tax returns required by statute, regulations,
and orders to be filed and pay all material taxes when due;
7. Financial Statements. Deliver to each member of the Bank Group (a)
unaudited interim consolidated financial statements of Contran within
75 days following the end of each of the first three quarterly
reporting periods of each fiscal year, (b) audited annual consolidated
financial statements of Contran within 120 days following the end of
each fiscal year, accompanied by a copy of an unqualified audit
opinion issued by certified public accountants reasonably satisfactory
to the Bank Group and, if issued, copies of such auditor's "management
letter," and (c) unaudited consolidating financial statements of NCL
within 75 days following the end of each of the first three quarterly
reporting periods and within 120 days of the end of each fiscal year,
which unaudited consolidating financial statements may omit all
footnote disclosures normally required in financial statements
prepared in accordance with GAAP;
8. Auditor Certificates. Deliver to each member of the Bank Group with
the audited annual consolidated financial statements of Contran the
certificate of the auditors addressed to the Agent and certifying,
based only on review of the annual audited financial statements and
the Loan Documents, that the auditors are not aware of any Event of
Default or Prospective Default or, if such auditors are aware of such
event, specifying such events with reasonable particularity; provided,
however, that in connection therewith the auditors shall be under no
obligation to go beyond the bounds of generally accepted auditing
standards for the purpose of certifying such compliance or
non-compliance;
9. Additional Information; Compliance Certificates. Provide to the Agent:
a) A Notice of Borrowing when and as Contran requests Advances;
b) Such additional information as and when reasonably requested by
the Bank Group or the Agent as to the Pledged Securities and the
business operations and financial condition of any one or more of
the Contran Companies;
c) Notice of any material adverse change in the business operation
or financial condition of any Contran Company; and
d) Within 10 Banking Days after any Contran Company receives written
notice thereof, a report of each pending and overtly threatened
claim, litigation, and governmental proceeding which, if
adversely determined, probably would involve an aggregate
liability of $5,000,000 or more;
e) Quarterly and annual compliance certificates, to accompany the
quarterly and annual financial statements, signed by a duly
authorized representative of the Contran Companies which either
(A) certifies that there is no Event of Default or Prospective
Default as of the date of the certificate to the knowledge of the
representative or (B) specifies with reasonable particularity
such events then existing and known to the representative and
outlines its plan for cure thereof;
f) Copies of any filings or reports that any Contran Company files
or makes with any federal or state government department,
commission, or agency regulating investment securities as and
when such filings or reports are filed or made to such government
department, commission, or agency; and
g) If Contran becomes aware of any Event of Default or Prospective
Default between quarterly and annual reporting dates, written
notice of such Event of Default or Prospective Default within 10
days after Contran's senior management learns of such Event of
Default or Prospective Default.
10. Inspection Rights. The Agent will have the right to discuss financial
statements and other books and records with accounting employees and
outside accountants of each Contran Company and the Contran Companies
will ensure that the Agent may exercise and enjoy such rights subject
to the obligation of the Agent to give reasonable advance notice to
the Contran Companies under the circumstances. The Contran Companies
will reimburse the Agent for all reasonable costs and expenses
incurred by the Agent in connection with the foregoing. All employees
and outside accountants are hereby authorized to discuss such matters
with the Agent, to provide such additional books and records and
information as may be reasonably requested by the Agent in connection
therewith, and to bill the Contran Companies for such services. The
Agent also will give prior notice to the Contran Companies of the
intention to discuss such matters with the outside accountants so as
to provide the opportunity to the management of the Contran Companies
to be present at such discussions.
11. Contest Rights. Notwithstanding the foregoing covenants, each Contran
Company will have the right to contest its obligations under statutory
laws, regulations, orders, and contracts (other than the Obligations)
and for payment of taxes as long as (a) such contest is started and
continued in good faith and by appropriate means, (b) adequate
reserves are maintained by the Contran Company engaging in such
contest for performance of the obligation in the event of an outcome
of such contest that is adverse to the Contran Company involved and
(c) the Bank Group is notified of any such contest where an adverse
outcome probably would involve a payment of $5,000,000 or more.
B. Negative Covenants. Each Contran Company promises and agrees that until the
Advances are repaid and all other Obligations have been discharged by
performance, it will not, unless the Bank Group otherwise consents in
writing:
1. Additional Debt. Directly or indirectly (by borrowing, deferred
purchase, guarantee, or otherwise) incur more than $25,000,000 as a
group in funded debt in excess of that immediately available or
outstanding to the Contran Companies on the date of this Agreement
except for loans occurring in the ordinary course of business from the
Contran Companies to each Contran Company and/or Valhi and/or other
affiliates of Contran;
2. Asset Transfers. Transfer any material or essential part of or
interest in their property to any third party except for sales of
inventory and surplus or obsolete equipment, the collection of
accounts, and sales and exchanges of other assets in the ordinary
course of business;
3. Transactions with Affiliates. Engage in any material business
transaction with any affiliate or other third party on terms less
favorable to the Contran Company than those which could be obtained at
the time thereof in arm's-length dealings with a nonaffiliated person;
4. Business Combinations. Engage in any merger, acquisition, or exchange
of equity securities unless the Contran Company is the surviving
corporation and the Contran Companies continue to be in compliance
with all of the terms and conditions of the Loan Documents; or
5. Use of Proceeds. Use the proceeds of any loan for any purpose not
permitted by the Loan Documents.
VI. DEFAULT.
TIME IS OF THE ESSENCE. Contran will be in default under the Loan Documents if:
A. Payment Failure. The Contran Companies fail to make any payment of
principal when due or fail to make any payment of interest, fees or costs
within three Banking Days following the due date;
B. LTV Compliance. The Contran Companies fail to prepay principal or pledge
additional Pledged Securities within three Banking Days following receipt
of written notice from the Agent that the LTV exceeds 40% if and when
required by the Agent under the terms of this Agreement.
C. Misrepresentation. Any Contran Company knowingly misrepresents any material
fact to the Bank Group or the Agent or fails to disclose to the Bank Group
or the Agent a material fact which is necessary to make the facts which
have been disclosed not misleading in the circumstances under which they
are made;
D. Affirmative Covenants. The Contran Companies fail to comply with the
affirmative covenants contained in any of the Loan Documents within 30 days
following the date such compliance is demanded by the Bank Group or, if
such compliance cannot be completed within that 30-day period, fails to
substantially commence compliance within that 30-day period and then to
complete such compliance as soon as possible thereafter but in no event
later than 60 days after such compliance is demanded;
E. Negative Covenants. Any Contran Company breaches any negative covenant
contained in the Loan Documents;
F. Debt Default. Any Contran Company breaches or is in default under any
agreement, instrument, or similar contractual undertaking for the repayment
of funded debt in excess of $5,000,000 or does not pay any trade account
payables which is material or essential to its business, other than those
where the amount or validity is being contested in good faith and by
appropriate means, in the ordinary course of business;
G. Guaranty. Any Contran Company repudiates, breaches, or is in default under
the Guaranty or the Security Documents;
H. Insolvency. Any Contran Company becomes insolvent, the subject of any
voluntary insolvency proceeding or, having become the subject of an
involuntary insolvency proceeding, fails to have the involuntary proceeding
dismissed within 90 days of commencement;
I. Judgments. Any Contran Company becomes a judgment debtor for more than
$5,000,000 if such liability is not either covered by insurance or vacated,
discharged, stayed, or bonded in connection with an appeal within 30 days
of entry of the judgment; or
J. Change in Control. Any person or group of persons, other than the current
holders, hereafter directly or indirectly acquires control of any Contran
Company and such change in control continues for 60 days.
VII. REMEDIES.
A. Suspending Commitment. The members of the Bank Group may suspend their
obligations to make Advances to Contran upon the occurrence of a
Prospective Default or when the LTV is more than 40%.
B. Canceling Commitments. The members of the Bank Group may cancel their
obligations to makes Advances to Contran and accelerate the due date of the
Notes (make payment of all principal, interest, fees and costs immediately
due and payable) without further notice or demand upon the occurrence of an
Event of Default and Contran's failure to cure such Event of Default within
applicable notice and grace periods.
C. Collecting Payments; Order of Exercise of Remedies. The Bank Group may
collect the overdue payments or the accelerated balance of the Notes at
such times and in such order as the Bank Group selects. All rights and
remedies provided by law, equity and contract are cumulative.
D. Consent to Jurisdiction. Each Contran Company consents to the jurisdiction
and venue of the circuit court of the state of Oregon for Multnomah County
(Portland) and of any federal court located in the state of Oregon for any
proceeding arising out of the Loan Documents, including offsets, defenses,
and counterclaims arising in contract or tort.
E. Offset. Without limiting the generality of the foregoing, each Contran
Company expressly grants to each member of the Bank Group the right to
offset the obligations of the Bank Group to the Contran Companies against
the Obligations without notice or demand upon the occurrence and
continuance of an Event of Default.
F. Jury Trial Waiver. On advice of counsel and in lieu of an arbitration
clause normally required by the agent, each Contran Company waives trial by
jury in any controversy (claim, offset, defense, counterclaim, or
third-party claim whether asserted in tort or contract) arising out of or
in any way related to construction, performance, and/or enforcement of the
Loan Documents.
G. Costs. The prevailing party in the trial or appeal of any civil action or
other proceeding relating to the Loan Documents (including claims and
adversary proceedings in the Bankruptcy Court) will be entitled to the
award of a reasonable attorney fee in addition to costs and disbursements.
If the Bank Group uses an attorney to enforce performance of the
Obligations, the Contran Companies will reimburse the Bank Group for such
costs reasonably incurred on demand whether or not a civil action or other
proceeding is commenced.
VIII. INDEMNITY.
A. Indemnity. The Contran Companies promise and agree to indemnify, defend and
hold harmless each member of the Bank Group from and against all claims and
causes of action (and any direct and reasonable loss, damage, liability,
cost, and expense, including penalties, damages, liens and reasonable
attorney fees and other defense costs resulting therefrom) of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against
any of such member in connection with any investigation, litigation, or
other proceeding, that arises from or relates to the Loan Documents or the
failure of any of the Contran Companies to perform the Obligations, but the
Contran Companies will not be responsible for any portion of such
indemnified claims or causes of action that arise from or relate to the
negligence or willful misconduct of any member of the Bank Group, any
controversies or claims among the members of the Bank Group, or the failure
of a member of the Bank Group to comply with any statute, regulation, or
order applicable to such indemnified party.
B. Durable Nature. This indemnity will survive the satisfaction or discharge
of the Advances by payment, bankruptcy discharge, or otherwise.
IX. AGENCY PROVISIONS.
A. Authorization and Action. Each member of the Bank Group hereby irrevocably
appoints the Agent as its agent for administration of the Advances and
Obligations and authorizes the Agent to take such action and exercise such
powers under this Agreement as are granted to the Bank Group, subject to
the voting/approval provisions of this Article, by the terms of this
Agreement together with such additional actions and powers as are
reasonably incidental thereto. The obligations of the Agent are mechanical
and administrative in nature. Accordingly, the Agent is not by reason of
its role under this Agreement a trustee or fiduciary for any member of the
Bank Group. The Agent will have no obligations except those expressly
stated in this Agreement. As to any matters not expressly provided for in
this Agreement (including, but not limited to, enforcement or collection of
the Notes), the Agent will not be required to exercise any discretion or
take any action, but will be required to act or to refrain from acting upon
the instructions of the Bank Group Majority, and such instructions will be
binding on all members of the Bank Group; provided, however, that the Agent
will not be required to take any action which exposes the Agent to personal
liability or that is contrary to this Agreement or applicable laws,
regulations, or orders.
B. Liability of the Agent. The Agent (including its shareholders, directors,
officers, agents, and employees) will not be liable for any action taken or
inaction by it under or in connection with this Agreement in the absence of
its own gross negligence or willful misconduct. Without thereby limiting
the foregoing sentence, the Agent:
1. May treat the payee of a Note as the holder thereof until the Agent
receives written notice of a transfer thereof signed by such payee in
a form reasonably satisfactory to the Agent;
2. May consult with legal counsel, independent public accountants, and
other experts selected by it and will not be liable for any action
taken or inaction by it in good faith in accordance with the advice of
such counsel, accountants, or experts;
3. Makes no warranty or representation to any Bank and will not be liable
or responsible for the statements, warranties, or representations made
by the Contran Companies or any other person in connection with this
Agreement,
4. Will not have any obligation to inquire as to the performance or
observance of any of the terms, covenants, or conditions of this
Agreement on the part of the Contran Companies or any other person or
to inspect any Pledged Securities, books and records, or other
property of the Contran Companies or any other person;
5. Will not be responsible to any member of the Bank Group for the due
execution, legality, validity, enforceability, genuineness,
perfection, sufficiency, or value of this Agreement, the Notes, or any
other certificate, instrument, or document furnished pursuant to this
Agreement, and
6. Will have no liability under this Agreement or otherwise by acting
upon any notice, consent, certificate, or other instrument, document,
or other writing (whether personally delivered or sent by mail,
messenger, telegram, telex, or facsimile) believed by the Agent to be
genuine and signed by the proper person.
C. Rights of Agent as a Member of the Bank Group. With respect to its
individual commitment, the Advances made by it, and the Note and Guaranty
issued to it, the Agent will have the same rights, powers, and obligations
under this Agreement as any other member of the Bank Group and may exercise
and perform the same as though it were not also the Agent. The Agent and
its affiliates may accept deposits from, lend money to, act as trustee for,
and generally engage in any business with or own securities of the Contran
Companies as if the Agent were not the Agent for the Bank Group and without
any obligation to account therefor to the Bank Group.
D. Independent Credit Decision. Each member of the Bank Group acknowledges
that it has made its own credit analysis and decision before making its
commitment on the basis of such documents and information that it deemed
appropriate and without reliance on any information, analysis, or
recommendation made by the Agent. Each member of the Bank Group also
acknowledges that it will continue to make such independent credit analyses
and decisions in taking or not taking action under this Agreement. Except
for the notices, reports, and other documents and information that the
Agent is specifically required to furnish to the members of the Bank Group
under this Agreement, the Agent will have no obligation to provide to the
members of the Bank Group any additional information concerning the
financial condition, business operations, or property of the Contran
Companies that may come into the possession of the Agent or its affiliates.
E. Indemnification. Each member of the Bank Group agrees to indemnify and hold
harmless the Agent from and against such member's Percentage Interest of
all claims and causes of action (and any resulting loss, damage, liability,
cost, and expense, including penalties, damages, liens and reasonable
attorney fees and other defense costs) of any kind or nature whatsoever
that (i) may be imposed on, incurred by, or asserted against the Agent in
any way relating to or arising from this Agreement, (ii) are not reimbursed
to the Agent by the Contran Companies, and (iii) are not the result of the
Agent's gross negligence or willful misconduct. Without limiting the
generality of the foregoing, each member of the Bank Group agrees to
reimburse the Agent for its Percentage Interest of any reasonable
out-of-pocket expenses, including reasonable attorney fees, incurred by the
Agent in connection with the preparation, administration, enforcement, or
legal advice with respect to rights or duties under, the Loan Documents to
the extent that such expenses are not reimbursed by the Contran Companies.
F. Successor Agent. The Agent may resign at any time by giving at least 60
days' prior written notice to the Bank Group and to the Contran Companies.
Upon resignation, the Bank Group Majority will appoint a successor Agent.
If no successor Agent has been appointed and accepted its appointment
within 30 days of receipt of the notice of resignation of the Agent, then
the Agent may appoint its successor which shall be a national bank having
combined capital and surplus of at least $100 million. Upon acceptance by
the successor of its appointment, such successor will succeed to and become
vested with all of the rights, powers, privileges, and duties of the Agent
and the retiring or removed Agent will be discharged from its obligations
as the Agent under this Agreement.
G. Sharing of Payments and Recoveries. If any member of the Bank Group obtains
any payment (whether voluntary, involuntary, by way of offset, or
otherwise) on account of the Note held by it and such payment is in excess
of its Percentage Interest, such member will purchase from the other
members of the Bank Group such participation in the Notes held by them as
is necessary to cause such purchasing member of the Bank Group to share the
excess payment ratably with the other members of the Bank Group. If such
member is thereafter required to return all or any part of the excess
payment, then the purchase of participation by such member of the Bank
Group will be rescinded to the same extent and the purchase price of such
participation (or so much thereof as is recovered) will be refunded.
H. Modifications, Consents, and Waivers. Except as allowed or limited by the
remainder of this section, the Bank Group Majority may in specific
instances modify the terms and conditions of this Agreement, grant consents
requested by the Contran Companies, waive compliance by the Contran
Companies with the terms and conditions of this Agreement but any such
modifications, consent, or waiver must be in writing to be effective.
Notwithstanding any other term or conditions of the Loan Documents, no
modification, consent, or waiver may, unless such modification, consent,
waiver, release, or termination is in writing and is signed by all members
of the Bank Group:
1. Waive any of the conditions precedent specified in Article III of this
Agreement;
2. Increase or decrease the individual commitment of any member of the
Bank Group, or otherwise subject any member of the Bank Group to any
additional obligations without such bank's consent
3. Reduce the amount payable on any Note (including principal, interest,
or fees);
4. Extend the Expiry Date;
5. Change the definition of "Bank Group Majority" or modify this section;
or
6. Authorize the release or termination of any Guaranty or the security
interest of the Bank Group in any material or essential part of or
interest in the Pledged Securities.
Notwithstanding the foregoing, the Bank Group Majority will have the
right to authorize the Agent to release parts of and/or interests in
Pledged Securities from time to time to accommodate ordinary course of
business transactions by the Contran Companies and the Agent may
release additional pledged securities as provided in II.B.10 of this
Agreement as long as the LTV is maintained at or below 40%.
X. MISCELLANEOUS.
A. Binding Successors. The Loan Documents will bind the successors and assigns
of the Contran Companies and will bind and inure to the benefit of the
successors and assigns of each member of the Bank Group and the Agent.
B. Participants and Assignees. Each member of the Bank Group will be entitled
to sell no more than 75% participation in its percentage interest in the
Loan Documents (including the Advances made thereunder) and will be
entitled to propose to the Contran Companies partial assignment of its
rights and delegation of its duties to no more than two financial
institutions. While the Contran Companies will have the right prior to an
Event of Default or Prospective Default to consent to any such assignment
and delegation, each Contran Company covenants that its consent will not be
unreasonably withheld. Any such sale or assignment shall be subject to the
condition that the Bank Group member pay Agent an administrative fee in the
amount of $2,000 per participant or assignee.
Upon the sale of a participation or a partial assignment, the participant
or assignee shall be entitled to receive directly from the Contran
Companies copies of all reports, certificates and other information,
including the financial statements, as and when such information is
provided to the member of the Bank Group participating or assigning such
interest.
C. Non-Waiver. No term or condition of the Loan Documents shall be deemed
waived nor shall the grounds for the claim of estoppel be established by a
course of performance, oral understanding or other circumstances. Terms and
conditions may be waived or amended only in writing executed by the Bank
Group or, in appropriate circumstances, the Bank Group Majority.
D. Communications. Whenever any communication is required by the terms of the
Loan Documents or by law, it will be deemed delivered when delivered
personally or by facsimile machine or on the third Banking Day after it is
mailed in a postage prepaid envelope addressed to the intended recipient at
the address specified below or such other address as a party may hereafter
specify by written notice to the other parties.
E. Costs. The Contran Companies will pay on demand all reasonable direct costs
and expenses, including reasonable attorney fees, incurred by the Agent in
drafting, negotiating, modifying and reviewing the Loan Documents.
F. Counterparts. The Loan Documents may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of
which, taken together shall constitute one and the same contract.
G. Statutory Statement. Under Oregon Law, most agreements, promises and
commitments made by a financial institution after October 3, 1989,
concerning Advances and other credit extensions which are not for personal,
family or household purposes or secured solely by the borrower's residence
must be in writing, express consideration and be signed by the financial
institution to be enforceable.
U.S. BANK NATIONAL ASSOCIATION CONTRAN CORPORATION
for itself and as the Agent for
the Bank Group
By: /s/ Janice T. Thede By: /s/ Bobby D. O'Brien
------------------------------- --------------------------
Janice T. Thede Bobby D. O'Brien
Vice President Vice President
NATIONAL CITY LINES, INC.
By: /s/ Bobby D. O'Brien
--------------------------
Bobby D. O'Brien
Vice President
U.S. BANK NATIONAL ASSOCIATION Commitment Amount $25,000,000
By: /s/ Janice T. Thede
------------------------------------
Janice T. Thede
Vice President
