SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 - For the fiscal year ended December 31, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-640
NL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 13-5267260
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
16825 Northchase Drive, Suite 1200, Houston, Texas 77060-2544
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 423-3300
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common stock ($.125 par value) New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
As of March 20, 1997, 51,144,014 shares of common stock were outstanding. The
aggregate market value of the 13,662,324 shares of voting stock held by
nonaffiliates as of such date approximated $149 million.
Documents incorporated by reference:
The information required by Part III is incorporated by reference from the
registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after the
end of the fiscal year covered by this report.
Forward-Looking Information.
The statements contained in this Annual Report on Form 10-K ("Annual
Report") which are not historical facts, including, but not limited to,
statements found (i) under the captions "Kronos-Industry," "Kronos-Products and
operations," "Kronos-Manufacturing process and raw materials,"
"Kronos-Competition," "Rheox-Products and operations," "Rheox-Manufacturing
process and raw materials," "Patents and Trademarks," "Foreign Operations," and
"Regulatory and Environmental Matters," all contained in Item 1. Business, (ii)
under the captions "Lead pigment litigation" and "Environmental matters and
litigation," both contained in Item 3. Legal Proceedings, and (iii) under the
captions "Results of Operations" and "Liquidity and Capital Resources," both
contained in Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations, are forward-looking statements that involve a number
of risks and uncertainties. The actual results of the future events described in
such forward-looking statements in this Annual Report could differ materially
from those stated in such forward-looking statements. Among the factors that
could cause actual results to differ materially are the risks and uncertainties
discussed in this Annual Report, including, without limitation, the portions
referenced above, and the uncertainties set forth from time to time in the
Company's filings with the Securities and Exchange Committee, and other public
statements.
PART I
ITEM 1. BUSINESS
General
NL Industries, Inc., organized as a New Jersey corporation in 1891,
conducts its operations through its principal wholly-owned subsidiaries, Kronos,
Inc. and Rheox, Inc. Valhi, Inc. and Tremont Corporation, each affiliates of
Contran Corporation, hold 56% and 18%, respectively, of NL's outstanding common
stock. Contran holds, directly or through subsidiaries, approximately 91% of
Valhi's and 44% of Tremont's outstanding common stock. Substantially all of
Contran's outstanding voting stock is held by trusts established for the benefit
of the children and grandchildren of Harold C. Simmons of which Mr. Simmons is
the sole trustee. Mr. Simmons, the Chairman of the Board of NL and the Chairman
of the Board, President and Chief Executive Officer of each of Contran and Valhi
and a director of Tremont, may be deemed to control each of such companies. NL
and its consolidated subsidiaries are sometimes referred to herein collectively
as the "Company."
Kronos is the world's fourth largest producer of titanium dioxide pigments
("TiO2") with an estimated 11% share of worldwide TiO2 sales volume in 1996.
Approximately one-half of Kronos' 1996 sales volume was in Europe, where Kronos
is the second largest producer of TiO2. In 1996, Kronos accounted for 86% of the
Company's sales and 63% of its operating income. Rheox is the world's largest
producer of rheological additives for solvent-based systems.
The Company's objective is to maximize total shareholder returns by (i)
focusing on continued cost control, (ii) investing in certain cost effective
debottlenecking projects to increase TiO2 production capacity and productivity,
and (iii) deleveraging as excess liquidity becomes available.
Kronos
Industry
Titanium dioxide pigments are chemical products used for imparting
whiteness, brightness and opacity to a wide range of products, including paints,
plastics, paper, fibers and ceramics. TiO2 is considered to be a
"quality-of-life" product with demand affected by the gross domestic product in
various regions of the world.
Demand, supply and pricing within the TiO2 industry is cyclical, and
changes in industry economic conditions can significantly impact the Company's
earnings and operating cash flow. The Company's average TiO2 selling prices have
been declining since the last half of 1995, which followed an upturn in TiO2
prices that began in the third quarter of 1993. The Company expects TiO2 prices
will begin to increase during the second quarter of 1997 as the impact of
recently-announced price increases begin to take effect. Despite the recent
decline in TiO2 average selling prices, industry-wide demand for TiO2 grew in
1996, and Kronos' record 1996 sales volume was about 6% higher than 1995. The
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Company's expectations as to the future prospects of the TiO2 industry are based
upon several factors beyond the Company's control, principally continued
worldwide growth of gross domestic product and the absence of technological
advancements in or modifications to TiO2 processes that would result in material
and unanticipated increases in production efficiencies. To the extent that
actual developments differ from the Company's expectations, the Company's and
the TiO2 industry's future performance could be unfavorably affected.
Kronos has an estimated 18% share of European TiO2 sales volume and an
estimated 12% share of North American TiO2 sales volume. Consumption per capita
in the United States and Western Europe far exceeds that in other areas of the
world and these regions are expected to continue to be the largest consumers of
TiO2. A significant market for TiO2 could emerge in Eastern Europe, the Far East
and China if the economies in these countries develop to the point where
quality-of-life products, including TiO2, are in greater demand. Kronos believes
that, due to its strong presence in Western Europe, it is well positioned to
participate in growth in the Eastern European market. Geographic segment
information is contained in Note 3 to the Consolidated Financial Statements.
Products and operations
The Company believes that there are no effective substitutes for TiO2.
However, extenders such as kaolin clays, calcium carbonate and polymeric
opacifiers are used in a number of Kronos' markets. Generally, extenders are
used to reduce to some extent the utilization of higher cost TiO2. The use of
extenders has not significantly affected TiO2 consumption over the past decade
because extenders generally have, to date, failed to match the performance
characteristics of TiO2. The Company believes that the use of extenders will not
materially alter the growth of the TiO2 business in the foreseeable future.
Kronos currently produces over 40 different TiO2 grades, sold under the
Kronos and Titanox trademarks, which provide a variety of performance properties
to meet customers' specific requirements. Kronos' major customers include
domestic and international paint, plastics and paper manufacturers.
Kronos is one of the world's leading producers and marketers of TiO2.
Kronos and its distributors and agents sell and provide technical services for
its products to over 4,000 customers with the majority of sales in Europe and
North America. Kronos' international operations are conducted through Kronos
International, Inc., a Germany-based holding company formed in 1989 to manage
and coordinate the Company's manufacturing operations in Germany, Canada,
Belgium and Norway, and its sales and marketing activities in over 100 countries
worldwide. Kronos and its predecessors have produced and marketed TiO2 in North
America and Europe for over 70 years. As a result, Kronos believes that it has
developed considerable expertise and efficiency in the manufacture, sale,
shipment and service of its products in domestic and international markets. By
volume, approximately one-half of Kronos' 1996 TiO2 sales were to Europe, with
37% to North America and the balance to export markets.
Kronos is also engaged in the mining and sale of ilmenite ore (a raw
material used in the sulfate pigment production process), and the manufacture
and sale of iron-based water treatment chemicals (derived from co-products of
the
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pigment production processes). Water treatment chemicals are used as treatment
and conditioning agents for industrial effluents and municipal wastewater and in
the manufacture of iron pigments.
Manufacturing process and raw materials
TiO2 is manufactured by Kronos using both the chloride process and the
sulfate process. Approximately two-thirds of Kronos' current production capacity
is based on its chloride process which generates less waste than the sulfate
process. Although most end-use applications can use pigments produced by either
process, chloride-process pigments are generally preferred in certain coatings
and plastics applications, and sulfate-process pigments are generally preferred
for certain paper, fibers and ceramics applications. Due to environmental
factors and customer considerations, the proportion of TiO2 industry sales
represented by chloride-process pigments has increased relative to
sulfate-process pigments in the past few years, and chloride-process production
facilities in 1996 represented approximately 56% of industry capacity.
Kronos produced 373,000 metric tons of TiO2 in 1996, compared to the
record 393,000 metric tons produced in 1995 and 357,000 metric tons in 1994.
Kronos reduced its production rates in early 1996 in response to softening
demand and its high inventory levels at the end of 1995. As demand increased
during 1996 and inventories declined, Kronos' production rates were increased to
near full capacity in late 1996. Kronos believes its annual attainable
production capacity is approximately 400,000 metric tons, including its one-half
interest in the joint venture-owned Louisiana plant (see "TiO2 manufacturing
joint venture"). Following the completion of the $35 million debottlenecking
expansion of its Leverkusen, Germany chloride-process plant in late 1997, the
Company expects its worldwide annual attainable production capacity to increase
to approximately 410,000 metric tons.
The primary raw materials used in the TiO2 chloride production process are
chlorine, coke and titanium-containing feedstock derived from beach sand
ilmenite and natural rutile ore. Chlorine and coke are available from a number
of suppliers. Titanium-containing feedstock suitable for use in the chloride
process is available from a limited number of suppliers around the world,
principally in Australia, Africa, Canada, India and the United States. Kronos
purchases slag refined from beach sand ilmenite from Richards Bay Iron and
Titanium (Proprietary) Limited (South Africa), approximately 50% of which is
owned by RTZ Iron and Titanium Inc. ("RTZ"), an indirect subsidiary of RTZ
Corp., under a long-term supply contract that expires in 2000. Natural rutile
ore, another chloride feedstock, is purchased primarily from RGC Mineral Sands
Limited (Australia), under a long-term supply contract that expires in 2000. Raw
materials under these contracts are expected to meet Kronos' chloride feedstock
requirements over the next several years. The Company does not expect to
encounter difficulties obtaining new long-term supply contracts prior to the
expiration of its existing contracts.
The primary raw materials used in the TiO2 sulfate production process are
sulfuric acid and titanium-containing feedstock derived primarily from rock and
beach sand ilmenite. Sulfuric acid is available from a number of suppliers.
Titanium-containing feedstock suitable for use in the sulfate process is
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available from a limited number of suppliers around the world. Currently, the
principal active sources are located in Norway, Canada, Australia, India and
South Africa. As one of the few vertically-integrated producers of
sulfate-process pigments, Kronos operates a Norwegian rock ilmenite mine which
provided all of Kronos' feedstock for its European sulfate-process pigment
plants in 1996. Kronos also purchases sulfate grade slag under contracts
negotiated annually with RTZ and, through 1997, with Tinfos Titanium and Iron
K/S.
Kronos believes the availability of titanium-containing feedstock for both
the chloride and sulfate processes is adequate through the remainder of the
decade. Kronos does not anticipate experiencing any interruptions of its raw
material supplies because of its long-term supply contracts. However, political
and economic instability in the countries from which the Company purchases its
raw material supplies could adversely affect the availability of such feedstock.
TiO2 manufacturing joint venture
Subsidiaries of Kronos and Tioxide Group, Ltd., a wholly-owned subsidiary
of Imperial Chemicals Industries PLC ("Tioxide"), each own a 50%-interest in a
manufacturing joint venture. The joint venture owns and operates a
chloride-process TiO2 plant located in Lake Charles, Louisiana. Production from
the plant is shared equally by Kronos and Tioxide (the "Partners") pursuant to
separate offtake agreements.
A supervisory committee, composed of four members, two of whom are
appointed by each Partner, directs the business and affairs of the joint
venture, including production and output decisions. Two general managers, one
appointed and compensated by each Partner, manage the daily operations of the
joint venture acting under the direction of the supervisory committee.
The manufacturing joint venture is intended to be operated on a break-even
basis and, accordingly, Kronos' transfer price for its share of TiO2 produced is
equal to its share of the joint venture's production costs and interest expense.
Kronos' share of the production costs are reported as cost of sales as the
related TiO2 acquired from the joint venture is sold, and its share of the joint
venture's interest expense is reported as a component of interest expense.
Competition
The TiO2 industry is highly competitive. During the early 1990s, supply
exceeded demand, primarily due to new chloride-process capacity coming
on-stream. Relative supply/demand relationships, which had a favorable impact on
industry-wide prices during the late 1980s, had a negative impact during the
subsequent downturn. During 1994 and the first half of 1995, strong demand
growth improved industry capacity utilization and resulted in increases in
worldwide TiO2 prices. Kronos believes that the increased demand was partially
due to customers stocking inventories. In the second half of 1995 and first half
of 1996, customers reduced inventory levels, which reduced industry-wide demand.
Demand improved in the second half of 1996, indicating, Kronos believes, that
customer inventories had returned to more-normal levels. Price increases were
announced in late 1996 by most major TiO2 producers, including Kronos, and the
results of such announcements are expected to impact second-quarter 1997
operating results.
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No assurance can be given that price trends will conform to the Company's
expectations.
Capacity additions that are the result of construction of grassroot plants
in the worldwide TiO2 market require significant capital expenditures and
substantial lead time (typically three to five years in the Company's
experience) for, among other things, planning, obtaining environmental approvals
and construction. No grassroot plants have been announced, but industry capacity
can be expected to increase as Kronos and its competitors complete
debottlenecking projects at existing plants. Based on the factors described
under the caption "Kronos-Industry" above, the Company expects that the average
annual increase in industry capacity from announced debottlenecking projects
will be less than the average annual demand growth for TiO2 during the next few
years.
Kronos competes primarily on the basis of price, product quality and
technical service, and the availability of high performance pigment grades.
Although certain TiO2 grades are considered specialty pigments, the majority of
grades and substantially all of Kronos' production are considered commodity
pigments with price generally being the most significant competitive factor.
Kronos has an estimated 11% share of worldwide TiO2 sales volume, and believes
that it is the leading marketer of TiO2 in a number of countries, including
Germany and Canada.
Kronos' principal competitors are E.I. du Pont de Nemours & Co. ("Du
Pont"); Imperial Chemical Industries PLC (Tioxide) ("ICI"); Millennium
Chemicals, Inc. (Millennium Inorganic Chemicals, Inc.), formerly a unit of
Hanson PLC; Kemira Oy; Kerr-McGee Corporation; Ishihara Sangyo Kaisha, Ltd.;
Bayer AG; and Thann et Mulhouse. In January 1997, ICI announced its intention to
spin off to its shareholders its Tioxide unit in the next six to eighteen
months. These eight competitors have estimated individual worldwide shares of
TiO2 sales volume ranging from 3% to 21%, and an estimated aggregate 75% share
of TiO2 sales volume. Du Pont has about one-half of total U.S. TiO2 production
capacity and is Kronos' principal North American competitor.
Rheox
Products and operations
Rheological additives control the flow and leveling characteristics for a
variety of products, including paints, inks, lubricants, sealants, adhesives and
cosmetics. Organoclay rheological additives are clays which have been chemically
reacted with organic chemicals and compounds. Rheox produces rheological
additives for both solvent-based and water-based systems. Rheox is the world's
largest producer of rheological additives for solvent-based systems and is also
a supplier of rheological additives used in water-based systems. Rheological
additives for solvent-based systems accounted for about 80% of Rheox's sales in
1996, with the remainder being principally rheological additives for water-based
systems. Rheox introduced a number of new products during the past few years,
the majority of which are for water-based systems, which are sold into a larger
market than solvent-based systems. The Company believes water-based additives
will account for an increasing portion of its sales in the long term.
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Sales of rheological additives generally follow gross domestic product
growth in Rheox's principal markets and are influenced by the volume of
shipments of the worldwide coatings industry. Since a portion of Rheox's
rheological additives are used in industrial coatings, plant and equipment
spending has an influence on demand for this product line.
Manufacturing process and raw materials
The primary raw materials utilized in the production of rheological
additives are bentonite clays, hectorite clays, quaternary amines, polyethylene
waxes and castor oil derivatives. Bentonite clays are currently purchased under
a three-year contract, renewable through 2004, with a subsidiary of Dresser
Industries, Inc. ("Dresser"), which has significant bentonite reserves in
Wyoming. This contract assures Rheox the right to purchase its anticipated
requirements of bentonite clays for the foreseeable future, and Dresser's
reserves are believed to be sufficient for such purpose. Hectorite clays are
mined from Company-owned reserves in Newberry Springs, California, which the
Company believes are adequate to supply its needs for the foreseeable future.
The Newberry Springs ore body contains the largest known commercial deposit of
hectorite clays in the world. Quaternary amines are purchased primarily from a
joint venture that is 50%-owned by Rheox and are also generally available on the
open market from a number of suppliers. Castor oil-based rheological additives
are purchased from sources outside the United States. Rheox has a supply
contract with a manufacturer of these products which may not be terminated
without 180 days notice by either party.
Competition
Competition in the specialty chemicals industry generally focuses on
product uniqueness, quality and availability, technical service, knowledge of
end-use applications and price. Rheox's principal competitors for rheological
additives for solvent-based systems are Laporte PLC and Sud-Chemie AG. Rheox's
principal competitors for water-based systems are Rohm and Haas Company,
Hercules Incorporated, and Union Carbide Corporation.
Research and Development
The Company's expenditures for research and development and certain
technical support programs have averaged approximately $11 million annually
during the past three years with Kronos accounting for approximately
three-quarters of the annual spending. Research and development activities
related to TiO2 are conducted principally at the Leverkusen, Germany facility.
Such activities are directed primarily toward improving both the chloride and
sulfate production processes, improving product quality and strengthening
Kronos' competitive position by developing new pigment applications. Activities
relating to rheological additives are conducted primarily in the United States
and are directed towards the development of new products for water-based
systems, environmental applications and new end-use applications for existing
product lines.
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Patents and Trademarks
Patents held for products and production processes are believed to be
important to the Company and contribute to the continuing business activities of
Kronos and Rheox. The Company continually seeks patent protection for its
technical developments, principally in the United States, Canada and Europe, and
from time to time enters into licensing arrangements with third parties. In
connection with the formation of the manufacturing joint venture with Tioxide,
Kronos and certain of its subsidiaries exchanged proprietary chloride process
and product technologies with Tioxide and certain of its affiliates. Use by each
recipient of the other's technology in Europe was restricted through October
1996. The Company does not expect that the technology sharing arrangement with
Tioxide will materially impact the Company's competitive position within the
TiO2 industry. See "Kronos - TiO2 manufacturing joint venture."
The Company's major trademarks, including Kronos, Titanox and Rheox, are
protected by registration in the United States and elsewhere with respect to
those products it manufactures and sells.
Foreign Operations
The Company's chemical businesses have operated in international markets
since the 1920s. Most of Kronos' current production capacity is located in
Europe and Canada, and approximately one-third of Rheox's sales in each of the
past three years have been from European production. Approximately
three-quarters of the Company's 1996 consolidated sales were to non-U.S.
customers, including 13% to customers in areas other than Europe and Canada.
Foreign operations are subject to, among other things, currency exchange rate
fluctuations and the Company's results of operations have in the past been both
favorably and unfavorably affected by fluctuations in currency exchange rates.
Effects of fluctuations in currency exchange rates on the Company's results of
operations are discussed in Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Political and economic uncertainties in certain of the countries in which
the Company operates may expose it to risk of loss. The Company does not believe
that there is currently any likelihood of material loss through political or
economic instability, seizure, nationalization or similar event. The Company
cannot predict, however, whether events of this type in the future could have a
material effect on its operations. The Company's manufacturing and mining
operations are also subject to extensive and diverse environmental regulation in
each of the foreign countries in which they operate. See "Regulatory and
Environmental Matters."
Customer Base and Seasonality
The Company believes that neither its aggregate sales nor those of any of
its principal product groups are concentrated in or materially dependent upon
any single customer or small group of customers. Neither the Company's business
as a whole nor that of any of its principal product groups is seasonal to any
significant extent. Due in part to the increase in paint production in the
spring to meet the spring and summer painting season demand, TiO2 sales are
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generally higher in the second and third calendar quarters than in the first and
fourth calendar quarters. Sales of rheological additives are influenced by the
worldwide industrial protective coatings industry, where second calendar quarter
sales are generally the strongest.
Employees
As of December 31, 1996, the Company employed approximately 3,100 persons,
excluding the joint venture employees, with approximately 400 employees in the
United States and approximately 2,700 at sites outside the United States. Hourly
employees in production facilities worldwide, including the TiO2 joint venture,
are represented by a variety of labor unions, with labor agreements having
various expiration dates. The Company believes its labor relations are good.
Regulatory and Environmental Matters
Certain of the Company's businesses are and have been engaged in the
handling, manufacture or use of substances or compounds that may be considered
toxic or hazardous within the meaning of applicable environmental laws. As with
other companies engaged in similar businesses, certain past and current
operations and products of the Company have the potential to cause environmental
or other damage. The Company has implemented and continues to implement various
policies and programs in an effort to minimize these risks. The policy of the
Company is to achieve compliance with applicable environmental laws and
regulations at all its facilities and to strive to improve its environmental
performance. It is possible that future developments, such as stricter
requirements of environmental laws and enforcement policies thereunder, could
adversely affect the Company's production, handling, use, storage,
transportation, sale or disposal of such substances as well as the Company's
consolidated financial position, results of operations or liquidity.
The Company's U.S. manufacturing operations are governed by federal
environmental and worker health and safety laws and regulations, principally the
Resource Conservation and Recovery Act, the Occupational Safety and Health Act,
the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Toxic
Substances Control Act and the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act ("CERCLA"), as well as the state counterparts of these
statutes. The Company believes that all of its U.S. plants and the Louisiana
plant owned and operated by the joint venture are in substantial compliance with
applicable requirements of these laws or compliance orders issued thereunder.
From time to time, the Company's facilities may be subject to environmental
regulatory enforcement under such statutes. Resolution of such matters typically
involves the establishment of compliance programs. Occasionally, resolution may
result in the payment of penalties, but to date such penalties have not involved
amounts having a material adverse effect on the Company's consolidated financial
position, results of operations or liquidity.
The Company's European and Canadian production facilities operate in an
environmental regulatory framework in which governmental authorities typically
are granted broad discretionary powers which allow them to issue operating
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permits required for the plants to operate. The Company believes that all its
plants are in substantial compliance with applicable environmental laws.
While the laws regulating operations of industrial facilities in Europe
vary from country to country, a common regulatory denominator is provided by the
European Union (the "EU"). Germany, Belgium and the United Kingdom, each a
member of the EU, follow the initiatives of the EU. Norway, although not a
member, generally patterns its environmental regulatory actions after the EU.
The Company believes that Kronos is in substantial compliance with agreements
reached with European environmental authorities and with an EU directive to
control the effluents produced by TiO2 production facilities. The Company also
believes that Rheox is in substantial compliance with the environmental
regulations in Germany and the United Kingdom.
The Company has a contract with a third party to treat certain of its
Leverkusen and Nordenham, Germany sulfate-process effluents. Either party may
terminate the contract after giving four years notice with regard to the
Nordenham plant. After December 1998 and under certain circumstances, Kronos may
terminate the contract after giving six months notice with regard to the
Leverkusen plant.
In order to reduce sulfur dioxide emissions into the atmosphere consistent
with applicable environmental regulations, Kronos is completing the installation
of off-gas desulfurization systems at its Norwegian and German plants at an
estimated cost of $30 million. The manufacturing joint venture installed a $16
million off-gas desulfurization system at the Louisiana plant and Kronos
completed an $11 million water treatment chemical purification project at its
Leverkusen, Germany facility in 1996.
The Quebec provincial government has environmental regulatory authority
over Kronos' Canadian chloride and sulfate-process TiO2 production facility in
Varennes, Quebec. The provincial government regulates discharges into the St.
Lawrence River. In May 1992, the Quebec provincial government extended Kronos'
right to discharge effluents from its Canadian sulfate-process TiO2 plant into
the St. Lawrence River until June 1994. Kronos completed a waste acid
neutralization facility and discontinued discharging untreated waste acid
effluents into the St. Lawrence River in June 1994. Notwithstanding the
foregoing, in March 1993, Kronos' Canadian subsidiary and two of its directors
were charged by the Canadian federal government with five violations of the
Canadian Fisheries Act relating to discharges into the St. Lawrence River from
the Varennes sulfate-process TiO2 plant. The monetary penalty for these
violations, if proven, could be up to Canadian $15 million. Additional charges,
if brought, could involve additional penalties. The Company believes that this
charge is inconsistent with the extension granted by provincial authorities,
referred to above, and is vigorously contesting the charge. A trial date has
been set for May 1997.
The Company's capital expenditures related to its ongoing environmental
protection and improvement programs are currently expected to be approximately
$3 million in 1997 and $5 million in 1998.
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The Company has been named as a defendant, potentially responsible party
("PRP"), or both, pursuant to CERCLA and similar state laws in approximately 75
governmental and private actions associated with waste disposal sites, mining
locations and facilities currently or previously owned, operated or used by the
Company, or its subsidiaries, or their predecessors, certain of which are on the
U.S. Environmental Protection Agency's ("U.S. EPA") Superfund National
Priorities List or similar state lists. See Item 3. "Legal Proceedings."
ITEM 2. PROPERTIES
Kronos currently operates four TiO2 facilities in Europe (Leverkusen and
Nordenham, Germany; Langerbrugge, Belgium; and Fredrikstad, Norway). In North
America, Kronos has a facility in Varennes, Quebec, Canada and, through the
manufacturing joint venture described above, a one-half interest in a plant in
Lake Charles, Louisiana. Certain of the Company's properties collateralize
long-term debt agreements and the Company's Nordenham TiO2 plant has a lien that
secures the German tax authorities, pending resolution of certain tax
litigation. See Notes 10 and 13 to the Consolidated Financial Statements.
Kronos' principal German operating subsidiary leases the land under its
Leverkusen TiO2 production facility pursuant to a lease expiring in 2050. The
Leverkusen facility, with about one-third of Kronos' current TiO2 production
capacity, is located within an extensive manufacturing complex owned by Bayer
AG, and Kronos is the only unrelated party so situated. Under a separate
supplies and services agreement expiring in 2011, Bayer provides some raw
materials, auxiliary and operating materials and utilities services necessary to
operate the Leverkusen facility. Both the lease and the supplies and services
agreement restrict Kronos' ability to transfer ownership or use of the
Leverkusen facility.
All of Kronos' principal production facilities described above are owned,
except for the land under the Leverkusen facility. Kronos has a governmental
concession with an unlimited term to operate its ilmenite mine in Norway.
Specialty chemicals are produced by Rheox at facilities in Charleston,
West Virginia; Newberry Springs, California; St. Louis, Missouri; Livingston,
Scotland and Nordenham, Germany. A portion of the land under the Livingston,
Scotland facility is leased from an unrelated party; all of the remaining
production facilities are owned.
ITEM 3. LEGAL PROCEEDINGS
Lead pigment litigation
The Company was formerly involved in the manufacture of lead pigments for
use in paint and lead-based paint. The Company has been named as a defendant or
third party defendant in various legal proceedings alleging that the Company and
other manufacturers are responsible for personal injury and property damage
allegedly associated with the use of lead pigments. The Company is vigorously
defending such litigation. Considering the Company's previous involvement in the
lead pigment and lead-based paint businesses, there can be no assurance that
additional litigation, similar to that described below, will not be filed. In
addition, various legislation and administrative regulations have, from time to
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time, been enacted or proposed that seek to (a) impose various obligations on
present and former manufacturers of lead pigment and lead-based paint with
respect to asserted health concerns associated with the use of such products and
(b) effectively overturn court decisions in which the Company and other pigment
manufacturers have been successful. Examples of such proposed legislation
include bills which would permit civil liability for damages on the basis of
market share. No legislation or regulations have been enacted to date which are
expected to have a material adverse effect on the Company's consolidated
financial position, results of operations or liquidity. The Company has not
accrued any amounts for the pending lead pigment and lead-based paint
litigation. There is no assurance that the Company will not incur future
liability in respect of this pending litigation in view of the inherent
uncertainties involved in court and jury rulings in pending and possible future
cases. However, based on, among other things, the results of such litigation to
date, the Company believes that the pending lead pigment and lead-based paint
litigation is without merit. Liability that may result, if any, cannot
reasonably be estimated.
In 1989 and 1990, the Housing Authority of New Orleans ("HANO") filed
third-party complaints for indemnity and/or contribution against the Company,
other alleged manufacturers of lead pigment (together with the Company, the
"pigment manufacturers") and the Lead Industries Association (the "LIA") in 14
actions commenced by residents of HANO units seeking compensatory and punitive
damages for injuries allegedly caused by lead pigment. The actions, which were
pending in the Civil District Court for the Parish of Orleans, State of
Louisiana, were dismissed by the district court in 1990. Subsequently, HANO
agreed to consolidate all the cases and appealed. In March 1992, the Louisiana
Court of Appeals, Fourth Circuit, dismissed HANO's appeal as untimely with
respect to three of these cases. With respect to the other cases included in the
appeal, the court of appeals reversed the lower court decision dismissing the
cases. These cases were remanded to the District Court for further proceedings.
In November 1994, the District Court granted defendants' motion for summary
judgment in one of the remaining cases and in June 1995 the District Court
granted defendants' motion for summary judgment in several of the remaining
cases. After such grant, only two cases remain pending.
In June 1989, a complaint was filed in the Supreme Court of the State of
New York, County of New York, against the pigment manufacturers and the LIA.
Plaintiffs seek damages, contribution and/or indemnity in an amount in excess of
$50 million for monitoring and abating alleged lead paint hazards in public and
private residential buildings, diagnosing and treating children allegedly
exposed to lead paint in city buildings, the costs of educating city residents
to the hazards of lead paint, and liability in personal injury actions against
the City and the Housing Authority based on alleged lead poisoning of city
residents (The City of New York, the New York City Housing Authority and the New
York City Health and Hospitals Corp. v. Lead Industries Association, Inc., et
al., No. 89-4617). In December 1991, the court granted the defendants' motion to
dismiss claims alleging negligence and strict liability and denied the remainder
of the motion. In January 1992, defendants appealed the denial. The Company has
answered the remaining portions of the complaint denying all allegations of
wrongdoing, and the case is in discovery. In May 1993, the Appellate Division of
the Supreme Court affirmed the denial of the motion to dismiss plaintiffs'
fraud, restitution and indemnification claims. In May 1994, the trial court
granted the
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defendants' motion to dismiss the plaintiffs' restitution and indemnification
claims, and plaintiffs appealed. In June 1996, the Appellate Division reversed
the trial court's dismissal of plaintiffs' restitution and indemnification
claims, reinstating those claims. Defendants' motion for summary judgment on the
fraud claim was denied in August 1995; defendants have appealed. In December
1995, defendants moved for summary judgment on the basis that the fraud claim
was time-barred. In February 1996, the motion was denied and defendants have
appealed. Discovery is proceeding.
In March 1992, the Company was served with a complaint in Skipworth v.
Sherwin-Williams Co., et al. (No. 92-3069), Court of Common Pleas, Philadelphia
County. Plaintiffs are a minor and her legal guardians seeking damages from lead
paint and pigment producers, the LIA, the Philadelphia Housing Authority and the
owners of the plaintiffs' premises for bodily injuries allegedly suffered by the
minor from lead-based paint. Plaintiffs' counsel has asserted that approximately
200 similar complaints would be served shortly, but no such complaints have yet
been served. In April 1994, the court granted defendants' motion for summary
judgment and the dismissal was affirmed by the Superior Court in October 1995.
In February 1997, the Pennsylvania Supreme Court unanimously affirmed the
Superior Court's decision.
In August 1992, the Company was served with an amended complaint in
Jackson, et al. v. The Glidden Co., et al., Court of Common Pleas, Cuyahoga
County, Cleveland, Ohio (Case No. 236835). Plaintiffs seek compensatory and
punitive damages for personal injury caused by the ingestion of lead, and an
order directing defendants to abate lead-based paint in buildings. Plaintiffs
purport to represent a class of similarly situated persons throughout the State
of Ohio. The amended complaint identifies 18 other defendants who allegedly
manufactured lead products or lead-based paint, and asserts causes of action
under theories of strict liability, negligence per se, negligence, breach of
express and implied warranty, fraud, nuisance, restitution, and negligent
infliction of emotional distress. The complaint asserts several theories of
liability including joint and several, market share, enterprise and alternative
liability. In October 1992, the Company and the other defendants moved to
dismiss the complaint with prejudice. In July 1993, the court dismissed the
complaint. In December 1994, the Ohio Court of Appeals reversed the trial court
dismissal and remanded the case to the trial court. In July 1996, the trial
court granted defendants' motion to dismiss the property damage and enterprise
liability claims, but denied the remainder of the motion. Discovery is
proceeding with respect to class certification.
In November 1993, the Company was served with a complaint in Brenner, et
al. v. American Cyanamid, et al., (No. 12596-93) Supreme Court, State of New
York, Erie County alleging injuries to two children purportedly caused by lead
pigment. The complaint seeks $24 million in compensatory and $10 million in
punitive damages for alleged negligent failure to warn, strict liability, fraud
and misrepresentation, concert of action, civil conspiracy, enterprise
liability, market share liability, and alternative liability. In January 1994,
the Company answered the complaint, denying liability. Discovery is proceeding.
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In January 1995, the Company was served with complaints in Wright (Alvin)
and Wright (Allen) v. Lead Industries, et. al., (Nos. 94-363042 and 363043),
Circuit Court, Baltimore City, Maryland. Plaintiffs are two brothers (one
deceased) who allege injuries due to exposure to lead pigment. The complaints,
as amended in April 1995, seek more than $100 million in compensatory and
punitive damages for alleged strict liability, negligence, conspiracy, fraud and
unfair and deceptive trade practices claims. In July 1995, the trial court
granted, in part, the defendants' motion to dismiss, and dismissed the
plaintiffs' fraud and unfair and deceptive trade practices claims. In June 1996,
the trial court granted defendants' motions for summary judgement on plaintiffs'
conspiracy claim, and dismissed the Company and certain other defendants from
the cases. In September 1996, the trial court granted the remaining defendants'
motions for summary judgment. Plaintiffs have appealed as to all defendants.
In November 1995, the Company was served with the complaint in Jefferson
v. Lead Industry Association, et. al. (No. 95-2835), filed in the U.S. District
Court for the Eastern District of Louisiana. The complaint asserts claims
against the LIA and the lead pigment defendants on behalf of a putative class of
allegedly injured children in Louisiana. The complaint purports to allege claims
for strict liability, negligence, failure to warn, breach of alleged warranties,
fraud and misrepresentation, and conspiracy, and seeks actual and punitive
damages. The complaint asserts several theories of liability, including joint
and several and market share liability. In June 1996, the trial court granted
defendants' motions to dismiss the complaint and entered judgment in favor of
all defendants. Plaintiffs appealed to the Fifth Circuit Court of Appeals, which
affirmed the judgment in favor of all defendants in March 1997.
In January 1996, the Company was served with a complaint on behalf of
individual intervenors in German, et. al. v. Federal Home Loan Mortgage Corp.,
et. al., (U.S. District Court, Southern District of New York, Civil Action No.
93 Civ. 6941 (RWS)). This class action lawsuit had originally been brought
against the City of New York and other landlord defendants. The intervenors'
complaint alleges claims against the Company and other former manufacturers of
lead pigment for medical monitoring, property abatement, and other injunctive
relief, based on various causes of action, including negligent product design,
negligent failure to warn, strict liability, fraud and misrepresentation,
concert of action, civil conspiracy, enterprise liability, market share
liability, breach of express and implied warranties, and nuisance. The
intervenors purport to represent a class of children and pregnant women who
reside in New York City. In May 1996, the Company and the other former
manufacturers of lead pigments filed motions to dismiss the intervenors'
complaint. Class discovery is proceeding.
In April 1996, the Company was served with a complaint in Gates v.
American Cyanamid Co., et al., (No. I1996-2114) Supreme Court, State of New
York, Erie County, an action alleging personal injury arising out of exposure to
lead pigment. Plaintiff seeks compensatory and punitive damages from the
Company, other former lead pigment manufacturers and the LIA based on claims of
negligence, strict liability, fraud, concert of action, civil conspiracy,
enterprise liability, market share liability and alternative liability.
Plaintiff also asserts claims against the landlords of the apartments in which
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plaintiff has lived since 1977. In July 1996, the Company filed an answer
denying plaintiff's allegations of wrongdoing and liability. Discovery is
proceeding.
In September 1996, the Company was served with a complaint in Ritchie v.
NL Industries, et al. (U.S. District Court, Northern District of Western
Virginia, Civil Action No. 5:96-CV-166), an action originally filed in West
Virginia state court on behalf of a minor allegedly injured as a result of
exposure to lead pigment. Plaintiffs seeks compensatory and punitive damages
from the Company and five other former manufacturers of lead pigment based on
claims of negligence, strict liability, breach of warranty, fraud, conspiracy,
market share liability and alternative liability. In October 1996, the
defendants removed the case to federal court and filed motions to dismiss.
Plaintiffs has filed a motion to remand the case to state court. The motions are
pending.
The Company believes that the foregoing lead pigment actions are without
merit and intends to continue to deny all allegations of wrongdoing and
liability and to defend such actions vigorously.
The Company has filed actions seeking declaratory judgment and other
relief against various insurance carriers with respect to costs of defense and
indemnity coverage for certain of its environmental and lead pigment litigation.
NL Industries, Inc. v. Commercial Union Insurance Cos., et al., Nos. 90-2124,
- -2125 (HLS) (District Court of New Jersey). The action relating to lead pigment
litigation defense costs filed in May 1990 against Commercial Union Insurance
Company ("Commercial Union") seeks to recover defense costs incurred in the City
of New York lead pigment case and two other cases which have since been resolved
in the Company's favor. In July 1991, the court granted the Company's motion for
summary judgment and ordered Commercial Union to pay the Company's reasonable
defense costs for such cases. In June 1992, the Company filed an amended
complaint in the United States District Court for the District of New Jersey
against Commercial Union seeking to recover costs incurred in defending four
additional lead pigment cases which have since been resolved in the Company's
favor. In August 1993, the court granted the Company's motion for summary
judgment and ordered Commercial Union to pay the reasonable costs of defending
those cases. In July 1994, the court entered judgment on the order requiring
Commercial Union to pay previously-incurred Company costs in defending those
cases. In September 1995, the U.S. Court of Appeals for the Third Circuit
reversed and remanded for further consideration the decision by the trial court
that Commercial Union was obligated to pay the Company's reasonable defense
costs in certain of the lead pigment cases. The trial court had made its
decision applying New Jersey law; the appeals court concluded that New York and
not New Jersey law applied and remanded the case to the trial court for a
determination under New York law. On remand from the Court of Appeals, the trial
court in April 1996 granted the Company's motion for summary judgment, finding
that Commercial Union had a duty to defend the Company in the four lead paint
cases which were the subject of the Company's second amended complaint. The
court also issued a partial ruling on Commercial Union's motion for summary
judgment in which it sought allocation of defense costs and contribution from
the Company and two other insurance carriers in connection with the three lead
paint actions on which the court had granted the Company summary judgment in
1991. The court
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ruled that Commercial Union is entitled to receive such contribution from the
Company and the two carriers, but reserved ruling with respect to the relative
contributions to be made by each of the parties, including contributions by the
Company that may be required with respect to periods in which it was
self-insured and contributions from one carrier which were reinsured by a former
subsidiary of the Company, the reinsurance costs of which the Company may
ultimately be required to bear. Other than granting motions for summary judgment
brought by two excess liability insurance carriers, which contended that their
policies contained absolute pollution exclusion language, and certain summary
judgment motions regarding policy periods, the court has not made any final
rulings on defense costs or indemnity coverage with respect to the Company's
pending environmental litigation. The Court has not made any final ruling on
indemnity coverage in the lead pigment litigation. No trial dates have been set.
Other than rulings to date, the issue of whether insurance coverage for defense
costs or indemnity or both will be found to exist depends upon a variety of
factors, and there can be no assurance that such insurance coverage will exist
in other cases. The Company has not considered any potential insurance
recoveries for lead pigment or environmental litigation in determining related
accruals.
Environmental matters and litigation
The Company has been named as a defendant, PRP, or both, pursuant to
CERCLA and similar state laws in approximately 75 governmental and private
actions associated with waste disposal sites, mining locations and facilities
currently or previously owned, operated or used by the Company, or its
subsidiaries, or their predecessors, certain of which are on the U.S. EPA's
Superfund National Priorities List or similar state lists. These proceedings
seek cleanup costs, damages for personal injury or property damage, or both.
Certain of these proceedings involve claims for substantial amounts. Although
the Company may be jointly and severally liable for such costs, in most cases it
is only one of a number of PRPs who may also be jointly and severally liable.
The extent of CERCLA liability cannot accurately be determined until the
Remedial Investigation and Feasibility Study ("RIFS") is complete, the U.S. EPA
issues a record of decision and costs are allocated among PRPs. The extent of
liability under analogous state cleanup statutes and for common law equivalents
are subject to similar uncertainties. The Company believes it has provided
adequate accruals for reasonably estimable costs for CERCLA matters and other
environmental liabilities. At December 31, 1996, the Company had accrued $113
million for those environmental matters which are reasonably estimable. The
Company determines the amount of accrual on a quarterly basis by analyzing and
estimating the range of possible costs to the Company. Such costs include, among
other things, remedial investigations, monitoring, studies, clean-up, removal
and remediation. During the first quarter of 1997, the Company's accrual will be
increased to include legal fees and other costs of managing and monitoring
environmental remediation sites as required by the adoption of the AICPA's
Statement of Position 96-1, "Environmental Remediation Liabilities." See Note 2
to the Consolidated Financial Statements. It is not possible to estimate the
range of costs for certain sites. The Company has estimated that the upper end
of the range of reasonably possible costs to the Company for sites for which it
is possible to estimate costs is approximately $160 million. The Company's
estimate of such liability has not been discounted to present value and the
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Company has not recognized any potential insurance recoveries. No assurance can
be given that actual costs will not exceed either accrued amounts or the upper
end of the range for sites for which estimates have been made, and no assurance
can be given that costs will not be incurred with respect to sites as to which
no estimate presently can be made. The imposition of more stringent standards or
requirements under environmental laws or regulations, new developments or
changes respecting site cleanup costs or allocation of such costs among PRPs, or
a determination that the Company is potentially responsible for the release of
hazardous substances at other sites could result in expenditures in excess of
amounts currently estimated by the Company to be required for such matters.
Further, there can be no assurance that additional environmental matters will
not arise in the future. More detailed descriptions of certain legal proceedings
relating to environmental matters are set forth below.
At Pedricktown, the U.S. EPA divided the site into two operable units.
Operable unit one addresses contaminated ground water, surface water, soils and
stream sediments. In July 1994, the U.S. EPA issued the Record of Decision for
operable unit one. The U.S. EPA estimates the cost to complete operable unit one
is $18.7 million. In May 1996, certain PRPs, but not the Company, entered into
an administrative consent order with the U.S. EPA to perform the remedial design
phase of operable unit one. In addition, the U.S. EPA incurred past costs in the
estimated amount of $5 million. The U.S. EPA issued an order with respect to
operable unit two in March 1992 to the Company and 30 other PRPs directing
immediate removal activities including the cleanup of waste, surface water and
building surfaces. The Company has complied with the order, and the work with
respect to operable unit two is completed. The Company has paid approximately
50% of operable unit two costs, or $2.5 million.
At Granite City, the RIFS is complete, and in 1990 the U.S. EPA selected a
remedy estimated at that time to cost approximately $28 million. In July 1991,
the United States filed an action in the U.S. District Court for the Southern
District of Illinois against the Company and others (United States of America v.
NL Industries, Inc., et al., Civ. No. 91-CV 00578) with respect to the Granite
City smelter. The complaint seeks injunctive relief to compel the defendants to
comply with an administrative order issued pursuant to CERCLA, and fines and
treble damages for the alleged failure to comply with the order. The Company and
the other parties did not implement the order believing that the remedy selected
by the U.S. EPA was invalid, arbitrary, capricious and was not selected in
accordance with law. The complaint also seeks recovery of past costs and a
declaration that the defendants are liable for future costs. Although the action
was filed against the Company and ten other defendants, there are 330 other PRPs
who have been notified by the U.S. EPA. Some of those notified were also
respondents to the administrative order. In February 1992, the court entered a
case management order directing that the remedy issues be tried before the
liability aspects are presented. In September 1995, the U.S. EPA released its
amended decision selecting cleanup remedies for the Granite City site. At that
time, the cost of the remedies selected by the U.S. EPA aggregated, in its
estimation, $40.8 million to $67.8 million, although its decision stated that
the higher amount was not considered to be representative of expected costs. The
Company presently is challenging portions of the U.S. EPA's selection of the
remedy. The U.S. EPA's current estimate for completion of the cleanup is $24.3
million, and in January 1997, the Company was informed that the U.S. EPA
incurred
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cleanup and other past costs approximating $30 million. There is currently no
allocation among the PRPs for these costs.
Having completed the RIFS at Portland, the Company conducted predesign
studies to explore the viability of the U.S. EPA's selected remedy pursuant to a
June 1989 consent decree captioned U.S. v. NL Industries, Inc., Civ. No. 89-
408, United States District Court for the District of Oregon. Subsequent to the
completion of the predesign studies, the U.S. EPA issued notices of potential
liability to approximately 20 PRPs, including the Company, directing them to
perform the remedy, which was initially estimated to cost approximately $17
million, exclusive of administrative and overhead costs and any additional
costs, for the disposition of recycled materials from the site. In January 1992,
the U.S. EPA issued unilateral administrative orders to the Company and six
other PRPs directing the performance of the remedy. The Company and the other
PRPs commenced performance of the remedy. In August 1994, the U.S. EPA
authorized the Company and the other PRPs to cease performing most aspects of
the selected remedy. The U.S. EPA has issued a proposed Record of Decision
Amendment changing portions of the cleanup remedy selected for the site. The
U.S. EPA currently estimates the cost of the proposed remedy to be from $10
million to $13 million. Pursuant to an interim allocation, the Company's share
of remedial costs is approximately 50%. In November 1991, Gould, Inc., the
current owner of the site, filed an action, Gould Inc. v. NL Industries, Inc.,
No. 91-1091, United States District Court for the District of Oregon, against
the Company for damages for alleged fraud in the sale of the smelter, rescission
of the sale, past CERCLA response costs and a declaratory judgment allocating
future response costs and punitive damages. The court granted Gould's motion to
amend the complaint to add additional defendants (adjoining current and former
landowners and generators). The amended complaint deletes the fraud and punitive
damages claims asserted against NL; thus, the pending action is essentially one
for reallocation of past and future cleanup costs. Discovery is proceeding. A
trial date has been set for September 1997. The Company and the other PRPs
performing the cleanup have reached settlement in principle with many of the
generators and adjoining landowner defendants.
The Company and other PRPs entered into an administrative consent order
with the U.S. EPA requiring the performance of a RIFS at two sites in Cherokee
County, Kansas, where the Company and others formerly mined lead and zinc. A
former subsidiary of the Company mined at the Baxter Springs subsite, where it
is the largest viable PRP. The final RIFS was submitted to the U.S. EPA in May
1993. In August 1994, the U.S. EPA issued its proposed plan for the cleanup of
the Baxter Springs and Treece sites in Cherokee County. The proposed remedy is
estimated by U.S. EPA to cost $6 million.
In January 1989, the State of Illinois brought an action against the
Company and several other subsequent owners and operators of the former plant in
Chicago, Illinois (People of the State of Illinois v. NL Industries, et al., No.
88-CH-11618, Circuit Court, Cook County). The complaint seeks recovery of $2.3
million of cleanup costs expended by the Illinois Environmental Protection
Agency, plus penalties and treble damages. In October 1992, the Supreme Court of
Illinois reversed the Appellate Division, which had affirmed the trial court's
earlier dismissal of the complaint, and remanded the case for further
proceedings. In December 1993, the trial court denied the State's petition to
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reinstate the complaint, and dismissed the case with prejudice. In November
1996, the appeals court reversed the dismissal. The U.S. EPA has issued an order
to the Company to perform a removal action at the Company's former facility
involved in the State of Illinois case. The Company is complying with the order.
In 1980, the State of New York commenced litigation against the Company in
connection with the operation of a plant in Colonie, New York formerly owned by
the Company. Flacke v. NL Industries, Inc., No. 1842-80 ("Flacke I") and Flacke
v. Federal Insurance Company and NL Industries, Inc., No. 3131-92 ("Flacke II"),
New York Supreme Court, Albany County. The plant manufactured military and
civilian products from depleted uranium and was acquired from the Company by the
U.S. Department of Energy ("DOE") in 1984. Flacke I seeks penalties for alleged
violations of New York's Environmental Conservation Law, and of a consent order
entered into to resolve these alleged violations. Flacke II seeks forfeiture of
a $200,000 surety bond posted in connection with the consent order, plus
interest from February 1980. The Company denied liability in both actions. The
litigation had been inactive from 1984 until July 1993 when the State moved for
partial summary judgment for approximately $1.5 million on certain of its claims
in Flacke I and for summary judgment in Flacke II. In January 1994, the Company
cross-moved for summary judgment in Flacke I and Flacke II. All summary judgment
motions have been denied. The Company has reached a settlement in principle with
the State.
Residents in the vicinity of the Company's former Philadelphia lead
chemicals plant commenced a class action allegedly comprised of over 7,500
individuals seeking medical monitoring and damages allegedly caused by emissions
from the plant. Wagner, et al. v. Anzon, Inc. and NL Industries, Inc., No. 87-
4420, Court of Common Pleas, Philadelphia County. The complaint sought
compensatory and punitive damages from the Company and the current owner of the
plant, and alleged causes of action for, among other things, negligence, strict
liability, and nuisance. A class was certified to include persons who resided,
owned or rented property, or who work or have worked within up to approximately
three-quarters of a mile from the plant from 1960 through the present. The
Company answered the complaint, denying liability. In December 1994, the jury
returned a verdict in favor of the Company. Plaintiffs appealed to the
Pennsylvania Superior Court, requesting a new trial and in September 1996, the
Superior Court affirmed the judgment in favor of the Company. In December 1996,
plaintiffs filed a petition for allowance of appeal to the Pennsylvania Supreme
Court. Plaintiffs' petition is pending. Residents also filed consolidated
actions in the United States District Court for the Eastern District of
Pennsylvania, Shinozaki v. Anzon, Inc. and Wagner and Antczak v. Anzon and NL
Industries, Inc. Nos. 87-3441, 87-3502, 87-4137 and 87-5150. The consolidated
action is a putative class action seeking CERCLA response costs, including
cleanup and medical monitoring, declaratory and injunctive relief and civil
penalties for alleged violations of the Resource Conservation and Recovery Act
("RCRA"), and also asserting pendent common law claims for strict liability,
trespass, nuisance and punitive damages. The court dismissed the common law
claims without prejudice, dismissed two of the three RCRA claims as against the
Company with prejudice, and stayed the case pending the outcome of the state
court litigation.
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In July 1991, a complaint was filed in the United States District Court
for the Central District of California, United States of America v. Peter Gull
and NL Industries, Inc., Civ. No. 91-4098, seeking recovery of $2 million in
costs incurred by the United States in response to the alleged release of
hazardous substances into the environment from a facility located in Norco,
California, treble damages and $1.75 million in penalties for the Company's
alleged failure to comply with the U.S. EPA's administrative order No. 88-13.
The order, which alleged that the Company arranged for the treatment or disposal
of materials at the Norco site, directed the immediate removal of hazardous
substances from the site. The Company carried out a portion of the remedy at the
Norco site, but did not complete the ordered activities because it believed they
were in conflict with California law. The court ruled that the Company was
liable for approximately $2.7 million in response costs plus approximately $3.6
million in penalties for failure to comply with the administrative order. In
April 1994, the court entered final judgment in this matter directing the
Company to pay $6.3 million plus interest. Both the Company and the government
have appealed. In August 1994, this matter was referred to mediation, which is
pending.
At a municipal and industrial waste disposal site in Batavia, New York,
the Company and six others have been identified as PRPs. The U.S. EPA has
divided the site into two operable units. Pursuant to an administrative consent
order entered into with the U.S. EPA, the Company conducted a RIFS for operable
unit one, the closure of the industrial waste disposal section of the landfill.
The Company's RIFS costs were approximately $2 million. In June 1995, the U.S.
EPA issued the record of decision for operable unit one, which is estimated by
the U.S. EPA to cost approximately $12.3 million. In September 1995, the U.S.
EPA and certain PRPs entered into an administrative order on consent for the
remedial design phase of the remedy for operable unit one and the design phase
is proceeding. The Company and other PRPs entered into an interim cost sharing
arrangement for this phase of work. With respect to the second operable unit,
the extension of the municipal water supply, the U.S. EPA estimated the costs at
$1.2 million plus annual operation and maintenance costs. The Company and the
other PRPs are performing the work comprising operable unit two. The U.S. EPA
has also demanded approximately $.9 million in past costs from the PRPs.
See Item 1. "Business - Regulatory and Environmental Matters."
Other litigation
Rhodes, et al. v. ACF Industries, Inc., et al. (Circuit Court of Putnam
County, West Virginia, No. 95-C-261). Twelve plaintiffs brought this action
against the Company and various other defendants in July 1995. Plaintiffs allege
that they were employed by demolition and disposal contractors, and claim that
as a result of the defendants' negligence they were exposed to asbestos during
demolition and disposal of materials from defendants' premises in West Virginia.
Plaintiffs allege personal injuries and seek compensatory damages totaling $18.5
million and punitive damages totaling $55.5 million. The Company has filed an
answer denying plaintiffs' allegations. Discovery is proceeding.
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The Company has been named as a defendant in various lawsuits alleging
personal injuries as a result of exposure to asbestos in connection with
formerly-owned operations. Various of these actions remain pending. One such
case, In re: Monongalia Mass II, (Circuit Court of Monongalia County, West
Virginia, Nos. 93-C-362, et al.), involves the consolidated claims of
approximately 3,100 plaintiffs. The Company intends to defend these matters
vigorously.
Plaintiff brought the complaint in Frank D. Seinfeld v. Harold C. Simmons,
et al. (Superior Court of New York, Bergen County, Chancery Division, No.
C-336-96) in September 1996 on behalf of himself and derivatively, on behalf of
NL, against the Company, Valhi and certain current and former members of the
Company's Board of Directors. The complaint alleges, among other things, that
the Company's purchase of shares in an August 1991 "Dutch auction" tender offer
was an unfair and wasteful expenditure of the Company's funds that constituted a
breach of the defendants' fiduciary duties to the Company's shareholders.
Plaintiff seeks, among other things, to rescind the Company's purchase of
approximately 10.9 million shares of its common stock from Valhi pursuant to the
Dutch auction, and plaintiff has stated that damages sought are $149 million.
The Company and the other defendants have answered the complaint and have denied
all allegations of wrongdoing. The Company believes, and understands that each
of the other defendants believes, that the complaint is without merit. The
Company intends, and believes that each of the other defendants intends, to
defend the action vigorously. Trial is scheduled to begin in November 1997.
The Company is also involved in various other environmental, contractual,
product liability and other claims and disputes incidental to its present and
former businesses, and the disposition of past properties and former businesses.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended December 31, 1996.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
NL's common stock is listed and traded on the New York and Pacific Stock
Exchanges under the symbol "NL." As of March 20, 1997, there were approximately
9,000 holders of record of NL common stock. The following table sets forth the
high and low sales prices for NL common stock on the New York Stock Exchange
("NYSE") Composite Tape. On March 20, 1997, the closing price of NL common stock
according to the NYSE Composite Tape was $10-7/8.
High Low
------- -------
Year ended December 31, 1995:
First quarter ................................ $13-1/2 $11-3/4
Second quarter ............................... 16-5/8 11-7/8
Third quarter ................................ 17-1/2 13-1/2
Fourth quarter ............................... 16-5/8 10-7/8
Year ended December 31, 1996:
First quarter ................................ 14-3/4 12-1/4
Second quarter ............................... 15-3/8 11-1/2
Third quarter ................................ 12-1/4 9-1/8
Fourth quarter ............................... 11-1/4 7-5/8
The Company's Senior Notes generally limit the ability of the Company to
pay dividends to 50% of consolidated net income, as defined in the indenture
governing the Notes, subsequent to October 1993. At December 31, 1996, no
amounts were available for dividends. The Company paid three quarterly cash
dividends during 1996 of $.10 per share, beginning with a dividend paid on March
1, 1996. The Company suspended its quarterly dividend in October 1996. The
Company did not pay dividends in 1994 or 1995. The declaration and payment of
future dividends and the amount thereof will be dependent upon the Company's
results of operations, financial condition, contractual restrictions and other
factors deemed relevant by the Company's Board of Directors.
-21-
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with the Consolidated Financial Statements and Notes thereto, and
Item 7. "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Years ended December 31,
-------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(In millions, except per share amounts)
INCOME STATEMENT DATA:
Net sales ..................... $ 893.5 $ 805.3 $ 888.0 $ 1,023.9 $ 986.1
Operating income .............. 110.7 62.4 111.4 199.7 113.4
Income (loss) from
continuing operations ........ (44.6) (83.2) (24.0) 85.6 10.8
Net income (loss) ............. (76.4) (109.8) (24.0) 85.6 10.8
Per common share:
Income (loss) from
continuing operations ...... $ (.88) $ (1.63) $ (.47) $ 1.66 $ .21
Net income (loss) ........... (1.50) (2.16) (.47) 1.66 .21
Cash dividends .............. $ .35 $ -- $ -- $ -- $ .30
BALANCE SHEET DATA at year-end:
Cash, cash equivalents
and current marketable
securities, including
restricted cash .............. $ 187.9 $ 147.6 $ 156.3 $ 141.3 $ 114.1
Current assets ................ 635.8 467.5 486.4 551.1 500.2
Total assets .................. 1,472.1 1,206.5 1,162.4 1,271.7 1,221.4
Current liabilities ........... 248.8 232.5 244.9 302.4 290.3
Long-term debt including
current maturities ........... 1,035.3 870.9 789.6 783.7 829.0
Shareholders' deficit ......... (146.3) (264.8) (293.1) (209.4) (203.5)
CASH FLOW DATA:
Operating activities .......... $ (44.7) $ (7.3) $ 181.8 $ 71.6 $ 16.5
Investing activities .......... 234.9 182.0 (32.8) (62.2) (67.6)
Financing activities .......... (223.1) (155.3) (132.1) (3.3) 26.6
OTHER NON-GAAP FINANCIAL DATA:
EBITDA (1) .................... $ 115.1 $ 67.2 $ 101.3 $ 212.1 $ 135.6
OTHER DATA:
Net debt (2) .................. $ 847.7 $ 723.2 $ 633.4 $ 681.6 $ 740.7
Interest expense, net (3) ..... 104.3 95.1 78.9 75.4 70.3
Cash interest expense,
net (4) ...................... 98.0 86.8 60.8 59.7 49.4
Capital expenditures .......... 85.2 48.0 36.9 64.2 66.9
TiO2 sales volumes
(metric tons in
thousands) ................... 336 346 376 366 388
Average TiO2 selling
price index (1983=100) ....... 140 128 132 152 139
-22-
(1) EBITDA, as presented, represents operating income less corporate expense,
net, plus depreciation, depletion and amortization. EBITDA is presented as
a supplement to the Company's operating income and cash flow from
operations because the Company believes that EBITDA is a widely accepted
financial indicator of cash flows and the ability to service debt. EBITDA
should not be considered as an alternative to, or more meaningful than,
generally accepted accounting principles ("GAAP") operating income or net
income as an indicator of the Company's operating performance, or GAAP
cash flows from operating, investing and financing activities as a measure
of liquidity. EBITDA is not intended to depict funds available for
reinvestment or other discretionary uses, as the Company has significant
debt requirements and other commitments. Investors should consider certain
factors in evaluating the Company's EBITDA, including interest expense,
income taxes, noncash income and expense items, changes in assets and
liabilities, capital expenditures, investments in joint ventures and other
items included in GAAP cash flows as well as future debt repayment
requirements and other commitments, including those described in Notes 10,
13 and 17 to the Consolidated Financial Statements. The Company believes
that the trend of its EBITDA is consistent with the trend of its GAAP
operating income. See "Management's Discussion and Analysis" for a
discussion of operating income and cash flows during the last three years
and the Company's outlook. EBITDA as a measure of a company's performance
may not be comparable to other companies, unless substantially all
companies and analysts determine EBITDA as computed and presented herein.
(2) Net debt represents notes payable and long-term debt less cash, cash
equivalents (including restricted cash) and current marketable securities.
(3) Interest expense, net represents interest expense less general corporate
interest and dividend income.
(4) Cash interest expense, net represents interest expense, net less noncash
interest expense (deferred interest expense on the Senior Secured Discount
Notes and amortization of deferred financing costs).
-23-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
General
The Company's operations are conducted in two business segments - TiO2
conducted by Kronos and specialty chemicals conducted by Rheox. As discussed
below, TiO2 selling prices increased during 1994 and the first half of 1995, but
declined in the last half of 1995 and during 1996. Kronos' operating income and
margins improved during 1995, but declined in 1996.
Many factors influence TiO2 pricing levels, including industry capacity,
worldwide demand growth and customer inventory levels and purchasing decisions.
Kronos believes the decline in prices in 1996 was due, in part, to the impact of
recent debottlenecking projects increasing capacity, TiO2 customers reducing
inventory levels in a period of declining prices, and greater competition for
sales volume with more industry capacity available. Kronos believes that the
TiO2 industry has long-term growth potential, as discussed in "Item 1. Business
- - Kronos - Industry" and "Competition."
Net sales and operating income
Years ended December 31, % Change
------------------------------ ----------------
1994 1995 1996 1995-94 1996-95
-------- -------- -------- ------- -------
(In millions)
Net sales:
Kronos .................... $ 770.1 $ 894.1 $ 851.2 +16% -5%
-------- -------- --------
Rheox ..................... 117.9 129.8 134.9 +10% +4%
$ 888.0 $1,023.9 $ 986.1 +15% -4%
======== ======== ========
Operating income:
Kronos .................... $ 80.6 $ 161.2 $ 71.6 +100% -56%
Rheox ..................... 30.8 38.5 41.8 +25% +8%
-------- -------- --------
$ 111.4 $ 199.7 $ 113.4 +79% -43%
======== ======== ========
Percent change in TiO2:
Sales volume .............. -3% +6%
Average selling prices
(in billing currencies) .. +15% -9%
Kronos' operating income in 1996 was lower than 1995 primarily due to
lower average TiO2 selling prices, partially offset by higher sales volumes. In
billing currency terms, Kronos' 1996 average TiO2 selling prices were
approximately 9% lower than in 1995. Average selling prices in the fourth
quarter of 1996 were 17% lower than the fourth quarter of 1995 and were 3% lower
than the third quarter of 1996. Selling prices at the end of 1996 were 17% below
year-end 1995 levels, 8% below the average for 1996 and were 1% below the
average selling prices during the fourth quarter of 1996. The improvement in
Kronos' 1995 results over 1994 was primarily due to 15% higher average TiO2
selling
-24-
prices and higher TiO2 production volumes, partially offset by lower TiO2 sales
volumes.
Kronos' cost of sales in 1996 was higher than 1995 due to higher sales
volumes and higher unit costs, primarily due to lower production levels. Kronos'
costs of sales in 1995 was higher than 1994 due to slightly higher manufacturing
costs, partially offset by lower sales volumes. As a percentage of net sales,
cost of sales increased in 1996 and decreased in 1995 primarily due to the
impact on net sales of changes in the average selling price during the
respective years.
Kronos' selling, general and administrative expenses declined in 1996 from
the previous year, as a result of continuing cost containment efforts, while
1995's expense was higher than 1994 due to the unfavorable effect of changes in
currency exchange rates.
Record sales volume of 388,000 metric tons of TiO2 in 1996 increased 6%
compared to 1995, with improvements in all major markets, including a 10%
increase in North America. Sales volumes in the second half of 1996 were 16%
higher than the same period in 1995. In response to soft demand in the first
half of 1996 and its high inventory levels at the end of 1995, Kronos curtailed
production rates in early 1996. As demand increased during the last half of 1996
and inventories declined, Kronos' production rates were increased to near full
capacity in late 1996 and the average capacity utilization was 95% for the year.
Kronos' production rates were 94% of its capacity in 1994 and at full capacity
in 1995. Approximately one-half of Kronos' 1996 TiO2 sales, by volume, were
attributable to markets in Europe with approximately 37% attributable to North
America and the balance to other regions.
Demand, supply and pricing of TiO2 have historically been cyclical. Kronos
anticipates its TiO2 operating margins will begin to improve in the second
quarter of 1997 as the impact of recently-announced TiO2 price increases takes
effect; however, Kronos expects its 1997 operating income will be below that of
1996, primarily because of lower anticipated average TiO2 prices for 1997
compared to 1996 and lower technology fee income. Demand for TiO2 in 1996
increased over 1995 and Kronos expects demand to remain strong in 1997. Kronos
believes continued growth in demand should result in significant improvement in
average selling prices over the longer term.
Rheox's operating income improved in 1996 compared to 1995 due to 5%
higher sales volumes, lower selling, general and administrative expenses and a
$2.7 million gain related to the curtailment of certain U.S. employee pension
benefits, partially offset by slightly higher manufacturing costs. Operating
income increased in 1995 over 1994 due to 5% higher sales volumes and higher
average selling prices, partially offset by higher raw material costs. Rheox's
cost of sales increased in 1995 and 1996 over the respective prior year
primarily due to higher sales volumes, and cost of sales as a percentage of net
sales were approximately the same level in 1994, 1995 and 1996. Selling, general
and administrative expenses decreased slightly in 1996 compared to 1995 due to
lower variable compensation expense, and selling, general and administrative
expenses in 1995 approximated 1994 amounts.
-25-
The Company has substantial operations and assets located outside the
United States (principally Germany, Norway, Belgium and Canada). The U.S. dollar
value of the Company's foreign sales and operating costs is subject to currency
exchange rate fluctuations which may slightly impact reported earnings and may
affect the comparability of period-to-period operating results. A significant
amount of the Company's sales are denominated in currencies other than the U.S.
dollar (61% in 1996), principally major European currencies and the Canadian
dollar. Certain purchases of raw materials, primarily titanium-containing
feedstocks, are denominated in U.S. dollars, while labor and other production
costs are primarily denominated in local currencies. Fluctuations in the value
of the U.S. dollar relative to other currencies decreased 1996 sales by $14
million compared to 1995 and increased 1995 sales by $54 million compared to
1994.
General corporate
The following table sets forth certain information regarding general
corporate income (expense).
Years ended December 31, Change
1994 1995 1996 1995-94 1996-95
------ ------ ------ ------- -------
(In millions)
Securities earnings .............. $ 3.9 $ 7.4 $ 4.7 $ 3.5 $ (2.7)
Corporate expenses, net .......... (44.7) (26.6) (17.4) 18.1 9.0
Interest expense ................. (83.9) (81.6) (75.0) 2.3 6.6
------ ------ ------ ------ ------
$(124.7) $(100.8) $(87.7) $ 23.9 $ 12.9
====== ====== ====== ====== ======
Securities earnings fluctuate in part based upon the amount of funds
invested and yields thereon. Corporate expenses, net in 1996 were lower than
1995 due to lower provisions for environmental remediation cost. Corporate
expenses, net were significantly lower in 1995 compared to 1994 due to lower
provisions for environmental remediation and litigation costs. The Company
expects corporate expenses, net in 1997 will exceed that of 1996, primarily due
to approximately $30 million of additional environmental remediation accruals
related to the adoption of a new accounting standard. See Note 2 to the
Consolidated Financial Statements.
Interest expense
Interest expense in 1996 declined compared to 1995 principally due to
lower interest rates on variable rate debt, principally Kronos' Deutsche
mark-denominated debt, partially offset by higher levels of such DM-denominated
debt. Interest expense in 1995 declined compared to 1994 due to lower levels of
debt, principally DM-denominated debt, and lower interest rates on such
DM-denominated debt. In January 1997, the Company refinanced certain U.S. debt
and prepaid certain DM-denominated debt, as discussed in "Liquidity and Capital
Resources," and expects its interest expense will be higher in 1997 compared to
1996 as a result of higher anticipated interest rates and average debt levels.
-26-
Provision for income taxes
The principal reasons for the difference between the U.S. federal
statutory income tax rates and the Company's effective income tax rates are
explained in Note 13 to the Consolidated Financial Statements. The Company's
operations are conducted on a worldwide basis and the geographic mix of income
can significantly impact the Company's effective income tax rate. In 1994 and
1996, the geographic mix of income, including losses in certain jurisdictions
for which no current refund was available and recognition of a deferred tax
asset was not considered appropriate, contributed to the Company's effective tax
rate varying from a normally-expected rate.
Due to the Company's higher U.S. earnings before taxes in 1995, the
Company's valuation allowance was reduced by approximately $10 million due to a
change in estimate of the future tax benefit of certain U.S. tax credits which
the Company believes satisfies the "more-likely-than-not" recognition criteria.
During 1995, the Company also recorded deferred tax benefits of $6.6 million due
to the reduction in dividend withholding tax rates pursuant to ratification of
the U.S./Canada income tax treaty. The Company's deferred income tax status at
December 31, 1996 is discussed in "Liquidity and Capital Resources."
LIQUIDITY AND CAPITAL RESOURCES
The Company's consolidated cash flows provided by operating, investing and
financing activities for each of the past three years are presented below.
Years ended December 31,
-----------------------------
1994 1995 1996
------ ------ ------
(In millions)
Net cash provided (used) by:
Operating activities ....................... $181.7 $ 71.5 $ 16.5
Investing activities ....................... (32.8) (62.2) (67.6)
Financing activities ....................... (132.1) (3.3) 26.6
------ ------ ------
Net cash provided (used) by operating,
investing and financing activities .......... $ 16.8 $ 6.0 $(24.5)
====== ====== ======
The TiO2 industry is cyclical and changes in economic conditions within
the industry significantly impact the earnings and operating cash flows of the
Company. During 1996, declining TiO2 selling prices unfavorably impacted Kronos'
operating income and cash flows from operations compared to 1995. Average
selling prices began a downward trend in the last half of 1995 and continued
throughout 1996. The Company expects prices will begin to increase in the second
quarter of 1997; however, no assurance can be given that price trends will
conform to the Company's expectations and future cash flows will be adversely
affected should price trends be lower than the Company's expectations.
Changes in the Company's inventories, receivables and payables (excluding
the effect of currency translation) also contributed to the cash provided by
operations in 1994 and 1996; however, such changes used cash in 1995 primarily
due to increased inventory levels. In 1994 and 1995, net proceeds of $15 million
and $26 million, respectively, from the sale of trading securities are
components of the cash provided from operations. Certain German income tax
refunds and
-27-
payments, discussed below, significantly increased cash flows from operating
activities during 1994 and decreased cash flows from operating activities in
1996.
The Company's capital expenditures during the past three years include an
aggregate of $67 million ($26 million in 1996) for the Company's ongoing
environmental protection and compliance programs, including a Canadian waste
acid neutralization facility, a Norwegian onshore tailings disposal system and
German and Norwegian off-gas desulfurization systems. The Company's estimated
1997 and 1998 capital expenditures are $35 million and $36 million,
respectively, and include $3 million and $5 million, respectively, in the area
of environmental protection and compliance primarily related to the off-gas
desulfurization systems. The Company spent $9 million in 1995, $18 million in
1996 and plans to spend an additional $8 million in 1997 in capital expenditures
related to a debottlenecking project at its Leverkusen, Germany chloride-process
TiO2 facility that is expected to increase the Company's worldwide annual
attainable production to approximately 410,000 metric tons in 1998. Capital
expenditures of the manufacturing joint venture are not included in the
Company's capital expenditures. Rheox acquired the minority interests of certain
of its non-U.S. subsidiaries for $5.2 million in 1996.
In 1996, the Company borrowed DM 144 million ($96 million when borrowed)
under its DM credit facility and used DM 49 million ($32 million) to fund the
German tax settlement payments described below, and used the remainder of the
proceeds primarily to fund operations. Repayments of indebtedness in 1996
included payments of $23 million on the Rheox bank term loan, $15 million in
payments on the joint venture term loan and DM 16 million ($10 million when
repaid) in payments on DM-denominated notes payable. Net repayments of
indebtedness in 1995 included $30 million in payments on the Rheox bank term
loan and $15 million in payments on the joint venture term loan. In addition,
the Company borrowed a net DM 56 million ($40 million when borrowed) under
DM-denominated short-term credit lines. In 1994, the Company borrowed DM 75
million ($45 million when borrowed) under the DM credit facility, and repayments
of indebtedness included DM 225 million ($140 million when paid) in payments on
the DM credit facility, $15 million in payments on the Rheox bank term loan and
$15 million in payments on the joint venture term loan.
In order to improve its near-term liquidity, during January 1997, the
Company refinanced its Rheox subsidiary, obtaining a net $125 million of new
long-term financing. The net proceeds, along with other available funds, were
used to prepay DM 207 million ($127 million when paid) of the Company's DM term
loan and to repay DM 43 million ($26 million when paid) of the Company's DM
revolving credit facility, leaving DM 130 million ($80 million) available for
borrowing at January 31, 1997. As a result of the refinancing and prepayment,
the Company's aggregate scheduled debt payments for 1997 and 1998 decreased by
$103 million ($64 million in 1997 and $39 million in 1998). In connection with
the prepayment, the Company and its lenders modified certain financial covenants
of the DM credit agreement and NL guaranteed the facility.
At December 31, 1996, the Company had cash and cash equivalents
aggregating $114 million (44% held by non-U.S. subsidiaries) including
restricted cash and cash equivalents of $11 million. At December 31, 1996, after
giving pro forma
-28-
effect for the refinancing discussed above, the Company had cash and cash
equivalents aggregating $87 million and the Company's subsidiaries had $9
million and $102 million available for borrowing under U.S. and non-U.S. credit
facilities, respectively. At December 31, 1996, the Company had complied with,
or had obtained waivers for, all financial covenants governing its debt
agreements.
Dividends paid during 1996 totaled $15.3 million. No dividends were paid
in 1994 or 1995. In October 1996, the Company's Board of Directors suspended the
Company's quarterly dividend and the Company is currently unable to pay
dividends due to certain restrictions under the indentures of the Senior Notes.
Based upon the Company's expectations for the TiO2 industry and
anticipated demands on the Company's cash resources as discussed herein, the
Company expects to have sufficient liquidity to meet its near-term obligations
including operations, capital expenditures and debt service. To the extent that
actual developments differ from Company's expectations, the Company's liquidity
could be adversely affected.
Certain of the Company's income tax returns in various U.S. and non-U.S.
jurisdictions are being examined and tax authorities have proposed or may
propose tax deficiencies. During 1994, the German tax authorities withdrew
certain proposed tax deficiencies of DM 100 million and remitted tax refunds
aggregating DM 225 million ($136 million when received), including interest, on
a tentative basis while examination of the Company's German income tax returns
continued. The Company subsequently reached an agreement with the German tax
authorities regarding such examinations which resolved certain significant tax
contingencies for years through 1990. The Company received final assessments and
paid certain tax deficiencies of approximately DM 50 million ($32 million),
including interest, in settlement of these issues in 1996. The Company considers
the agreement to be a favorable resolution of the contingencies and the payment
was within previously-accrued amounts for such matters.
Certain other German tax contingencies remain outstanding and will
continue to be litigated. Although the Company believes that it will ultimately
prevail in the litigation, the Company has granted a DM 100 million ($64 million
at December 31, 1996) lien on its Nordenham, Germany TiO2 plant in favor of the
German tax authorities until the litigation is resolved. No assurances can be
given that this litigation will be resolved in the Company's favor in view of
the inherent uncertainties involved in court rulings. The Company believes that
it has adequately provided accruals for additional income taxes and related
interest expense which may ultimately result from all such examinations and
believes that the ultimate disposition of such examinations should not have a
material adverse effect on the Company's consolidated financial position,
results of operations or liquidity.
At December 31, 1996, the Company had net deferred tax liabilities of $152
million. The Company operates in numerous tax jurisdictions, in certain of which
it has temporary differences that net to deferred tax assets (before valuation
allowance). The Company has provided a deferred tax valuation allowance of $207
million at December 31, 1996, principally related to the U.S. and Germany,
-29-
partially offsetting deferred tax assets which the Company believes do not
currently meet the "more-likely-than-not" recognition criteria.
In addition to the chemicals businesses conducted through Kronos and
Rheox, the Company also has certain interests and associated liabilities
relating to certain discontinued or divested businesses and other holdings of
marketable equity securities including securities issued by Valhi and other
Contran subsidiaries.
The Company has been named as a defendant, PRP, or both, in a number of
legal proceedings associated with environmental matters, including waste
disposal sites, mining locations and facilities currently or previously owned,
operated or used by the Company, certain of which are on the U.S. EPA's
Superfund National Priorities List or similar state lists. On a quarterly basis,
the Company evaluates the potential range of its liability at sites where it has
been named as a PRP or defendant. The Company believes it has adequate accruals
for reasonably estimable costs of such matters, but the Company's ultimate
liability may be affected by a number of factors, including changes in remedial
alternatives and costs and the allocation of such costs among PRPs. The Company
is also a defendant in a number of legal proceedings seeking damages for
personal injury and property damage arising out of the sale of lead pigments and
lead-based paints. There is no assurance that the Company will not incur future
liability in respect of this pending litigation in view of the inherent
uncertainties involved in court and jury rulings in pending and possible future
cases. However, based on, among other things, the results of such litigation to
date, the Company believes that the pending lead pigment and paint litigation is
without merit. The Company has not accrued any amounts for such pending
litigation. Liability that may result, if any, cannot reasonably be estimated.
The Company currently believes the disposition of all claims and disputes,
individually or in the aggregate, should not have a material adverse effect on
the Company's consolidated financial position, results of operations or
liquidity. There can be no assurance that additional matters of these types will
not arise in the future. See Item 3. "Legal Proceedings" and Note 17 to the
Consolidated Financial Statements.
As discussed above, the Company has substantial operations located outside
the United States for which the functional currency is not the U.S. dollar. As a
result, the reported amount of the Company's assets and liabilities related to
its non-U.S. operations, and therefore the Company's consolidated net assets,
will fluctuate based upon changes in currency exchange rates. The carrying value
of the Company's net investment in its German operations is a net liability due
principally to its DM credit facility, while its net investment in its other
non-U.S. operations are net assets.
The Company periodically evaluates its liquidity requirements, alternative
uses of capital, capital needs and availability of resources in view of, among
other things, its debt service and capital expenditure requirements and
estimated future operating cash flows. As a result of this process, the Company
in the past has sought and in the future may seek to reduce, refinance,
repurchase or restructure indebtedness, raise additional capital, issue
additional securities, modify its dividend policy, restructure ownership
interests, sell interests in subsidiaries or other assets, or take a combination
of such steps or other steps
-30-
to manage its liquidity and capital resources. In the normal course of its
business, the Company may review opportunities for the acquisition, divestiture,
joint venture or other business combinations in the chemicals industry. In the
event of any such transaction, the Company may consider using available cash,
issuing equity securities or increasing its indebtedness to the extent permitted
by the agreements governing the Company's existing debt. See Note 10 to the
Consolidated Financial Statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is contained in a separate section
of this Annual Report. See "Index of Financial Statements and Schedules" on page
F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is incorporated by reference to the
Company's definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the end of
the fiscal year covered by this report (the "NL Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
NL Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
NL Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
NL Proxy Statement. See also Note 16 to the Consolidated Financial Statements.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) and (d) Financial Statements and Schedules
-31-
The consolidated financial statements and schedules listed by the
Registrant on the accompanying Index of Financial Statements and
Schedules (see page F-1) are filed as part of this Annual Report.
(b) Reports on Form 8-K
Reports on Form 8-K for the quarter ended December 31, 1996 and
thereafter through the date of this report.
October 23, 1996 - reported Items 5 and 7.
January 30, 1997 - reported Items 5 and 7.
(c) Exhibits
Included as exhibits are the items listed in the Exhibit Index.
NL will furnish a copy of any of the exhibits listed below upon
payment of $4.00 per exhibit to cover the costs to NL of
furnishing the exhibits. Instruments defining the rights of
holders of long-term debt issues which do not exceed 10% of
consolidated total assets will be furnished to the Securities and
Exchange Commission upon request.
-32-
Item No. Exhibit Index
3.1 By-Laws, as amended on June 28, 1990 - incorporated by reference to
Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1990.
3.2 Certificate of Amended and Restated Certificate of Incorporation
dated June 28, 1990 - incorporated by reference to Exhibit 1 to the
Registrant's Proxy Statement on Schedule 14A for the annual meeting
held on June 28, 1990.
4.1 Registration Rights Agreement dated October 30, 1991, by and between
the Registrant and Tremont Corporation - incorporated by reference
to Exhibit 4.3 to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1991.
4.2 Indenture dated October 20, 1993 governing the Registrant's 11.75%
Senior Secured Notes due 2003, including form of Senior Note
incorporated by reference to Exhibit 4.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1993.
4.3 Senior Mirror Notes dated October 20, 1993 - incorporated by
reference to Exhibit 4.3 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993.
4.4 Senior Note Subsidiary Pledge Agreement dated October 20, 1993
between Registrant and Kronos, Inc. - incorporated by reference to
Exhibit 4.4 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1993.
4.5 Third Party Pledge and Intercreditor Agreement dated October 20,
1993 between Registrant, Chase Manhattan Bank (National Association)
and Chemical Bank - incorporated by reference to Exhibit 4.5 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.
4.6 Indenture dated October 20, 1993 governing the Registrant's 13%
Senior Secured Discount Notes due 2005, including form of Discount
Note - incorporated by reference to Exhibit 4.6 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1993.
4.7 Discount Mirror Notes dated October 20, 1993 - incorporated by
reference to Exhibit 4.8 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993.
4.8 Discount Note Subsidiary Pledge Agreement dated October 20, 1993
between Registrant and Kronos, Inc. - incorporated by reference to
Exhibit 4.9 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1993.
-33-
10.1 Amended and Restated Loan Agreement dated as of October 15, 1993
among Kronos International, Inc., the Banks set forth therein,
Hypobank International S.A., as Agent and Banque Paribas, as
Co-agent - incorporated by reference to Exhibit 10.17 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.
10.2 Second Amended and Restated Loan Agreement dated as of January 31,
1997 among Kronos International, Inc., Hypobank International S.A.,
as Agent, and the Banks set forth therein.
10.3 Amended and Restated Liquidity Undertaking dated October 15, 1993 by
the Registrant, Kronos, Inc. and Kronos International, Inc. to
Hypobank International S.A., as agent, and the Banks set forth
therein - incorporated by reference to Exhibit 10.18 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.
10.4 Second Amended and Restated Liquidity Undertaking dated January 31,
1997 by the Registrant, Kronos, Inc. and Kronos International, Inc.
to and in favor of Hypobank International S.A., as Agent, and the
Banks set forth therein.
10.5 Guaranty dated as of January 31, 1997 made by the Registrant in
favor of Hypobank International S.A., as Agent.
10.6 Credit Agreement dated as of March 20, 1991 between Rheox, Inc. and
Subsidiary Guarantors and The Chase Manhattan Bank (National
Association) and the Nippon Credit Bank, Ltd., as Co-agents
incorporated by reference to Exhibit 10.4 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1990.
10.7 Amendments 1 and 2 dated May 1, 1991 and February 15, 1992,
respectively, to the Credit Agreement between Rheox, Inc. and
Subsidiary Guarantors and the Chase Manhattan Bank (National
Association) and the Nippon Credit Bank, Ltd. as Co-agents
incorporated by reference to Exhibit 10.2 to the Registrant's
Quarterly Report on form 10-Q for the quarter ended June 30, 1992.
10.8 Third amendment to the Credit Agreement, dated March 5, 1993 between
Rheox, Inc. and Subsidiary Guarantors and the Chase Manhattan Bank
(National Association) and the Nippon Credit Bank, Ltd as Co-agents
- incorporated by reference to Exhibit 10.7 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992.
10.9 Fourth and Fifth Amendments to the Credit Agreement, dated September
23, 1994 and December 15, 1994, respectively, between Rheox, Inc.
and Subsidiary Guarantors and the Chase Manhattan Bank (National
Association) and the Nippon Credit Bank, Ltd. as Co-agents
incorporated by reference to Exhibit 10.6 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.
-34-
10.10 Sixth and Seventh Amendments to the Credit Agreement, dated
September 23, 1995 and February 2, 1996, respectively, between
Rheox, Inc. and Subsidiary Guarantors and the Chase Manhattan Bank
(National Association) and the Nippon Credit Bank, Ltd. as Co-agents
- incorporated by reference to Exhibit 10.7 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995.
10.11 Eighth amendment to the Credit Agreement, dated September 17, 1996,
between Rheox, Inc. and Subsidiaries, Guarantors and the Chase
Manhattan Bank (National Association) and the Nippon Credit Bank,
Ltd. as Co-Agents - incorporated by reference to Exhibit 10.1 to the
Registrants' Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996.
10.12 Amended and Restated Credit Agreement dated as of January 30, 1997
between Rheox, Inc., the Subsidiary Guarantors Party thereto, the
Lenders Party thereto, the Chase Manhattan Bank, as Administrative
Agent, and Bankers Trust Company, as Documentation Agent.
10.13 Credit Agreement dated as of October 18, 1993 among Louisiana
Pigment Company, L.P., as Borrower, the Banks listed therein and
Citibank, N.A., as Agent - incorporated by reference to Exhibit
10.11 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
10.14 Security Agreement dated October 18, 1993 from Louisiana Pigment
Company, L.P., as Borrower, to Citibank, N.A., as Agent incorporated
by reference to Exhibit 10.12 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1993.
10.15 Security Agreement dated October 18, 1993 from Kronos Louisiana,
Inc. as Grantor, to Citibank, N.A., as Agent - incorporated by
reference to Exhibit 10.13 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993.
10.16 KLA Consent and Agreement dated as of October 18, 1993 between
Kronos Louisiana, Inc. and Citibank, N.A., as Agent - incorporated
by reference to Exhibit 10.14 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1993.
10.17 Guaranty dated October 18, 1993, from Kronos, Inc., as guarantor, in
favor of Lenders named therein, as Lenders, and Citibank, N.A., as
Agent - incorporated by reference to Exhibit 10.15 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.
10.18 Mortgage by Louisiana Pigment Company, L.P. dated October 18, 1993
in favor of Citibank, N.A. - incorporated by reference to Exhibit
10.16 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
-35-
10.19 Lease Contract dated June 21, 1952, between Farbenfabrieken Bayer
Aktiengesellschaft and Titangesellschaft mit beschrankter Haftung
(German language version and English translation thereof)
incorporated by reference to Exhibit 10.14 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1985.
10.20 Contract on Supplies and Services among Bayer AG, Kronos Titan-GmbH
and Kronos International, Inc. dated June 30, 1995 (English
translation from German language document) - incorporated by
reference to Exhibit 10.1 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995.
10.21 Richards Bay Slag Sales Agreement dated May 1, 1995 between Richards
Bay Iron and Titanium (Proprietary) Limited and Kronos, Inc.
incorporated by reference to Exhibit 10.17 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995.
10.22 Formation Agreement dated as of October 18, 1993 among Tioxide
Americas Inc., Kronos Louisiana, Inc. and Louisiana Pigment Company,
L.P. - incorporated by reference to Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1993.
10.23 Joint Venture Agreement dated as of October 18, 1993 between Tioxide
Americas Inc. and Kronos Louisiana, Inc. - incorporated by reference
to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993.
10.24 Amendment No. 1 to Joint Venture Agreement dated as of December 20,
1995 between Tioxide Americas Inc. and Kronos Louisiana, Inc. -
incorporated by reference to Exhibit 10.20 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995.
10.25 Kronos Offtake Agreement dated as of October 18, 1993 between Kronos
Louisiana, Inc. and Louisiana Pigment Company, L.P. - incorporated
by reference to Exhibit 10.4 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993.
10.26 Amendment No. 1 to Kronos Offtake Agreement dated as of December 20,
1995 between Kronos Louisiana, Inc. and Louisiana Pigment Company,
L.P. - incorporated by reference to Exhibit 10.22 to the
Registrant's Annual Report on Form 10-K for the year ended December
31, 1995.
10.27 Tioxide Americas Offtake Agreement dated as of October 18, 1993
between Tioxide Americas Inc. and Louisiana Pigment Company, L.P. -
incorporated by reference to Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1993.
10.28 Amendment No. 1 to Tioxide Americas Offtake Agreement dated as of
December 20, 1995 between Tioxide Americas Inc. and Louisiana
-36-
Pigment Company, L.P. - incorporated by reference to Exhibit 10.24
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995.
10.29 TCI/KCI Output Purchase Agreement dated as of October 18, 1993
between Tioxide Canada Inc. and Kronos Canada, Inc. - incorporated
by reference to Exhibit 10.6 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1993.
10.30 TAI/KLA Output Purchase Agreement dated as of October 18, 1993
between Tioxide Americas Inc. and Kronos Louisiana, Inc. -
incorporated by reference to Exhibit 10.7 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1993.
10.31 Master Technology Exchange Agreement dated as of October 18, 1993
among Kronos, Inc., Kronos Louisiana, Inc., Kronos International,
Inc., Tioxide Group Limited and Tioxide Group Services Limited
incorporated by reference to Exhibit 10.8 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1993.
10.32 Parents' Undertaking dated as of October 18, 1993 between ICI
American Holdings Inc. and Kronos, Inc. - incorporated by reference
to Exhibit 10.9 to the Registrant's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993.
10.33 Allocation Agreement dated as of October 18, 1993 between Tioxide
Americas Inc., ICI American Holdings, Inc., Kronos, Inc. and Kronos
Louisiana, Inc. - incorporated by reference to Exhibit 10.10 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993.
10.34* 1985 Long Term Performance Incentive Plan of NL Industries, Inc., as
adopted by the Board of Directors on February 27, 1985 incorporated
by reference to Exhibit A to the Registrant's Proxy Statement on
Schedule 14A for the annual meeting of shareholders held on April
24, 1985.
10.35 Form of Director's Indemnity Agreement between NL and the
independent members of the Board of Directors of NL - incorporated
by reference to Exhibit 10.20 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1987.
10.36* 1989 Long Term Performance Incentive Plan of NL Industries, Inc. -
incorporated by reference to Exhibit B to the Registrant's Proxy
Statement on Schedule 14A for the annual meeting of shareholders
held on May 8, 1996.
10.37* NL Industries, Inc. Variable Compensation Plan - incorporated by
reference to Exhibit A to the Registrant's Proxy Statement on
-37-
Schedule 14A for the annual meeting of shareholders held on May 8,
1996.
10.38* NL Industries, Inc. Retirement Savings Plan, as amended and restated
effective April 1, 1996.
10.39* NL Industries, Inc. 1992 Non-Employee Director Stock Option Plan, as
adopted by the Board of Directors on February 13, 1992 incorporated
by reference to Appendix A to the Registrant's Proxy Statement on
Schedule 14A for the annual meeting of shareholders held April 30,
1992.
10.40 Intercorporate Services Agreement by and between Valhi, Inc. and the
Registrant effective as of January 1, 1996.
10.41 Intercorporate Services Agreement by and between Contran Corporation
and the Registrant effective as of January 1, 1996.
10.42 Intercorporate Services Agreement by and between Tremont Corporation
and the Registrant effective as of January 1, 1996.
10.43 Insurance Sharing Agreement, effective January 1, 1990, by and
between the Registrant, NL Insurance, Ltd. (an indirect subsidiary
of Tremont Corporation) and Baroid Corporation - incorporated by
reference to Exhibit 10.20 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1991.
10.44* Executive severance agreement effective as of February 16, 1994 by
and between the Registrant and Joseph S. Compofelice - incorporated
by reference to Exhibit 10.2 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
10.45* Executive severance agreement effective as of March 9, 1995 by and
between the Registrant and Lawrence A. Wigdor - incorporated by
reference to Exhibit 10.3 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
10.46* Executive Severance Agreement effective as of December 31, 1991 by
and between the Registrant and J. Landis Martin - incorporated by
reference to Exhibit 10.22 to the Registrant's Annual Report on Form
10-K for the year ended December 31, 1991.
10.47* Supplemental Executive Retirement Plan for Executives and Officers
of NL Industries, Inc. effective as of January 1, 1991 incorporated
by reference to Exhibit 10.26 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992.
10.48* Agreement to Defer Bonus Payment dated December 28, 1995 between the
Registrant and Lawrence A. Wigdor and related trust agreement
incorporated by reference to Exhibit 10.43 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995.
-38-
21.1 Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
27.1 Financial Data Schedules for the year ended December 31, 1996.
99.1 Annual Report of Savings Plan for Employees of NL Industries, Inc.
(Form 11-K) to be filed under Form 10-K/A to the Registrant's Annual
Report on Form 10-K within 180 days after December 31, 1996.
* Management contract, compensatory plan or arrangement.
-39-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NL Industries, Inc.
(Registrant)
By /s/ J. Landis Martin
J. Landis Martin, March 20, 1997
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated:
/s/ J. Landis Martin /s/ Harold C. Simmons
- ----------------------------------- ----------------------------------------
J. Landis Martin, March 20, 1997 Harold C. Simmons, March 20, 1997
Director, President and Chairman of the Board
Chief Executive Officer
/s/ Glenn R. Simmons /s/ Joseph S. Compofelice
- ----------------------------------- ----------------------------------------
Glenn R. Simmons, March 20, 1997 Joseph S. Compofelice, March 20, 1997
Director Director, Vice President and
Chief Financial Officer
/s/ Kenneth R. Peak /s/ Dr. Lawrence A. Wigdor
- ----------------------------------- ----------------------------------------
Kenneth R. Peak, March 20, 1997 Dr. Lawrence A. Wigdor, March 20, 1997
Director Director, President and Chief
Executive Officer of Kronos and Rheox
/s/ Elmo R. Zumwalt, Jr. /s/ Dennis G. Newkirk
- ----------------------------------- ----------------------------------------
Elmo R. Zumwalt, Jr., March 20,1997 Dennis G. Newkirk, March 20, 1997
Director Vice President and Controller
(Principal Accounting Officer)
-40-
NL INDUSTRIES, INC.
ANNUAL REPORT ON FORM 10-K
Items 8, 14(a) and 14(d)
Index of Financial Statements and Schedules
Financial Statements Pages
Report of Independent Accountants ............................. F-2
Consolidated Balance Sheets - December 31, 1995 and 1996 ...... F-3 / F-4
Consolidated Statements of Operations - Years ended
December 31, 1994, 1995 and 1996 ............................. F-5
Consolidated Statements of Shareholders' Deficit - Years
ended December 31, 1994, 1995 and 1996 ....................... F-6
Consolidated Statements of Cash Flows - Years ended
December 31, 1994, 1995 and 1996 ............................. F-7 / F-9
Notes to Consolidated Financial Statements .................... F-10 / F-36
Financial Statement Schedules
Report of Independent Accountants ............................. S-1
Schedule I - Condensed Financial Information of Registrant .... S-2 / S-7
Schedule II - Valuation and qualifying accounts ............... S-8
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of NL Industries, Inc.:
We have audited the accompanying consolidated balance sheets of NL
Industries, Inc. as of December 31, 1995 and 1996, and the related consolidated
statements of operations, shareholders' deficit, and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of NL Industries,
Inc. as of December 31, 1995 and 1996, and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 7, 1997
F-2
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1996
(In thousands, except per share data)
ASSETS
1995 1996
---------- ----------
Current assets:
Cash and cash equivalents, including
restricted cash of $10,104 and $10,895 ........ $ 141,333 $ 114,115
Accounts and notes receivable, less
allowance of $4,039 and $3,813 ................ 147,428 138,538
Refundable income taxes ........................ 4,941 9,267
Inventories .................................... 251,630 232,510
Prepaid expenses ............................... 3,217 4,219
Deferred income taxes .......................... 2,522 1,597
---------- ----------
Total current assets ....................... 551,071 500,246
---------- ----------
Other assets:
Marketable securities .......................... 20,944 23,718
Investment in joint ventures ................... 185,893 181,479
Prepaid pension cost ........................... 22,576 24,821
Deferred income taxes .......................... 788 223
Other .......................................... 31,165 24,825
---------- ----------
Total other assets ......................... 261,366 255,066
---------- ----------
Property and equipment:
Land ........................................... 22,902 21,963
Buildings ...................................... 166,349 165,479
Machinery and equipment ........................ 648,458 660,333
Mining properties .............................. 97,190 95,891
Construction in progress ....................... 11,187 13,231
---------- ----------
946,086 956,897
Less accumulated depreciation and depletion .... 486,870 490,851
---------- ----------
Net property and equipment ................. 459,216 466,046
---------- ----------
$1,271,653 $1,221,358
========== ==========
F-3
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
December 31, 1995 and 1996
(In thousands, except per share data)
LIABILITIES AND SHAREHOLDERS' DEFICIT
1995 1996
----------- -----------
Current liabilities:
Notes payable ................................ $ 39,247 $ 25,732
Current maturities of long-term debt ......... 43,369 91,946
Accounts payable and accrued liabilities ..... 165,985 153,904
Payable to affiliates ........................ 10,181 10,204
Income taxes ................................. 40,088 5,664
Deferred income taxes ........................ 3,555 2,895
----------- -----------
Total current liabilities ................ 302,425 290,345
----------- -----------
Noncurrent liabilities:
Long-term debt ............................... 740,334 737,100
Deferred income taxes ........................ 157,192 151,221
Accrued pension cost ......................... 69,311 57,941
Accrued postretirement benefits cost ......... 60,235 55,935
Other ........................................ 148,511 132,048
----------- -----------
Total noncurrent liabilities ............. 1,175,583 1,134,245
----------- -----------
Minority interest .............................. 3,066 249
----------- -----------
Shareholders' deficit:
Preferred stock - 5,000 shares authorized,
no shares issued or outstanding ............. -- --
Common stock - $.125 par value; 150,000
shares authorized; 66,839 shares issued ..... 8,355 8,355
Additional paid-in capital ................... 759,281 759,281
Adjustments:
Currency translation ....................... (126,934) (118,629)
Pension liabilities ........................ (1,908) (1,822)
Marketable securities ...................... (525) 1,278
Accumulated deficit .......................... (481,432) (485,948)
Treasury stock, at cost (15,748 and 15,721
shares) ..................................... (366,258) (365,996)
----------- -----------
Total shareholders' deficit .............. (209,421) (203,481)
----------- -----------
$ 1,271,653 $ 1,221,358
=========== ===========
Commitments and contingencies (Notes 13 and 17)
See accompanying notes to consolidated financial statements.
F-4
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1994, 1995 and 1996
(In thousands, except per share data)
1994 1995 1996
----------- ----------- -----------
Revenues and other income:
Net sales ........................... $ 887,954 $ 1,023,939 $ 986,074
Other, net .......................... 44,828 22,241 30,480
----------- ----------- -----------
932,782 1,046,180 1,016,554
----------- ----------- -----------
Costs and expenses:
Cost of sales ....................... 649,745 676,184 738,438
Selling, general and administrative . 212,516 189,477 177,464
Interest ............................ 83,926 81,617 75,039
----------- ----------- -----------
946,187 947,278 990,941
----------- ----------- -----------
Income (loss) before income
taxes and minority interest ...... (13,405) 98,902 25,613
Income tax expense .................... 9,734 12,671 14,833
----------- ----------- -----------
Income (loss) before minority
interest ......................... (23,139) 86,231 10,780
Minority interest ..................... 843 622 (37)
----------- ----------- -----------
Net income (loss) ................ $ (23,982) $ 85,609 $ 10,817
=========== =========== ===========
Net income (loss) per share of common
stock and common stock equivalents ... $ (.47) $ 1.66 $ .21
=========== =========== ===========
Weighted average common shares and
common stock equivalents outstanding . 51,022 51,512 51,350
=========== =========== ===========
See accompanying notes to consolidated financial statements.
F-5
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
Years ended December 31, 1994, 1995 and 1996
(In thousands)
Adjustments
-----------------------------------
Additional
Common paid-in Currency Pension Marketable Accumulated Treasury
stock capital translation liabilities securities deficit stock Total
--------- --------- ----------- ----------- ---------- ----------- --------- ---------
Balance at December 31, 1993 $ 8,355 $ 759,281 $(115,803) $ (3,442) $ (2,164) $(543,059) $(367,963) $(264,795)
Net loss ................... -- -- -- -- -- (23,982) -- (23,982)
Treasury stock reissued .... -- -- -- -- -- -- 1,427 1,427
Adjustments ................ -- -- (9,691) 1,807 2,152 -- -- (5,732)
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at December 31, 1994 8,355 759,281 (125,494) (1,635) (12) (567,041) (366,536) (293,082)
Net income ................. -- -- -- -- -- 85,609 -- 85,609
Treasury stock reissued .... -- -- -- -- -- -- 278 278
Adjustments ................ -- -- (1,440) (273) (513) -- -- (2,226)
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at December 31, 1995 8,355 759,281 (126,934) (1,908) (525) (481,432) (366,258) (209,421)
Net income ................. -- -- -- -- -- 10,817 -- 10,817
Common dividends declared -
$.30 per share ............ -- -- -- -- -- (15,333) -- (15,333)
Treasury stock reissued .... -- -- -- -- -- -- 262 262
Adjustments ................ -- -- 8,305 86 1,803 -- -- 10,194
--------- --------- --------- --------- --------- --------- --------- ---------
Balance at December 31, 1996 $ 8,355 $ 759,281 $(118,629) $ (1,822) $ 1,278 $(485,948) $(365,996) $(203,481)
========= ========= ========= ========= ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
F-6
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1994, 1995 and 1996
(In thousands)
1994 1995 1996
--------- --------- ---------
Cash flows from operating activities:
Net income (loss) ..................... $ (23,982) $ 85,609 $ 10,817
Depreciation, depletion and
amortization ......................... 34,592 38,989 39,664
Noncash interest expense .............. 18,071 19,396 20,959
Deferred income taxes ................. 11,907 (29,248) 2,802
Minority interest ..................... 843 622 (37)
Net (gains) losses from:
Securities transactions ............. 1,220 (1,175) --
Disposition of property and
equipment .......................... 1,981 2,713 2,312
Pension cost, net ..................... (2,753) (7,248) (12,893)
Other postretirement benefits, net .... (3,437) (4,169) (5,086)
Other, net ............................ 68 (477) (126)
--------- --------- ---------
38,510 105,012 58,412
Change in assets and liabilities:
Accounts and notes receivable ....... (13,152) (1,483) 2,798
Inventories ......................... 17,778 (57,378) 8,401
Prepaid expenses .................... 3,221 1,148 (1,426)
Accounts payable and accrued
liabilities ........................ (17,343) (17,700) (3,311)
Income taxes ........................ 109,243 14,861 (39,424)
Accounts with affiliates ............ (2,024) (4,059) 3,229
Other noncurrent assets ............. 2,219 1,587 684
Other noncurrent liabilities ........ 28,706 3,233 (12,825)
Marketable trading securities:
Purchases ......................... (870) (762) --
Dispositions ...................... 15,530 27,102 --
--------- --------- ---------
Net cash provided by operating
activities ......................... 181,818 71,561 16,538
--------- --------- ---------
F-7
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years ended December 31, 1994, 1995 and 1996
(In thousands)
1994 1995 1996
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures .................. $ (36,931) $ (64,196) $ (66,906)
Purchase of minority interest ......... -- -- (5,168)
Investment in joint ventures, net ..... 3,133 1,793 4,359
Proceeds from disposition of
property and equipment ............... 598 182 108
Other, net ............................ 362 -- --
--------- --------- ---------
Net cash used by investing
activities ....................... (32,838) (62,221) (67,607)
--------- --------- ---------
Cash flows from financing activities:
Indebtedness:
Borrowings .......................... 44,490 57,556 97,503
Principal payments .................. (175,886) (61,128) (55,403)
Dividends paid ........................ -- -- (15,333)
Other, net ............................ (742) 264 (202)
--------- --------- ---------
Net cash provided (used) by
financing activities ............. (132,138) (3,308) 26,565
--------- --------- ---------
Net change during the year from
operating, investing and
financing activities ............. $ 16,842 $ 6,032 $ (24,504)
========= ========= =========
F-8
NL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years ended December 31, 1994, 1995 and 1996
(In thousands)
1994 1995 1996
--------- --------- ---------
Cash and cash equivalents:
Net change during the year from:
Operating, investing and financing
activities ......................... $ 16,842 $ 6,032 $ (24,504)
Currency translation ................ 7,689 4,177 (2,714)
--------- --------- ---------
24,531 10,209 (27,218)
Balance at beginning of year .......... 106,593 131,124 141,333
--------- --------- ---------
Balance at end of year ................ $ 131,124 $ 141,333 $ 114,115
========= ========= =========
Supplemental disclosures - cash paid
(received) for:
Interest, net of amounts capitalized .. $ 66,801 $ 62,078 $ 51,678
Income taxes, net ..................... (111,418) 27,965 50,400
See accompanying notes to consolidated financial statements.
F-9
NL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and basis of presentation:
NL Industries, Inc. conducts its operations primarily through its wholly-
owned subsidiaries, Kronos, Inc. (titanium dioxide pigments or "TiO2") and
Rheox, Inc. (specialty chemicals).
Valhi, Inc. and Tremont Corporation, each affiliates of Contran
Corporation, hold 56% and 18%, respectively, of NL's outstanding common stock.
Contran holds, directly or through subsidiaries, approximately 91% of Valhi's
and 44% of Tremont's outstanding common stock. Substantially all of Contran's
outstanding voting stock is held by trusts established for the benefit of the
children and grandchildren of Harold C. Simmons, of which Mr. Simmons is the
sole trustee. Mr. Simmons, the Chairman of the Board of NL and the Chairman of
the Board, President, and Chief Executive Officer of Contran and Valhi and a
director of Tremont, may be deemed to control each of such companies.
Note 2 - Summary of significant accounting policies:
Principles of consolidation and management's estimates
The accompanying consolidated financial statements include the accounts of
NL and its majority-owned subsidiaries (collectively, the "Company"). All
material intercompany accounts and balances have been eliminated. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amount of revenues and expenses during the reporting period.
Ultimate actual results may in some instances differ from previously estimated
amounts.
Translation of foreign currencies
Assets and liabilities of subsidiaries whose functional currency is deemed
to be other than the U.S. dollar are translated at year-end rates of exchange
and revenues and expenses are translated at weighted average exchange rates
prevailing during the year. Resulting translation adjustments and the related
income tax effects are accumulated in the currency translation adjustment
component of shareholders' deficit. Currency transaction gains and losses are
recognized in income currently.
F-10
Cash and cash equivalents
Cash equivalents, including restricted cash, include U.S. Treasury
securities purchased under short-term agreements to resell, bank deposits, and
government and commercial notes and bills with original maturities of three
months or less. Restricted cash of approximately $6 million in 1995 and 1996 is
restricted under the Company's joint venture indebtedness agreement and
restricted cash of approximately $4 million in 1995 and $5 million in 1996
secures undrawn letters of credit.
Marketable securities and securities transactions
Marketable securities are classified as either "available-for-sale" or
"trading" and are carried at market based on quoted market prices. Unrealized
gains and losses on trading securities are recognized in income currently.
Unrealized gains and losses on available-for-sale securities, and the related
deferred income tax effects, are accumulated in the marketable securities
adjustment component of shareholders' deficit. See Note 4. Realized gains or
losses are computed based on specific identification of the securities sold.
Inventories
Inventories are stated at the lower of cost (principally average cost) or
market. Amounts are removed from inventories at average cost.
Investment in joint ventures
Investments in 20% to 50%-owned entities are accounted for by the equity
method.
Intangible assets
Intangible assets, included in other noncurrent assets, are amortized by
the straight-line method over the periods expected to be benefitted, not
exceeding ten years.
Property, equipment, depreciation and depletion
Property and equipment are stated at cost. Interest costs related to
major, long-term capital projects are capitalized as a component of construction
costs. Maintenance, repairs and minor renewals are expensed; major improvements
are capitalized.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of ten to forty years for buildings and three to twenty
years for machinery and equipment. Depletion of mining properties is computed by
the unit-of-production and straight-line methods.
F-11
Long-term debt
Long-term debt is stated net of unamortized original issue discount
("OID"). OID is amortized over the period during which cash interest payments
are not required and deferred financing costs are amortized over the term of the
applicable issue, both by the interest method.
Employee benefit plans
Accounting and funding policies for retirement plans and postretirement
benefits other than pensions ("OPEB") are described in Note 11.
The Company accounts for stock-based employee compensation in accordance
with Accounting Principles Board Opinion ("APBO") No. 25, "Accounting for Stock
Issued to Employees," and its various interpretations. Under APBO No. 25, no
compensation cost is generally recognized for fixed stock options in which the
exercise price is not less than the market price on the grant date. Compensation
cost recognized by the Company in accordance with APBO No. 25 has not been
significant in each of the past three years.
Environmental remediation costs
Environmental remediation costs are accrued when estimated future
expenditures are probable and reasonably estimable. The estimated future
expenditures are not discounted to present value. Recoveries of remediation
costs from other parties, if any, are reported as receivables when their receipt
is deemed probable. At December 31, 1995 and 1996, no receivables for recoveries
have been recognized.
The Company will adopt the recognition and disclosure requirements of
AICPA's Statement of Position No. 96-1, "Environmental Remediation Liabilities,"
in the first quarter of 1997. The new rule, among other things, expands the
types of costs which must be considered in determining environmental remediation
accruals. As a result of adopting the new Statement of Position, the Company
expects to recognize a noncash cumulative charge of approximately $30 million in
the first quarter of 1997. The charge is not expected to materially change the
Company's 1997 tax expense due to existing net operating losses for which no
benefit is expected to be recognized. Such charge is comprised primarily of
estimated future undiscounted expenditures associated with managing and
monitoring existing environmental remediation sites. The expenditures consist
principally of legal and professional fees, but do not include litigation
defense costs with respect to situations in which the Company asserts that no
liability exists. Currently, such expenditures are expensed as incurred.
Net sales
Sales are recognized as products are shipped.
Income taxes
Deferred income tax assets and liabilities are recognized for the expected
future tax consequences of temporary differences between the income tax and
financial reporting carrying amounts of assets and liabilities, including
investments in subsidiaries and unconsolidated affiliates not included in the
F-12
Company's U.S. tax group (the "NL Tax Group"). The Company periodically
evaluates its deferred tax assets and adjusts any related valuation allowance.
The Company's valuation allowance is equal to the amount of deferred tax assets
which the Company believes do not meet the "more-likely-than-not" realization
criteria.
Income (loss) per share of common stock
Income (loss) per share of common stock is based on the weighted average
number of common shares and equivalents outstanding. Common stock equivalents,
consisting of nonqualified stock options, are excluded from the computation when
their effect is antidilutive.
Note 3 - Business and geographic segments:
The Company's operations are conducted in two business segments - TiO2
conducted by Kronos and specialty chemicals conducted by Rheox. Titanium dioxide
pigments are used to impart whiteness, brightness and opacity to a wide variety
of products, including paints, plastics, paper, fibers and ceramics. Specialty
chemicals include rheological additives which control the flow and leveling
characteristics of a variety of products, including paints, inks, lubricants,
sealants, adhesives and cosmetics. General corporate assets consist principally
of cash, cash equivalents and marketable securities. At December 31, 1995 and
1996, the net assets of non-U.S. subsidiaries included in consolidated net
assets approximated $121 million and $124 million, respectively.
Years ended December 31,
-----------------------------------------
1994 1995 1996
----------- ----------- -----------
(In thousands)
Business segments
Net sales:
Kronos .......................... $ 770,077 $ 894,149 $ 851,179
Rheox ........................... 117,877 129,790 134,895
----------- ----------- -----------
$ 887,954 $ 1,023,939 $ 986,074
=========== =========== ===========
Operating income:
Kronos .......................... $ 80,515 $ 161,175 $ 71,606
Rheox ........................... 30,837 38,544 41,767
----------- ----------- -----------
111,352 199,719 113,373
General corporate income (expense):
Securities earnings ............. 3,855 7,419 4,708
Expenses, net ................... (44,686) (26,619) (17,429)
Interest expense ................ (83,926) (81,617) (75,039)
----------- ----------- -----------
$ (13,405) $ 98,902 $ 25,613
=========== =========== ===========
Capital expenditures:
Kronos .......................... $ 34,522 $ 60,699 $ 64,201
Rheox ........................... 2,283 3,464 2,665
General corporate ............... 126 33 40
----------- ----------- -----------
$ 36,931 $ 64,196 $ 66,906
=========== =========== ===========
F-13
Years ended December 31,
1994 1995 1996
----------- ----------- -----------
(In thousands)
Depreciation, depletion and
amortization:
Kronos ........................ $ 31,156 $ 35,706 $ 36,295
Rheox ......................... 3,153 3,089 3,175
General corporate ............. 283 194 194
----------- ----------- -----------
$ 34,592 $ 38,989 $ 39,664
=========== =========== ===========
Geographic areas
Net sales - point of origin:
United States ................. $ 303,475 $ 339,568 $ 348,071
Europe ........................ 587,291 703,206 653,828
Canada ........................ 122,957 139,341 139,346
Eliminations .................. (125,769) (158,176) (155,171)
----------- ----------- -----------
$ 887,954 $ 1,023,939 $ 986,074
=========== =========== ===========
Net sales - point of destination:
United States ................. $ 238,568 $ 258,850 $ 273,110
Europe ........................ 468,915 580,794 523,667
Canada ........................ 64,374 60,472 56,436
Other ......................... 116,097 123,823 132,861
----------- ----------- -----------
$ 887,954 $ 1,023,939 $ 986,074
=========== =========== ===========
Operating income:
United States ................. $ 49,358 $ 75,650 $ 71,914
Europe ........................ 50,273 103,096 27,971
Canada ........................ 11,721 20,973 13,488
----------- ----------- -----------
$ 111,352 $ 199,719 $ 113,373
=========== =========== ===========
December 31,
------------------------------------------
1994 1995 1996
---------- ---------- ----------
(In thousands)
Identifiable assets
Business segments:
Kronos ....................... $ 950,200 $1,063,369 $1,064,285
Rheox ........................ 83,176 83,620 90,095
General corporate ............ 129,034 124,664 66,978
---------- ---------- ----------
$1,162,410 $1,271,653 $1,221,358
========== ========== ==========
Geographic segments:
United States ................ $ 308,017 $ 311,374 $ 303,547
Europe ....................... 594,921 690,353 718,626
Canada ....................... 130,438 145,262 132,207
General corporate ............ 129,034 124,664 66,978
---------- ---------- ----------
$1,162,410 $1,271,653 $1,221,358
========== ========== ==========
F-14
Note 4 - Marketable securities and securities transactions:
December 31,
----------------------
1995 1996
-------- --------
(In thousands)
Available-for-sale securities - noncurrent
marketable equity securities:
Unrealized gains ................................. $ 1,962 $ 3,516
Unrealized losses ................................ (2,770) (1,550)
Cost ............................................. 21,752 21,752
-------- --------
Aggregate market ............................. $ 20,944 $ 23,718
======== ========
Years ended December 31,
----------------------------
1994 1995 1996
------- ------- ----
(In thousands)
Securities transactions gains (losses)
on trading securities:
Unrealized .................................. $(1,177) $ 1,125 $--
Realized .................................... (43) 50 --
------- ------- ---
$(1,220) $ 1,175 $--
======= ======= ===
Note 5 - Inventories:
December 31,
---------------------------
1995 1996
-------- --------
(In thousands)
Raw materials ............................ $ 35,075 $ 43,284
Work in process .......................... 9,132 10,356
Finished products ........................ 172,330 142,091
Supplies ................................. 35,093 36,779
-------- --------
$251,630 $232,510
======== ========
Note 6 - Investment in joint ventures:
December 31,
------------------------
1995 1996
-------- --------
(In thousands)
TiO2 manufacturing joint venture ............... $183,129 $179,195
Other .......................................... 2,764 2,284
-------- --------
$185,893 $181,479
======== ========
Kronos Louisiana, Inc. ("KLA"), a wholly-owned subsidiary of Kronos, owns
a 50% interest in Louisiana Pigment Company, L.P. ("LPC"). LPC is a
manufacturing joint venture that is also 50%-owned by Tioxide Group, Ltd., a
wholly-owned subsidiary of Imperial Chemicals Industries PLC ("Tioxide"). LPC
owns and operates a chloride-process TiO2 plant in Lake Charles, Louisiana.
F-15
LPC has long-term debt that is collateralized by the partnership interests
of the partners and substantially all of the assets of LPC. The long-term debt
consists of two tranches, one attributable to each partner, and each tranche is
serviced through (i) the purchase of the plant's TiO2 output in equal quantities
by the partners and (ii) cash capital contributions. KLA is required to purchase
one-half of the TiO2 produced by LPC. KLA's tranche of LPC's debt is reflected
as outstanding indebtedness of the Company because Kronos has guaranteed the
purchase obligation relative to the debt service of its tranche. See Note 10.
LPC is intended to be operated on a break-even basis and, accordingly,
Kronos' transfer price for its share of the TiO2 produced is equal to its share
of LPC's production costs and interest expense. Kronos' share of the production
costs are reported as cost of sales as the related TiO2 acquired from LPC is
sold, and its share of the interest expense is reported as a component of
interest expense.
Summary balance sheets of LPC are shown below.
December 31,
----------------------
1995 1996
-------- --------
ASSETS (In thousands)
Current assets ..................................... $ 49,398 $ 47,861
Other assets ....................................... 1,553 1,224
Property and equipment, net ........................ 335,254 325,617
-------- --------
$386,205 $374,702
======== ========
LIABILITIES AND PARTNERS' EQUITY
Long-term debt, including current portion:
Kronos tranche ................................... $ 73,286 $ 57,858
Tioxide tranche .................................. 59,400 16,800
Note payable to Tioxide .......................... -- 21,000
Other liabilities, primarily current ............... 17,719 14,084
-------- --------
150,405 109,742
Partners' equity ................................... 235,800 264,960
-------- --------
$386,205 $374,702
======== ========
F-16
Summary income statements of LPC are shown below.
Years ended December 31,
------------------------------------
1994 1995 1996
-------- -------- --------
(In thousands)
Revenues and other income:
Kronos ............................. $ 70,492 $ 76,365 $ 74,916
Tioxide ............................ 67,218 75,241 73,774
Interest income .................... 462 653 518
-------- -------- --------
138,172 152,259 149,208
-------- -------- --------
Cost and expenses:
Cost of sales ...................... 126,972 140,103 140,361
General and administrative ......... 572 385 377
Interest ........................... 10,628 11,771 8,470
-------- -------- --------
138,172 152,259 149,208
-------- -------- --------
Net income ....................... $ -- $ -- $ --
======== ======== ========
Note 7 - Other noncurrent assets:
December 31,
---------------------
1995 1996
------- -------
(In thousands)
Intangible assets, net of accumulated
amortization of $20,562 and $22,207 ............... $11,803 $ 7,939
Deferred financing costs, net ...................... 13,199 9,791
Other .............................................. 6,163 7,095
------- -------
$31,165 $24,825
======= =======
Note 8 - Accounts payable and accrued liabilities:
December 31,
---------------------------
1995 1996
-------- --------
(In thousands)
Accounts payable ......................... $ 68,734 $ 60,648
-------- --------
Accrued liabilities:
Employee benefits ...................... 49,884 34,618
Environmental costs .................... 6,000 6,000
Interest ............................... 6,633 9,429
Miscellaneous taxes .................... 2,557 4,073
Other .................................. 32,177 39,136
-------- --------
97,251 93,256
-------- --------
$165,985 $153,904
======== ========
F-17
Note 9 - Other noncurrent liabilities:
December 31,
----------------------
1995 1996
-------- --------
(In thousands)
Environmental costs ................................ $112,827 $106,849
Employee benefits .................................. 13,148 11,960
Insurance claims expense ........................... 12,088 11,673
Deferred technology fee income ..................... 8,456 --
Other .............................................. 1,992 1,566
-------- --------
$148,511 $132,048
======== ========
Note 10 - Notes payable and long-term debt:
December 31,
----------------------
1995 1996
-------- --------
(In thousands)
Notes payable (DM 56,000 and DM 40,000,
respectively) ..................................... $ 39,247 $ 25,732
======== ========
Long-term debt:
NL Industries:
11.75% Senior Secured Notes .................... $250,000 $250,000
13% Senior Secured Discount Notes .............. 132,034 149,756
-------- --------
382,034 399,756
Kronos:
DM bank credit facility (DM 397,610 and
DM 539,971, respectively) ..................... 276,895 347,362
LPC term loan .................................. 73,286 57,858
Other .......................................... 13,672 9,125
-------- --------
363,853 414,345
Rheox:
Bank term loan ................................. 37,263 14,659
Other .......................................... 553 286
-------- --------
37,816 14,945
783,703 829,046
Less current maturities .......................... 43,369 91,946
-------- --------
$740,334 $737,100
The Company's $250 million principal amount of 11.75% Senior Secured Notes
due 2003 and $188 million principal amount at maturity ($100 million proceeds at
issuance) of 13% Senior Secured Discount Notes due 2005 (collectively, the
"Notes") are collateralized by a series of intercompany notes from Kronos
International, Inc. ("KII"), a wholly-owned subsidiary of Kronos, to NL, the
interest rate and payment terms of which mirror those of the respective Notes
(the "Mirror Notes"). The Senior Secured Notes are also collateralized by a
first priority lien on the stock of Kronos and a second priority lien on the
stock of Rheox. In the event of foreclosure, the Note holders would have access
F-18
to the consolidated assets, earnings and equity of the Company. The Company
believes the collateralization of the Notes, as described above, is the
functional economic equivalent to a full, unconditional and joint and several
guarantee of the Notes by Kronos and Rheox.
The Senior Secured Notes and the Senior Secured Discount Notes are
redeemable, at the Company's option, after October 2000 and October 1998,
respectively. The redemption prices range from 101.5% (starting October 2000)
declining to 100% (after October 2001) of the principal amount for the Senior
Secured Notes and range from 106% (starting October 1998) declining to 100%
(after October 2001) of the accreted value of the Senior Secured Discount Notes.
In the event of a Change of Control, as defined, the Company would be required
to make an offer to purchase the Notes at 101% of the principal amount of the
Senior Secured Notes and 101% of the accreted value of the Senior Secured
Discount Notes. The Notes are issued pursuant to indentures which contain a
number of covenants and restrictions which, among other things, restrict the
ability of the Company and its subsidiaries to incur debt, incur liens, pay
dividends or merge or consolidate with, or sell or transfer all or substantially
all of their assets to, another entity. At December 31, 1996, no amounts were
available for payment of dividends pursuant to the terms of the indentures. The
Senior Secured Discount Notes do not require cash interest payments through
October 1998. The net carrying value of the Senior Secured Discount Notes per
$100 principal amount at maturity was $70.42 and $79.87 at December 31, 1995 and
1996, respectively. At December 31, 1996, the quoted market price of the Senior
Secured Notes was $106.08 per $100 principal amount and the quoted market price
of the Senior Secured Discount Notes was $86.34 per $100 principal amount (1995
- - $107.06 and $80.95, respectively).
At December 31, 1996, the DM credit facility consists of a DM 396 million
term loan and a DM 250 million revolving credit facility, of which DM 144
million is outstanding. Borrowings bear interest at DM LIBOR plus 1.625% (5.5%
and 4.76% at December 31, 1995 and 1996, respectively), and are collateralized
by the stock of certain KII subsidiaries. In January 1997, the Company completed
an amendment to the DM credit facility in which the Company prepaid a net DM 207
million ($127 million) of the term loan and DM 43 million ($26 million) of the
revolver, leaving DM 188 million and DM 100 million outstanding, respectively.
In addition, the aggregate amount available for borrowing under the revolver was
reduced to DM 230 million. The majority of the cash generated from a refinancing
of the Rheox term loan, discussed below, was used for a portion of such
prepayments. As amended, the term loan is due in 1998 and 1999 and the revolver
is due in 2000, borrowings bear interest at DM LIBOR plus 2.75%, additional
collateral in the form of pledges of certain Canadian and German assets was
granted and NL has guaranteed the facility.
At December 31, 1996, Rheox's term loan is due in quarterly installments
through December 1997, and is collateralized principally by the stock of Rheox
and its U.S. subsidiaries. The term loan bears interest, at Rheox's option, at
the prime rate plus 1.5% or LIBOR plus 2.5% (1995 - 8.3% with LIBOR rate
borrowings; 1996 - 9.8% with prime rate borrowings). In January 1997, the
Company completed a refinancing of this facility which increased the term loan
to $125 million and provided for a $25 million revolving facility, generating a
net $135 million in cash proceeds and credit availability. As amended, the term
F-19
loan is due in quarterly installments commencing in September 1997 through
January 2004 and the revolver is due no later than January 2004. The margin on
LIBOR-based borrowings will range from .75% to 1.75%, depending upon the level
of a certain Rheox financial ratio.
After giving effect for the Rheox term loan and the amendment to the DM
credit facility, unused lines of credit available for borrowing under the Rheox
U.S. facility and under the Company's non-U.S. credit facilities, including the
DM facility, approximated $9 million and $102 million, respectively, at December
31, 1996.
Borrowings under KLA's tranche of LPC's term loan bear interest at U.S.
LIBOR plus 1.625% (7.315% and 7.245% at December 31, 1995 and 1996,
respectively) and are repayable in quarterly installments through September
2000. See Note 6.
Notes payable at December 31, 1995 and 1996 consists of DM 56 million and
DM 40 million, respectively, of short-term borrowings due within one year from
non-U.S. banks with interest rates ranging from 4.25% to 4.856% in 1995 and from
3.25% to 3.70% in 1996.
The aggregate maturities of long-term debt at December 31, 1996 on a
historical and a pro forma basis, giving effect for the January 1997 refinancing
described above, are shown in the table below.
Years ending December 31, Historical Pro forma
---------- ---------
(In thousands)
1997 $ 91,946 $ 28,152
1998 103,938 65,040
1999 133,295 120,609
2000 11,855 26,855
2001 215 22,715
2002 and thereafter 525,541 567,937
-------- --------
866,790 831,308
Less unamortized original issue discount
on the Senior Secured Discount Notes 37,744 37,744
-------- --------
$829,046 $793,564
======== ========
Note 11 - Employee benefit plans:
Company-sponsored pension plans
The Company maintains various defined benefit and defined contribution
pension plans covering substantially all employees. Personnel employed by
non-U.S. subsidiaries are covered by separate plans in their respective
countries and U.S. employees are covered by various plans including the
Retirement Programs of NL Industries, Inc. (the "NL Pension Plan").
A majority of U.S. employees are eligible to participate in a contributory
savings plan. The Company partially matches employee contributions to the Plan,
and, beginning April 1996, the Company contributes to each employee's account an
amount equal to approximately 3% of the employee's annual eligible earnings. The
Company also has an unfunded defined contribution plan covering certain
F-20
executives, and contributions are based on a formula involving eligible
earnings. The Company's expense related to these plans was $.8 million in 1994,
and $1.2 million in 1995 and $1.3 million in 1996.
Defined pension benefits are generally based upon years of service and
compensation under fixed-dollar, final pay or career average formulas, and the
related expenses are based upon independent actuarial valuations. The funding
policy for U.S. defined benefit plans is to contribute amounts which satisfy
funding requirements of the Employee Retirement Income Security Act of 1974, as
amended, and the Retirement Protection Act of 1994. Non-U.S. defined benefit
pension plans are funded in accordance with applicable statutory requirements.
Certain actuarial assumptions used in measuring the defined benefit
pension assets, liabilities and expenses are presented below.
Years ended December 31,
1994 1995 1996
---------- ---------- ----------
(Percentages)
Discount rate ..................... 8.5 7.0 to 8.5 6.5 to 8.5
Rate of increase in future
compensation levels .............. 5.0 to 6.0 3.5 to 6.0 3.5 to 6.0
Long-term rate of return on
plan assets ...................... 8.5 to 9.0 8.0 to 9.0 7.0 to 9.0
During 1996, the Company curtailed certain U.S. employee pension benefits
and recognized a $4.6 million gain. Plan assets are comprised primarily of
investments in U.S. and non-U.S. corporate equity and debt securities,
short-term investments, mutual funds and group annuity contracts.
Statement of Financial Accounting Standards ("SFAS") No. 87, "Employers'
Accounting for Pension Costs" requires that an additional pension liability be
recognized when the unfunded accumulated pension benefit obligation exceeds the
unfunded accrued pension liability. Variances from actuarially-assumed rates,
including the rate of return on pension plan assets, will result in additional
increases or decreases in accrued pension liabilities, pension expense and
funding requirements in future periods. At December 31, 1996, 79% of the
projected benefit obligations in excess of plan assets relate to non-U.S. plans.
The funded status of the Company's defined benefit pension plans is set forth
below.
F-21
Assets exceed Accumulated benefits
accumulated benefits exceed assets
---------------------- ----------------------
December 31, December 31,
---------------------- ----------------------
1995 1996 1995 1996
--------- --------- --------- ---------
(In thousands)
Actuarial present value of benefit
obligations:
Vested benefits ................. $ 47,181 $ 48,953 $ 156,275 $ 167,411
Nonvested benefits .............. 3,744 4,075 2,562 9,466
--------- --------- --------- ---------
Accumulated benefit obligations . 50,925 53,028 158,837 176,877
Effect of projected salary
increases ...................... 7,885 7,598 22,373 25,741
--------- --------- --------- ---------
Projected benefit obligations
("PBO") ........................ 58,810 60,626 181,210 202,618
Plan assets at fair value ......... 71,345 78,511 124,632 126,580
--------- --------- --------- ---------
Plan assets over (under) PBO ...... 12,535 17,885 (56,578) (76,038)
Unrecognized net loss (gain) from
experience different from
actuarial assumptions ............ 7,155 3,567 (20,643) 11,414
Unrecognized prior service cost
(credit) ......................... 3,147 3,838 (2,711) 262
Unrecognized transition obligations
(assets) being amortized over 15
to 18 years ...................... (261) (469) 2,517 2,043
Adjustment required to recognize
minimum liability ................ -- -- (1,908) (1,822)
--------- --------- --------- ---------
Total prepaid (accrued)
pension cost ............... 22,576 24,821 (79,323) (64,141)
Less current portion .............. -- -- (10,012) (6,200)
--------- --------- --------- ---------
Noncurrent prepaid (accrued)
pension cost ............... $ 22,576 $ 24,821 $(69,311) $(57,941)
========= ========= ========= =========
The components of the net periodic defined benefit pension cost, excluding
curtailment gain, are set forth below.
Years ended December 31,
------------------------------------
1994 1995 1996
-------- -------- --------
(In thousands)
Service cost benefits ................ $ 4,905 $ 4,325 $ 3,482
Interest cost on PBO ................. 15,371 17,853 16,577
Return on plan assets ................ (8,039) (16,574) (16,245)
Net amortization and deferrals ....... (5,940) (2,399) (39)
-------- -------- --------
$ 6,297 $ 3,205 $ 3,775
======== ======== ========
F-22
Incentive bonus programs
The Company has incentive bonus programs for certain employees providing
for annual payments, which may be in the form of NL common stock, based on
formulas involving the profitability of Kronos and Rheox in relation to the
annual operating plan of the employee's business unit and, for most of these
employees, individual performance.
Postretirement benefits other than pensions
In addition to providing pension benefits, the Company currently provides
certain health care and life insurance benefits for eligible retired employees.
Certain of the Company's U.S. and Canadian employees may become eligible for
such postretirement health care and life insurance benefits if they reach
retirement age while working for the Company. In 1989, the Company began phasing
out such benefits for currently active U.S. employees over a ten-year period.
The majority of all retirees are required to contribute a portion of the cost of
their benefits and certain current and future retirees are eligible for reduced
health care benefits at age 65. The Company's policy is to fund medical claims
as they are incurred, net of any contributions by the retirees.
For measuring the OPEB liability at December 31, 1996, the expected rate
of increase in health care costs is 8% in 1997, gradually declining to 5% in
2000. Other assumptions used to measure the liability and expense are presented
below.
Years ended December 31,
------------------------
1994 1995 1996
------- ------ -----
(Percentages)
Discount rate ....................................... 8.5 7.5 7.5
Long-term rate for compensation increases ........... 6.0 4.5 6.0
Long-term rate of return on plan assets ............. 9.0 9.0 9.0
Variances from actuarially-assumed rates will result in additional
increases or decreases in accrued OPEB liabilities, net periodic OPEB expense
and funding requirements in future periods. If the health care cost trend rate
was increased by one percentage point for each year, postretirement benefit
expense would have increased approximately $.2 million in 1996, and the
actuarial present value of accumulated benefit obligations at December 31, 1996
would have increased by approximately $2.2 million. During 1996, the Company
curtailed certain Canadian employee OPEB benefits and recognized a $1.3 million
gain.
F-23
December 31,
-------------------
1995 1996
------- -------
(In thousands)
Actuarial present value of accumulated benefit
obligations:
Retiree benefits ..................................... $53,211 $41,768
Other fully eligible active plan participants ........ 1,228 840
Other active plan participants ....................... 2,322 2,152
------- -------
56,761 44,760
Plan assets at fair value .............................. 7,103 6,689
------- -------
Accumulated postretirement benefit obligations
in excess of plan assets .............................. 49,658 38,071
Unrecognized net gain from experience different
from actuarial assumptions ............................ 4,676 7,083
Unrecognized prior service credit ...................... 12,199 16,259
------- -------
Total accrued postretirement benefits cost ......... 66,533 61,413
Less current portion ................................... 6,298 5,478
------- -------
Noncurrent accrued postretirement benefits
cost .............................................. $60,235 $55,935
======= =======
The components of the Company's net periodic postretirement benefit cost,
excluding curtailment gain, are set forth below.
Years ended December 31,
-----------------------------
1994 1995 1996
------- ------- -------
(In thousands)
Interest cost on accumulated benefit
obligations .................................. $ 4,338 $ 4,415 $ 3,995
Service cost benefits earned during the year .. 99 101 112
Return on plan assets ......................... (688) (637) (596)
Net amortization and deferrals ................ (1,495) (1,870) (1,473)
------- ------- -------
$ 2,254 $ 2,009 $ 2,038
======= ======= =======
Note 12 - Shareholders' deficit:
Common stock
Shares of common stock
----------------------------------
Treasury
Issued stock Outstanding
------- -------- -----------
(In thousands)
Balance at December 31, 1993 ........... 66,839 15,949 50,890
Treasury shares reissued ............. -- (162) 162
------- ------- -------
Balance at December 31, 1994 ........... 66,839 15,787 51,052
Treasury shares reissued ............. -- (39) 39
------- ------- -------
Balance at December 31, 1995 ........... 66,839 15,748 51,091
Treasury shares reissued ............. -- (27) 27
------- ------- -------
Balance at December 31, 1996 ........... 66,839 15,721 51,118
======= ======= =======
F-24
Common stock options
The 1989 Long Term Performance Incentive Plan of NL Industries, Inc. (the
"NL Option Plan") provides for the discretionary grant of restricted common
stock, stock options, stock appreciation rights ("SARs") and other incentive
compensation to officers and other key employees of the Company. Although
certain stock options granted pursuant to a similar plan which preceded the NL
Option Plan ("the Predecessor Option Plan") remain outstanding at December 31,
1996, no additional options may be granted under the Predecessor Option Plan.
Up to five million shares of NL common stock may be issued pursuant to the
NL Option Plan and at December 31, 1996, an aggregate of 2.5 million shares were
available for future grants. The NL Option Plan provides for the grant of
options that qualify as incentive options and for options which are not so
qualified. Generally, stock options and SARs (collectively, "options") are
granted at a price equal to or greater than 100% of the market price at the date
of grant, vest over a five year period and expire ten years from the date of
grant. Restricted stock, forfeitable unless certain periods of employment are
completed, is held in escrow in the name of the grantee until the restriction
period expires. No SARs have been granted under the NL Option Plan.
In addition to the NL Option Plan, the Company maintains a stock option
plan for its nonemployee directors. At December 31, 1996, there were options to
acquire 10,000 shares of common stock outstanding of which 8,000 were fully
vested.
Changes in outstanding options granted pursuant to the NL Option Plan, the
Predecessor Option Plan and the nonemployee director plan are summarized in the
table below.
F-25
Exercise price Amount
per share payable
-------------- upon
Shares Low High exercise
-------- ------ ------ --------
(In thousands, except per share amounts)
Outstanding at December 31, 1993 ..... 1,718 $ 4.81 $24.19 $ 20,624
Granted ............................ 675 8.69 10.69 6,315
Exercised .......................... (13) 9.31 10.50 (120)
Forfeited .......................... (6) 5.00 9.31 (46)
-------- ------ ------ --------
Outstanding at December 31, 1994 ..... 2,374 4.81 24.19 26,773
Granted ............................ 94 11.81 14.81 1,150
Exercised .......................... (39) 5.00 10.78 (282)
Forfeited .......................... (36) 5.00 11.81 (320)
-------- ------ ------ --------
Outstanding at December 31, 1995 ..... 2,393 4.81 24.19 27,321
Granted ............................ 218 14.25 17.25 3,316
Exercised .......................... (27) 5.00 10.78 (262)
Forfeited .......................... (10) 5.00 14.25 (91)
Expired ............................ (1) 10.78 10.78 (6)
-------- ------ ------ --------
Outstanding at December 31, 1996 ..... 2,573 $ 4.81 $24.19 $ 30,278
======== ====== ====== ========
At December 31, 1994, 1995 and 1996, options to purchase 850,582,
1,189,907 and 1,660,068 shares, respectively, were exercisable and options to
purchase 298,698 shares become exercisable in 1997. Of the exercisable options
at December 31, 1996, options to purchase 1,161,398 shares had exercise prices
less than the Company's December 31, 1996 quoted market price of $10.875 per
share. Outstanding options at December 31, 1996 expire at various dates through
2006, with a weighted-average remaining life of six years.
The pro forma information required by SFAS No. 123, "Accounting for
Stock-Based Compensation," is based on an estimation of the fair value of
options issued during 1995 and 1996. The weighted average fair values of options
granted during 1995 and 1996 were $6.02 and $8.38 per share, respectively. The
fair values of employee stock options were calculated using the Black-Scholes
stock option valuation model with the following weighted average assumptions for
grants in 1995 and 1996: stock price volatility of 31% and 42% in 1995 and 1996,
respectively; risk-free rate of return of 5%; no dividend yield; and an expected
term of 9 years. If the fair value-based method of accounting in SFAS No. 123
had been applied, the Company's earnings per share would not have changed in
1995 and would have been reduced by $.01 per share in 1996. The pro forma impact
on earnings per share for 1996 is not necessarily indicative of future effects
on earnings per share.
Preferred stock
The Company is authorized to issue a total of five million shares of
preferred stock. The rights of preferred stock as to dividends, redemption,
liquidation and conversion are determined upon issuance.
F-26
Note 13 - Income taxes:
The components of (i) income (loss) before income taxes and minority
interest ("pretax income (loss)"), (ii) the difference between the provision for
income taxes attributable to pretax income (loss) and the amounts that would be
expected using the U.S. federal statutory income tax rate of 35%, (iii) the
provision for income taxes and (iv) the comprehensive tax provision are
presented below.
Years ended December 31,
--------------------------------
1994 1995 1996
-------- -------- --------
(In thousands)
Pretax income (loss):
U.S ...................................... $ (6,241) $ 43,125 $ 50,430
Non-U.S .................................. (7,164) 55,777 (24,817)
-------- -------- --------
$(13,405) $ 98,902 $ 25,613
======== ======== ========
Expected tax expense (benefit) ............. $ (4,692) $ 34,616 $ 8,965
Non-U.S. tax rates ......................... (7,108) (7,016) (206)
Rate change adjustment of deferred taxes ... -- (6,593) --
Valuation allowance ........................ 24,309 (9,588) 3,013
Settlement of U.S. tax audits .............. (5,437) -- --
Incremental tax on income of companies not
included in the NL Tax Group .............. 790 499 3,132
U.S. state income taxes .................... 534 721 468
Other, net ................................. 1,338 32 (539)
-------- -------- --------
$ 9,734 $ 12,671 $ 14,833
======== ======== ========
Provision for income taxes:
Current income tax expense (benefit):
U.S. federal ........................... $ (5,222) $ 249 $ 4,934
U.S. state ............................. 475 2,135 1,136
Non-U.S ................................ 2,574 39,535 5,961
-------- -------- --------
(2,173) 41,919 12,031
-------- -------- --------
Deferred income tax expense (benefit):
U.S. federal ........................... 4,058 (9,005) (4,764)
U.S. state ............................. 347 (1,026) (668)
Non-U.S ................................ 7,502 (19,217) 8,234
-------- -------- --------
11,907 (29,248) 2,802
-------- -------- --------
$ 9,734 $ 12,671 $ 14,833
======== ======== ========
Comprehensive tax provision allocable to:
Pretax income (loss) ..................... $ 9,734 $ 12,671 $ 14,833
Shareholders' deficit, principally
deferred income taxes allocable to
currency translation and marketable
securities adjustments .................. 7 10 971
-------- -------- --------
$ 9,741 $ 12,681 $ 15,804
======== ======== ========
F-27
The components of the net deferred tax liability are summarized below:
December 31,
-------------------------------------------------
1995 1996
---- ----
Deferred tax Deferred tax
----------------------- ----------------------
Assets Liabilities Assets Liabilities
--------- ----------- --------- -----------
(In thousands)
Tax effect of temporary
differences relating to:
Inventories .............. $ 5,277 $ (5,644) $ 4,130 $ (4,967)
Property and equipment ... 574 (109,418) 512 (109,963)
Accrued postretirement
benefits cost ........... 23,200 -- 21,396 --
Accrued (prepaid) pension
cost .................... 8,978 (14,942) 6,308 (17,579)
Accrued environmental
costs ................... 38,214 -- 36,670 --
Other accrued liabilities
and deductible
differences ............. 26,496 -- 33,464 --
Other taxable differences -- (101,621) -- (102,578)
Tax on unremitted earnings
of non-U.S. subsidiaries .. 281 (22,526) -- (18,048)
Tax loss and tax credit
carryforwards ............. 189,263 -- 205,476 --
Valuation allowance ........ (195,569) -- (207,117) --
--------- --------- --------- ---------
Gross deferred tax assets
(liabilities) ........... 96,714 (254,151) 100,839 (253,135)
Reclassification,
principally netting by tax
tax jurisdiction .......... (93,404) 93,404 (99,019) 99,019
--------- --------- --------- ---------
Net total deferred tax
assets (liabilities) .... 3,310 (160,747) 1,820 (154,116)
Net current deferred tax
assets (liabilities) .... 2,522 (3,555) 1,597 (2,895)
--------- --------- --------- ---------
Net noncurrent deferred
tax assets (liabilities) $ 788 $(157,192) $ 223 $(151,221)
========= ========= ========= =========
The Company's valuation allowance increased in the aggregate by $31
million in each of 1994 and 1995 and $12 million in 1996. During 1995, both the
Company's gross deferred tax assets and the offsetting valuation allowance were
increased by $34 million as a result of recharacterizations of certain tax
attributes primarily due to changes in certain tax return elections. In
addition, the valuation allowance increased during 1995 by $6 million due to
foreign currency translation and was reduced by approximately $10 million due to
a change in estimate of the future tax benefit of certain tax credits which the
Company believes satisfies the "more-likely-than-not" recognition criteria. In
1996, both the Company's gross deferred tax assets and the offsetting valuation
allowance were increased by $14 million due to certain non-U.S. tax losses of
its dual resident subsidiary. In addition, the valuation allowance decreased
during
F-28
1996 by $6 million due to foreign currency translation and was increased by $3
million as a result of increases in certain other deductible temporary
differences during the year which the Company believes do not currently satisfy
the "more-likely-than-not" recognition criteria.
Certain of the Company's income tax returns in various U.S. and non-U.S.
jurisdictions are being examined and tax authorities have proposed or may
propose tax deficiencies. During 1994, the German tax authorities withdrew
certain proposed tax deficiencies of DM 100 million and remitted tax refunds
aggregating DM 225 million ($136 million), including interest, on a tentative
basis while examination of the Company's German income tax returns continued.
The Company subsequently reached an agreement with the German tax authorities
regarding such examinations which resolved certain significant tax contingencies
for years through 1990. The Company received final assessments and paid certain
tax deficiencies of approximately DM 50 million ($32 million when paid),
including interest, in settlement of these issues in 1996. The Company considers
the agreement to be a favorable resolution of the contingencies and the payment
was within previously-accrued amounts for such matters.
Certain other German tax contingencies remain outstanding and will
continue to be litigated. Although the Company believes that it will ultimately
prevail in the litigation, the Company has granted a DM 100 million ($64 million
at December 31, 1996) lien on its Nordenham, Germany TiO2 plant in favor of the
German tax authorities until the litigation is resolved. No assurances can be
given that this litigation will be resolved in the Company's favor in view of
the inherent uncertainties involved in court rulings. The Company believes that
it has adequately provided accruals for additional income taxes and related
interest expense which may ultimately result from all such examinations and
believes that the ultimate disposition of such examinations should not have a
material adverse effect on the Company's consolidated financial position,
results of operations or liquidity.
During 1995, the Company recorded tax benefits of $6.6 million due to the
reduction in dividend withholding tax rates pursuant to ratification of the
U.S./Canada income tax treaty.
During 1995, the Company utilized $14 million of foreign tax credit
carryforwards and U.S. net operating loss carryforwards from prior years to
reduce its 1995 U.S. federal income tax expense. At December 31, 1996, for U.S.
federal income tax purposes, the Company had approximately $27 million of
foreign tax credit carryforwards expiring during 1997 through 2001 and
approximately $10 million of alternative minimum tax credit carryforwards with
no expiration date. The Company also had approximately $400 million of income
tax loss carryforwards in Germany with no expiration date.
F-29
Note 14 - Other income, net:
Years ended December 31,
--------------------------------
1994 1995 1996
-------- -------- --------
(In thousands)
Securities earnings:
Interest and dividends ................... $ 5,075 $ 6,244 $ 4,708
Securities transactions .................. (1,220) 1,175 --
-------- -------- --------
3,855 7,419 4,708
Litigation settlement gains ................ 22,978 -- 2,756
Technology fee income ...................... 10,344 10,660 8,743
Currency transaction gains, net ............ 1,735 561 5,637
Pension and OPEB curtailment gains ......... -- -- 5,900
Royalty income ............................. 1,508 -- --
Disposition of property and equipment ...... (1,981) (2,713) (2,312)
Other, net ................................. 6,389 6,314 5,048
-------- -------- --------
$ 44,828 $ 22,241 $ 30,480
======== ======== ========
Litigation settlement gains includes $20 million related to the Company's
1994 settlement of its lawsuit against Lockheed Corporation. Technology fee
income was amortized by the straight-line method over a three-year period ending
October 1996.
Note 15 - Other items:
Advertising costs, expensed as incurred, were $2 million in each of 1994,
1995 and 1996.
Research, development and certain sales technical support costs, expensed
as incurred, approximated $10 million in 1994, and $11 million in each of 1995
and 1996.
Interest capitalized in connection with long-term capital projects was $1
million in each of 1994 and 1995, and $2 million in 1996.
Note 16 - Related party transactions:
The Company may be deemed to be controlled by Harold C. Simmons.
Corporations that may be deemed to be controlled by or affiliated with Mr.
Simmons sometimes engage in (a) intercorporate transactions such as guarantees,
management and expense sharing arrangements, shared fee arrangements, joint
ventures, partnerships, loans, options, advances of funds on open account, and
sales, leases and exchanges of assets, including securities issued by both
related and unrelated parties and (b) common investment and acquisition
strategies, business combinations, reorganizations, recapitalizations,
securities repurchases, and purchases and sales (and other acquisitions and
dispositions) of subsidiaries, divisions or other business units, which
transactions have involved both related and unrelated parties and have included
transactions which resulted in the acquisition by one related party of a
publicly-held minority equity interest in another related party. While no
transactions of the type described above are planned or proposed with respect to
the Company other than as set forth in this Annual Report on Form 10-K, the
Company from time to time
F-30
considers, reviews and evaluates and understands that Contran, Valhi and related
entities consider, review and evaluate, such transactions. Depending upon the
business, tax and other objectives then relevant, and restrictions under the
indentures and other agreements, it is possible that the Company might be a
party to one or more such transactions in the future.
It is the policy of the Company to engage in transactions with related
parties on terms, in the opinion of the Company, no less favorable to the
Company than could be obtained from unrelated parties.
The Company is a party to an intercorporate services agreement with
Contran (the "Contran ISA") whereby Contran provides certain management services
to the Company on a fee basis. Management services fee expense related to the
Contran ISA was $.4 million in each of 1994, 1995 and 1996.
The Company is a party to an intercorporate services agreement with Valhi
(the "Valhi ISA") whereby Valhi and the Company provide certain management,
financial and administrative services to each other on a fee basis. Net
management services fee expense related to the Valhi ISA was $.2 million in
1994, and $.1 million in each of 1995 and 1996.
The Company is party to an intercorporate services agreement with Tremont
(the "Tremont ISA"). Under the terms of the contract, the Company provides
certain management and financial services to Tremont on a fee basis. Management
services fee income related to the Tremont ISA was nil in 1994, and $.1 million
in each of 1995 and 1996.
Baroid Corporation, a former wholly-owned subsidiary of the Company and
currently a subsidiary of Dresser Industries, Inc., and the Company were parties
to an intercorporate services agreement (the "Baroid ISA") pursuant to which, as
amended, Baroid agreed to make certain services available to the Company on a
fee basis. The agreement was terminated in 1994. Management services fee expense
pursuant to the Baroid ISA approximated $.2 million in 1994.
Sales to Baroid in the ordinary course of business were $1.8 million in
1994, $1.6 million in 1995 and $1.1 million in 1996.
Purchases in the ordinary course of business from unconsolidated joint
ventures, including LPC, were approximately $74 million in 1994, $79 million in
1995 and $81 million in 1996.
Certain employees of the Company have been granted options to purchase
Valhi common stock under the terms of Valhi's stock option plans. The Company
and Valhi have agreed that the Company will pay Valhi the aggregate difference
between the option price and the market value of Valhi's common stock on the
exercise date of such options. For financial reporting purposes, the Company
accounts for the related expense (income) ($64,000 in 1994, $(25,000) in 1995
and $1,000 in 1996) in a manner similar to accounting for SARs. At December 31,
1996, employees of the Company held options to purchase 365,000 shares of Valhi
common stock at exercise prices ranging from $4.76 to $14.66 per share. At
December 31, 1996, 30,000 of the vested options were exercisable at prices less
than Valhi's quoted market price per share of $6.375.
F-31
The Company and NLI Insurance, Ltd., a wholly-owned subsidiary of Tremont,
are parties to an Insurance Sharing Agreement with respect to certain loss
payments and reserves established by NLI Insurance, Ltd. that (i) arise out of
claims against other entities for which the Company is responsible and (ii) are
subject to payment by NLI Insurance, Ltd. under certain reinsurance contracts.
Also, NLI Insurance, Ltd. will credit the Company with respect to certain
underwriting profits or credit recoveries that NLI Insurance, Ltd. receives from
independent reinsurers that relate to retained liabilities.
Net amounts payable to affiliates are summarized in the following table.
December 31,
----------------------------
1995 1996
-------- --------
(In thousands)
Tremont Corporation .................... $ 3,525 $ 3,529
LPC .................................... 6,677 6,677
Other .................................. (21) (2)
-------- --------
$ 10,181 $ 10,204
Amounts payable to LPC are generally for the purchase of TiO2 (see Note
6), and amounts payable to Tremont principally relate to the Company's Insurance
Sharing Agreement described above.
Note 17 - Commitments and contingencies:
Leases
The Company leases, pursuant to operating leases, various manufacturing
and office space and transportation equipment. Most of the leases contain
purchase and/or various term renewal options at fair market and fair rental
values, respectively. In most cases management expects that, in the normal
course of business, leases will be renewed or replaced by other leases.
Kronos' principal German operating subsidiary leases the land under its
Leverkusen TiO2 production facility pursuant to a lease expiring in 2050. The
Leverkusen facility, with approximately one-third of Kronos' current TiO2
production capacity, is located within the lessor's extensive manufacturing
complex, and Kronos is the only unrelated party so situated. Under a separate
supplies and services agreement expiring in 2011, the lessor provides some raw
materials, auxiliary and operating materials and utilities services necessary to
operate the Leverkusen facility. Both the lease and the supplies and services
agreements restrict the Company's ability to transfer ownership or use of the
Leverkusen facility.
F-32
Net rent expense aggregated $8 million in 1994, $9 million in 1995 and $12
million in 1996. At December 31, 1996, minimum rental commitments under the
terms of noncancellable operating leases were as follows:
Years ending December 31, Real Estate Equipment
(In thousands)
1997 $ 2,219 $ 2,721
1998 2,086 2,179
1999 2,102 1,197
2000 1,777 119
2001 1,415 17
2002 and thereafter 24,752 -
------- ----
$34,351 $ 6,233
======= =======
Capital expenditures
At December 31, 1996, the estimated cost to complete capital projects in
process approximated $16 million, including a $8 million debottlenecking
expansion project at the Company's Leverkusen, Germany chloride-process TiO2
facility and $2 million related to environmental protection and compliance
programs.
Purchase commitments
The Company has long-term supply contracts that provide for the Company's
chloride feedstock requirements through 2000. The agreements require the Company
purchase certain minimum quantities of feedstock with average minimum annual
purchase commitments aggregating approximately $115 million.
Legal proceedings
Lead pigment litigation. Since 1987, the Company, other past manufacturers
of lead pigments for use in paint and lead-based paint and the Lead Industries
Association have been named as defendants in various legal proceedings seeking
damages for personal injury and property damage allegedly caused by the use of
lead-based paints. Certain of these actions have been filed by or on behalf of
large United States cities or their public housing authorities and certain
others have been asserted as class actions. These legal proceedings seek
recovery under a variety of theories, including negligent product design,
failure to warn, breach of warranty, conspiracy/concert of action, enterprise
liability, market share liability, intentional tort, and fraud and
misrepresentation.
The plaintiffs in these actions generally seek to impose on the defendants
responsibility for lead paint abatement and asserted health concerns associated
with the use of lead-based paints, including damages for personal injury,
contribution and/or indemnification for medical expenses, medical monitoring
expenses and costs for educational programs. Most of these legal proceedings are
in various pre-trial stages; several are on appeal.
The Company believes that these actions are without merit, intends to
continue to deny all allegations of wrongdoing and liability and to defend all
F-33
actions vigorously. The Company has not accrued any amounts for the pending lead
pigment litigation. Considering the Company's previous involvement in the lead
and lead pigment businesses, there can be no assurance that additional
litigation similar to that currently pending will not be filed.
Environmental matters and litigation. Some of the Company's current and
former facilities, including several divested secondary lead smelters and former
mining locations, are the subject of civil litigation, administrative
proceedings or investigations arising under federal and state environmental
laws. Additionally, in connection with past disposal practices, the Company has
been named a potential responsible party ("PRP") pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act ("CERCLA") in approximately 75
governmental and private actions associated with hazardous waste sites and
former mining locations, certain of which are on the U.S. Environmental
Protection Agency's Superfund National Priorities List. These actions seek
cleanup costs and/or damages for personal injury or property damage. While the
Company may be jointly and severally liable for such costs, in most cases it is
only one of a number of PRPs who are also jointly and severally liable. In
addition, the Company is a party to a number of lawsuits filed in various
jurisdictions alleging CERCLA or other environmental claims. At December 31,
1996, the Company had accrued $113 million for those environmental matters which
are reasonably estimable. It is not possible to estimate the range of costs for
certain sites. The upper end of the range of reasonably possible costs to the
Company for sites which it is possible to estimate costs is approximately $160
million. The Company's estimates of such liabilities have not been discounted to
present value, and the Company has not recognized any potential insurance
recoveries. The imposition of more stringent standards or requirements under
environmental laws or regulations, new developments or changes respecting site
cleanup costs or allocation of such costs among PRPs, or a determination that
the Company is potentially responsible for the release of hazardous substances
at other sites could result in expenditures in excess of amounts currently
estimated by the Company to be required for such matters. No assurance can be
given that actual costs will not exceed accrued amounts or the upper end of the
range for sites for which estimates have been made and no assurance can be given
that costs will not be incurred with respect to sites as to which no estimate
presently can be made. Further, there can be no assurance that additional
environmental matters will not arise in the future. As discussed in Note 2, the
Company will adopt the AICPA's Statement of Position 96-1, "Environmental
Remediation Liabilities," during the first quarter of 1997, increasing its
environmental liability by approximately $30 million.
Certain of the Company's businesses are and have been engaged in the
handling, manufacture or use of substances or compounds that may be considered
toxic or hazardous within the meaning of applicable environmental laws. As with
other companies engaged in similar businesses, certain operations and products
of the Company have the potential to cause environmental or other damage. The
Company continues to implement various policies and programs in an effort to
minimize these risks. The Company's policy is to comply with environmental laws
and regulations at all of its facilities and to continually strive to improve
environmental performance in association with applicable industry initiatives.
It is possible that future developments, such as stricter requirements of
F-34
environmental laws and enforcement policies thereunder, could affect the
Company's production, handling, use, storage, transportation, sale or disposal
of such substances as well as the Company's consolidated financial position,
results of operations or liquidity.
Other litigation. The Company is also involved in various other
environmental, contractual, product liability and other claims and disputes
incidental to its present and former businesses.
The Company currently believes the disposition of all claims and disputes
individually or in the aggregate, should not have a material adverse effect on
the Company's consolidated financial condition, results of operations or
liquidity.
Concentrations of credit risk
Sales of TiO2 accounted for almost 90% of net sales during the past three
years. TiO2 is sold to the paint, plastics and paper industries. Such markets
are generally considered "quality-of-life" markets whose demand for TiO2 is
influenced by the relative economic well-being of the various geographic
regions. TiO2 is sold to over 4,000 customers, none of which represents a
significant portion of net sales. In each of the past three years, approximately
one-half of the Company's TiO2 sales by volume were to Europe and approximately
36% in both 1994 and 1995 and 37% in 1996 of sales were attributable to North
America.
Consolidated cash, cash equivalents and restricted cash includes $103
million and $53 million invested in U.S. Treasury securities purchased under
short-term agreements to resell at December 31, 1995 and 1996, respectively, of
which $88 million and $41 million, respectively, of such securities are held in
trust for the Company by a single U.S. bank.
Note 18 - Financial instruments:
Summarized below is the estimated fair value and related net carrying
value of the Company's financial instruments.
December 31, December 31,
1995 1996
----------------- ----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------ -------- ------
(In millions)
Cash and cash equivalents, including
restricted cash ......................... $141.3 $141.3 $114.1 $114.1
Marketable securities - classified as
available-for-sale ...................... 20.9 20.9 23.7 23.7
Notes payable and long-term debt:
Fixed rate with market quotes:
Senior Secured Notes ................. $250.0 $267.7 $250.0 $265.2
Senior Secured Discount Notes ........ 132.0 151.8 149.8 161.9
Variable rate debt ..................... 440.9 440.9 455.0 455.0
Common shareholders' equity (deficit) .... $(209.4) $619.5 $(203.5) $555.9
Fair value of the Company's marketable securities and Notes are based upon
quoted market prices and the fair value of the Company's common shareholder's
equity (deficit) is based upon quoted market prices for NL's common stock. The
Company held no derivative financial instruments at December 31, 1995 and 1996.
Note 19 - Quarterly financial data (unaudited):
Quarter ended
---------------------------------------------------
March 31 June 30 Sept. 30 Dec. 31
----------- ---------- --------- ---------
(In thousands, except per share amounts)
Year ended December 31, 1995:
Net sales ................. $ 250,875 $ 283,474 $ 255,339 $ 234,251
Cost of sales ............. 169,768 187,896 169,058 149,462
Operating income .......... 41,968 57,549 50,590 49,612
Net income ............ $ 13,062 $ 21,002 $ 17,426 $ 34,119(a)
========= ========= ========= =========
Net income per share of
common stock ............. $ .26 $ .41 $ .34 $ .66(a)
========= ========= ========= =========
Weighted average shares
and common stock
equivalents outstanding .. 51,176 51,552 51,628 51,486
========= ========= ========= =========
Year ended December 31, 1996:
Net sales ................. $ 240,440 $ 263,162 $ 248,462 $ 234,010
Cost of sales ............. 169,816 194,794 193,271 180,557
Operating income .......... 41,938 36,098 19,471 15,866
Net income (loss) ..... $ 13,444 $ 11,919 $ (4,249) $ (10,297)
========= ========= ========= =========
Net income (loss) per
share of common stock .... $ .26 $ .23 $ (.08) $ (.20)
========= ========= ========= =========
Weighted average shares
and common stock
equivalents outstanding .. 51,510 51,493 51,118 51,118
========= ========= ========= =========
(a) Income tax benefits in the fourth quarter of 1995 include the recognition
of $10 million of deferred tax assets related to a change in estimate of
the future tax benefit of certain tax credits which the Company believes
satisfies the "more-likely-than-not" recognition criteria and $6.6 million
related to the reduction in U.S./Canada dividend withholding tax rates.
See Note 13.
F-35
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
Our report on the consolidated financial statements of NL Industries, Inc.
is included on page F-2 of this Annual Report on Form 10-K. In connection with
our audits of such financial statements, we have also audited the related
financial statement schedules listed in the index on page F-1.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Houston, Texas
February 7, 1997
S-1
NL INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Balance Sheets
December 31, 1995 and 1996
(In thousands)
1995 1996
--------- ---------
Current assets:
Cash and cash equivalents, including
restricted cash of $4,349 and $4,833 .......... $ 40,080 $ 12,135
Accounts and notes receivable .................. 203 356
Receivable from subsidiaries ................... 4,273 9,542
Refundable income taxes ........................ 1,662 --
Prepaid expenses ............................... 729 445
--------- ---------
Total current assets ....................... 46,947 22,478
--------- ---------
Other assets:
Marketable securities .......................... 20,944 23,718
Notes receivable from subsidiary ............... 382,034 505,557
Investment in subsidiaries ..................... (89,395) (175,063)
Other .......................................... 7,582 6,680
--------- ---------
Total other assets ......................... 321,165 360,892
--------- ---------
Property and equipment, net ...................... 3,562 3,396
--------- ---------
$ 371,674 $ 386,766
========= =========
Current liabilities:
Accounts payable and accrued liabilities ....... $ 28,116 $ 24,929
Payable to affiliates .......................... 3,498 2,813
Income taxes ................................... -- 3,024
Deferred income taxes .......................... 1,905 1,908
--------- ---------
Total current liabilities .................. 33,519 32,674
--------- ---------
Noncurrent liabilities:
Long-term debt ................................. 382,034 399,756
Deferred income taxes .......................... 10,211 9,736
Accrued pension cost ........................... 10,835 10,974
Accrued postretirement benefits cost ........... 37,430 34,396
Other .......................................... 107,066 102,711
--------- ---------
Total noncurrent liabilities ............... 547,576 557,573
--------- ---------
Shareholders' deficit ............................ (209,421) (203,481)
--------- ---------
$ 371,674 $ 386,766
========= =========
Contingencies (Note 4)
S-2
NL INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
Condensed Statements of Operations
Years ended December 31, 1994, 1995 and 1996
(In thousands)
1994 1995 1996
--------- --------- ---------
Revenues and other income:
Equity in income of subsidiaries ..... $ 7,925 $ 99,734 $ 18,236
Interest and dividends ............... 2,538 2,739 1,461
Interest income from subsidiary ...... 43,157 45,551 49,738
Securities transactions .............. (1,220) 1,175 --
Other income, net .................... 3,135 460 1,873
--------- --------- ---------
55,535 149,659 71,308
--------- --------- ---------
Costs and expenses:
General and administrative ........... 69,875 27,079 18,094
Interest ............................. 44,003 45,842 47,940
--------- --------- ---------
113,878 72,921 66,034
--------- --------- ---------
Income (loss) before income
taxes ........................... (58,343) 76,738 5,274
Income tax benefit ..................... 34,361 8,871 5,543
--------- --------- ---------
Net income (loss) ................ $ (23,982) $ 85,609 $ 10,817
========= ========= =========
S-3
NL INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
Condensed Statements of Cash Flows
Years ended December 31, 1994, 1995 and 1996
(In thousands)
1994 1995 1996
-------- -------- --------
Cash flows from operating activities:
Net income (loss) ........................ $(23,982) $ 85,609 $ 10,817
Equity in income of subsidiaries ......... (7,925) (99,734) (18,236)
Distributions from subsidiaries .......... 30,000 15,000 20,000
Noncash interest expense ................. 845 842 842
Deferred income taxes .................... (20,577) 1,411 (1,443)
Securities transactions .................. 1,220 (1,175) --
Other, net ............................... (3,836) (5,819) (3,291)
-------- -------- --------
(24,255) (3,866) 8,689
Change in assets and liabilities, net .... 23,263 8,042 (8,593)
Marketable trading securities:
Purchases .............................. (870) (762) --
Dispositions ........................... 15,530 27,102 --
-------- -------- --------
Net cash provided by operating
activities .......................... 13,668 30,516 96
-------- -------- --------
Cash flows from investing activities:
Investments in and loans to subsidiaries . (6,630) (9,062) (12,941)
Capital expenditures ..................... (126) (33) (40)
Other, net ............................... 402 10 11
-------- -------- --------
Net cash used by investing
activities .......................... (6,354) (9,085) (12,970)
-------- -------- --------
S-4
NL INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I-CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
Condensed Statements of Cash Flows (Continued)
Years ended December 31, 1994, 1995 and 1996
(In thousands)
1994 1995 1996
-------- -------- --------
Cash flows from financing activities:
Dividends ................................ $ -- $ -- $(15,333)
Principal payments of borrowings ......... (170) -- --
Other, net ............................... 120 278 262
-------- -------- --------
Net cash provided (used) by
financing activities ................ (50) 278 (15,071)
-------- -------- --------
Cash and cash equivalents:
Increase (decrease) from:
Operating activities ................... 13,668 30,516 96
Investing activities ................... (6,354) (9,085) (12,970)
Financing activities ................... (50) 278 (15,071)
-------- -------- --------
Net change from operating, investing
and financing activities ................ 7,264 21,709 (27,945)
Balance at beginning of year ............. 11,107 18,371 40,080
-------- -------- --------
Balance at end of year ................... $ 18,371 $ 40,080 $ 12,135
======== ======== ========
S-5
NL INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
Notes to Condensed Financial Information
Note 1 - Basis of presentation:
The Consolidated Financial Statements of NL Industries, Inc. (the
"Company") and the related Notes to Consolidated Financial Statements are
incorporated herein by reference.
Note 2 - Net receivable from (payable to) subsidiaries and affiliates:
December 31,
--------------------------
1995 1996
--------- ---------
(In thousands)
Current:
Tremont Corporation ........................ $ (3,525) $ (3,529)
Other ...................................... 27 (2)
Kronos and Rheox:
Income taxes ............................. 567 (836)
Other, net ............................... 3,706 11,096
--------- ---------
$ 775 $ 6,729
========= =========
Noncurrent - notes receivable from:
Kronos ..................................... $ 382,034 $ 399,756
Rheox ...................................... -- 105,801
--------- ---------
$ 382,034 $ 505,557
Note 3 - Long-term debt:
December 31,
------------------------
1995 1996
-------- --------
(In thousands)
11.75% Senior Secured Notes .................... $250,000 $250,000
13% Senior Secured Discount Notes .............. 132,034 149,756
-------- --------
$382,034 $399,756
See Note 10 of the Consolidated Financial Statements for a description of
the Notes.
S-6
The aggregate maturities of the Company's long-term debt at December 31,
1996 are shown in the table below.
Amount
--------------
(In thousands)
Senior Secured Notes due 2003 .................................. $250,000
Senior Secured Discount Notes due 2005 ......................... 187,500
--------
437,500
Less unamortized original issue discount on the
Senior Secured Discount Notes ................................. 37,744
$399,756
========
The Company and Kronos have agreed, under certain circumstances, to
provide Kronos' principal international subsidiary with up to DM 125 million
through January 1, 2001. The Company has guaranteed the DM credit facility.
Note 4 - Contingencies:
See Legal proceedings in Note 17 to the Consolidated Financial Statements.
S-7
NL INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Balance at Charged to Currency
beginning costs and translation Balance at
Description of year expenses Deductions adjustments Other end of year
----------- ---------- ---------- ---------- ----------- ------- -----------
Year ended December 31, 1996:
Allowance for doubtful accounts
and notes receivable .......... $ 4,039 $ 1,274 $ (1,331)(a) $ (169) $ -- $ 3,813
======== ======== ======== ======== ======== ========
Amortization of intangibles .... $ 20,562 $ 3,152 $ -- $ (1,507) $ -- $ 22,207
======== ======== ======== ======== ======== ========
Valuation allowance for deferred
income taxes .................. $195,569 $ 3,013 $ -- $ (5,937) $14,472(c) $207,117
======== ======== ======== ======== ======== ========
Year ended December 31, 1995:
Allowance for doubtful accounts
and notes receivable .......... $ 3,749 $ 289 $ (166)(a) $ 167 $ -- $ 4,039
======== ======== ======== ======== ======== ========
Amortization of intangibles .... $ 16,149 $ 3,241 $ -- $ 1,172 $ -- $ 20,562
======== ======== ======== ======== ======== ========
Valuation allowance for deferred
income taxes .................. $164,500 $ (9,588) $ -- $ 6,451 $ 34,206(b) $195,569
======== ======== ======== ======== ======== ========
Year ended December 31, 1994:
Allowance for doubtful accounts
and notes receivable .......... $ 3,008 $ 1,141 $ (616)(a) $ 216 $ -- $ 3,749
======== ======== ======== ======== ======== ========
Amortization of intangibles .... $ 11,941 $ 2,901 $ -- $ 1,307 $ -- $ 16,149
======== ======== ======== ======== ======== ========
Valuation allowance for deferred
income taxes .................. $133,377 $ 24,309 $ -- $ 6,814 $ -- $164,500
======== ======== ======== ======== ======== ========
(a) Amounts written off, less recoveries.
(b) Direct offset to the increase in gross deferred income tax assets
resulting from recharacterization of certain tax attributes due primarily
to changes in certain income tax return elections.
(c) Direct offset to the increase in non-U.S. gross deferred income tax assets
due to dual residency status of a Company subsidiary.
S-8
EXHIBIT 10.2
KRONOS INTERNATIONAL, INC.
SECOND AMENDED AND RESTATED LOAN AGREEMENT
Dated as of January 31, 1997
DM 418,249,878
HYPOBANK INTERNATIONAL S.A.
as Agent
and the
BANKS NAMED HEREIN
1
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS......................................................................4
ARTICLE 2. THE FACILITY....................................................................38
2.01 .............................................................................38
2.02 .............................................................................40
2.03 .............................................................................40
2.04 .............................................................................40
2.05 .............................................................................42
2.06 .............................................................................42
ARTICLE 3. PURPOSE OF THE LOAN.............................................................45
ARTICLE 4. CONDITIONS PRECEDENT AND NOTICE OF BORROWING....................................45
4.01 .............................................................................45
4.02 .............................................................................49
4.03 .............................................................................50
4.04 .............................................................................50
ARTICLE 5. INTEREST PERIODS................................................................50
5.01 .............................................................................50
5.02 .............................................................................50
5.03 .............................................................................50
5.04 .............................................................................51
ARTICLE 6. INTEREST........................................................................51
6.01 .............................................................................51
6.02 .............................................................................51
6.03 .............................................................................51
6.04 .............................................................................51
6.05 .............................................................................51
ARTICLE 7. SUBSTITUTE BASIS................................................................52
7.01 .............................................................................52
7.02 .............................................................................52
7.03 .............................................................................53
7.04 .............................................................................54
ARTICLE 8. PREPAYMENT......................................................................54
8.01 .............................................................................54
8.02 .............................................................................58
ii
8.03 .............................................................................59
ARTICLE 9. REPAYMENT.......................................................................59
ARTICLE 10. EVIDENCE OF DEBT...............................................................60
10.01 .............................................................................60
10.02 .............................................................................60
10.03 .............................................................................61
ARTICLE 11. PAYMENTS.......................................................................61
11.01 .............................................................................61
11.02 .............................................................................62
11.03 .............................................................................63
11.04 .............................................................................63
11.05 .............................................................................63
11.06 .............................................................................64
11.07 .............................................................................64
11.08 .............................................................................64
11.09 .............................................................................65
ARTICLE 12. DEFAULT INTEREST AND INDEMNITY.................................................65
12.01 .............................................................................65
12.02 .............................................................................66
12.03 .............................................................................66
12.04 .............................................................................67
ARTICLE 13. SET-OFF AND REDISTRIBUTION OF PAYMENTS.........................................67
13.01 .............................................................................67
13.02 .............................................................................68
13.03 .............................................................................68
13.04 .............................................................................68
13.05 .............................................................................68
ARTICLE 14. CHANGE OF CIRCUMSTANCES; ILLEGALITY;
RESERVE REQUIREMENTS.....................................................69
14.01 Change of Circumstances......................................................69
14.02 Illegality...................................................................70
14.03 Reserve Requirements.........................................................71
ARTICLE 15. REPRESENTATIONS AND WARRANTIES.................................................72
15.01 Corporate Existence of Borrower and Subsidiaries.............................72
15.02 Power and Authority of Borrower..............................................72
15.03 Power and Authority of Pledgors and Guarantors...............................72
iii
15.04 Rank of Indebtedness.........................................................73
15.05 No Conditions to Performance and Enforceability..............................73
15.06 No Filings; No Stamp Taxes...................................................73
15.07 Legal, Valid and Enforceable Obligations.....................................74
15.08 Bankruptcy...................................................................74
15.09 No Defaults; No Litigation...................................................74
15.10 Environmental Compliance.....................................................75
15.11 Financial Statements.........................................................76
15.12 No Material Adverse Change...................................................76
15.13 Accurate Information.........................................................76
15.14 No Violation, Defaults or Liens..............................................76
15.15 ERISA........................................................................77
15.16 Non-U.S. Employee Plans......................................................79
15.17 Investment Company...........................................................79
15.18 Subsidiaries.................................................................79
15.19 Margin Stock.................................................................80
15.20 Taxes........................................................................81
15.21 Intellectual Property Rights.................................................81
15.22 Key Contracts................................................................82
15.23 Affiliate Transactions.......................................................82
15.24 NL Debt Offering; Mirror Notes; Subordinated Loans; Consideration
for Prepayments............................................................83
15.25 Taxes relating to Mirror Notes...............................................83
15.26 Ownership of Material Assets.................................................83
15.27 Optional Prepayments.........................................................84
15.28 Certain Adjusted Restricted Payments.........................................84
ARTICLE 16. UNDERTAKINGS AND COVENANTS.....................................................84
16.01 Delivery of Financial Statements, etc........................................84
16.02 Operating Permits............................................................86
16.03 Environmental Compliance.....................................................86
16.04 Compliance with Applicable Law...............................................86
16.05 Books and Records............................................................87
16.06 Environmental Reports........................................................87
16.07 Intellectual Property Rights.................................................87
16.08 Liens........................................................................88
16.09 Dispositions.................................................................88
16.10 Merger; Consolidation........................................................89
16.11 Employee Matters.............................................................90
16.12 Interest Rate Protection Agreements..........................................92
16.13 Indebtedness to Subsidiaries.................................................92
16.14 Maintenance of Separate Corporate Identities.................................92
16.15 Affiliate Transactions.......................................................92
iv
16.16 Transactions with Subsidiaries...............................................93
16.17 Notice of Default; Change of Law.............................................94
16.18 Limitation of Indebtedness...................................................94
16.19 Subsidiary Indebtedness......................................................94
16.20 Restricted Payments..........................................................94
16.21 Maximum Funded Debt Ratio; Maximum Indebtedness..............................95
16.22 Minimum Consolidated Equity..................................................96
16.23 Current Assets to Current Liabilities Ratio..................................96
16.24 Interest Coverage Ratio......................................................96
16.25 Minimum EBITDA...............................................................97
16.26 Registered Office in Germany.................................................97
16.27 Service Contract of Kronos Titan.............................................97
16.28 Restriction on Dividends from Subsidiaries...................................97
16.29 Investments..................................................................98
16.30 Limitation on Restricted Payments............................................98
16.31 Maintenance of Property; Insurance...........................................99
16.32 Continuation of Business.....................................................99
16.33 Taxes........................................................................99
16.34 Additional Guaranties, Pledged Subsidiaries..................................99
16.35 Pledged Stock...............................................................100
16.36 Principal Shareholder Waiver................................................101
16.37 Maximum Capital Expenditures................................................101
16.38 Mirror Notes; Subordinated Loans............................................102
16.39 Notification of Indenture Defaults..........................................102
16.40 Bank Accounts...............................................................102
ARTICLE 17. COLLATERAL....................................................................103
17.01 ............................................................................103
17.02 ............................................................................104
17.03 ............................................................................104
17.04 ............................................................................105
17.05 ............................................................................106
ARTICLE 18. EVENTS OF DEFAULT.............................................................107
18.01 ............................................................................107
18.02 ............................................................................107
18.03 ............................................................................107
18.04 ............................................................................107
18.05 ............................................................................107
18.06 ............................................................................107
18.07 ............................................................................108
18.08 ............................................................................108
18.09 ............................................................................108
v
18.10 ............................................................................108
18.11 ............................................................................108
18.12 ............................................................................108
18.13 ............................................................................109
18.14 ............................................................................109
18.15 ............................................................................109
18.16 ............................................................................109
18.17 ............................................................................109
ARTICLE 19. FEES..........................................................................110
19.01 ............................................................................110
19.02 ............................................................................111
19.03 ............................................................................111
19.04 ............................................................................111
ARTICLE 20. EXPENSES AND DUTIES...........................................................111
20.01 ............................................................................111
20.02 ............................................................................111
20.03 ............................................................................112
20.04 ............................................................................112
ARTICLE 21. THE AGENT AND THE BANKS.......................................................112
21.01 ............................................................................112
21.02 ............................................................................112
21.03 ............................................................................113
21.04 ............................................................................113
21.05 ............................................................................114
21.06 ............................................................................114
21.08 ............................................................................115
21.09 ............................................................................115
21.10 ............................................................................116
21.11 ............................................................................116
ARTICLE 22. NO WAIVER.....................................................................116
ARTICLE 23. PARTIAL INVALIDITY; CHANGE IN ACCOUNTING PRINCIPLES...........................117
23.01 ............................................................................117
23.02 ............................................................................117
ARTICLE 24. ASSIGNMENTS, PARTICIPATION....................................................117
24.01 ............................................................................117
24.02 ............................................................................118
24.03 ............................................................................119
vi
24.04 ............................................................................120
24.05 ............................................................................120
24.06 ............................................................................120
24.07 ............................................................................121
ARTICLE 25. LANGUAGE......................................................................121
ARTICLE 26. NOTICES.......................................................................121
ARTICLE 27. LIMITATION ON SPECIAL DAMAGES.................................................121
ARTICLE 28. APPLICABLE LAW; JURISDICTION; SERVICE OF PROCESS..............................122
ARTICLE 29. COUNTERPARTS..................................................................122
ARTICLE 30. FURTHER ASSURANCES............................................................122
ARTICLE 31. CONSTRUCTION..................................................................123
ARTICLE 32. ENTIRE AGREEMENT..............................................................123
ARTICLE 33. SURVIVAL OF WARRANTIES AND AGREEMENTS.........................................123
ARTICLE 34. NO THIRD PARTY BENEFICIARIES..................................................123
ARTICLE 35. NO NOVATION...................................................................124
ARTICLE 36. MISCELLANEOUS.................................................................124
36.01 ............................................................................124
36.02 ............................................................................124
36.03 ............................................................................124
36.04 ............................................................................125
vii
SCHEDULES
Schedule 1 List of Banks
Schedule 2 Indebtedness
Schedule 3 Liens
Schedule 4 Certain Legal Matters
Schedule 5 Litigation
Schedule 6 ERISA and Non-U.S. Employee Plans
A Erisa Disclosure
B Termination
C Plan Description
D Withdrawal
E Claims
F Non-U.S. Employee Plans
Schedule 7 Subsidiaries
Schedule 8 License Agreements and Intellectual Property Rights
A Exceptions to Ownership of Intellectual Property Rights
B Affiliate License Agreements
C Third Party License Agreements
D Other Agreements
E Patents
F Trademarks
G Infringements Claims
Schedule 9 Affiliate Transactions
Schedule 10 Insurance
Schedule 11 Tax Information
Schedule 12 Certain Loan Agreements
Schedule 13 Certain Material Assets
viii
EXHIBITS
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Mirror Notes
Exhibit C Subordinated Loan Documents
Exhibit D Forms of Amendments and/or Reaffirmations of Pledge Agreements
Exhibit E Forms of Amendments and/or Reaffirmations of Guaranties
Exhibit F Form of Second Amended and Restated Technology and Trademark
Undertaking
Exhibit G Form of Amendment and/or Reaffirmation of Subordination and
Contribution Agreement
Exhibit H Form of Second Amended and Restated Liquidity Undertaking
Exhibit I Form of Acknowledgment of Limitation of Special Damages
Exhibit J Form of NL Guaranty
Exhibit K Form of Canadian Security Documents
Exhibit L Form of Nordenham Mortgage
Exhibit M Forms of Cash Pledge Agreements of the Borrower
Exhibit N Forms of Cash Pledge Agreements of the Canadian Subsidiaries
Exhibit O Form of Solvency Certificate
Exhibit P Form of Notice of Borrowing
Exhibit Q Form of Certificate of Chief Financial Officer of Borrower as
to Annual Financial Statements
Exhibit R Form of Certificate of Chief Financial Officer of Borrower as
to Quarterly Financial Statements
Exhibit S Form of Confidentiality Agreement
ix
SECOND AMENDED AND RESTATED LOAN AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT, dated as of January 31,
1997, is executed and delivered by and among KRONOS INTERNATIONAL, INC., a
Delaware corporation (the "BORROWER"), KRONOS TITAN - GMBH, a German corporation
("KRONOS TITAN") (for the limited purposes specified herein), the BANKS (as
hereinafter defined), HYPOBANK INTERNATIONAL S.A., as Agent for the Banks.
The Borrower has a registered office in Leverkusen, Germany, and is an
indirect wholly-owned subsidiary of NL Industries, Inc., a New Jersey
corporation ("NL INDUSTRIES"). As of May 30, 1990, and prior to January 1, 1992,
the Borrower was a wholly-owned subsidiary of Kronos (US), Inc., a Delaware
corporation formerly and then known as Kronos, Inc. ("KRONOS (US)"). Effective
as of January 1, 1992, Kronos (US) assigned the Stock of the Borrower to Kronos,
Inc., a Delaware corporation formerly (prior to such assignment) known as Kronos
(USA), Inc. ("KRONOS") and a subsidiary of Kronos (US), whereupon the Borrower
became (and is now) a wholly-owned subsidiary of Kronos.
The Borrower, the Banks (or their predecessors in interest), the Agent
and Banque Paribas, Co-Agent for the Banks (the "CO-AGENT") were parties to that
certain Loan Agreement dated as of May 30, 1990, as amended by that certain (a)
First Amendment Agreement (herein so called) dated as of December 31, 1990, (b)
Second Amendment Agreement (herein so called) dated as of March 22, 1991, and
(c) Third Amendment Agreement (herein so called) dated as of June 15, 1992 (as
amended thereby, the "ORIGINAL AGREEMENT"). Pursuant to the Original Agreement,
the Borrower requested that the Banks (and/or their predecessors in interest)
make, and the Banks (and/or their predecessors in interest) made, advances to
the Borrower in Deutsche Mark in the aggregate principal amount of DM
1,600,000,000 on the terms and subject to the conditions and for the purposes
set forth in the Original Agreement.
Pursuant to the First Amendment Agreement, certain financial covenants
in the Original Agreement were amended for the year 1990.
Pursuant to the Second Amendment Agreement, INTER ALIA, certain
financial covenants in the Original Agreement were amended, the repayment
schedule for the Loan was amended and the NL/Kronos Guaranty and the Investment
Account Agreement (as defined in the Original Agreement) were executed.
Pursuant to the Third Amendment Agreement, INTER ALIA, certain financial
covenants in the Original Agreement were amended, the repayment schedule for the
Loan was amended, certain U.S. Dollar denominated tranches of the Loan were
permitted, the Borrower was given the right to reborrow certain prepayments of
the final repayment installment of the Loan and a Liquidity Undertaking was
executed by NL Industries and Kronos (US).
Effective as of January 1, 1992, the Borrower became a wholly-owned
subsidiary of Kronos as explained in the second paragraph of the preamble of
this Agreement.
1
During February 1993, the Borrower notified the Agent and the Co-Agent
of certain proposed transactions involving its Subsidiaries, certain of which
transactions were required to be approved by the requisite Banks. As a result,
the First Approval Agreement was executed and the transactions described in the
First Approval Agreement have been consummated (except for the transactions
referred to in Step 10 of Schedule 1 to the First Approval Agreement, which
transactions have not been, and need not be, consummated).
The Borrower, the Banks, the Agent and the Co-Agent are parties to that
certain Amended and Restated Loan Agreement dated as of October 15, 1993 (the
"FIRST RESTATED AGREEMENT"), which amends and restates the Original Agreement.
Pursuant to or in connection with the First Restated Agreement, (a) the Agent
and the Banks (or their predecessors in interest) were requested by NL
Industries, Kronos (US) and Kronos to approve, and did approve, certain
transactions pursuant to which NL Industries assigned, contributed or otherwise
transferred the Stock of Kronos (US) to Kronos and Kronos (US) assigned or
otherwise transferred the Stock of Kronos to NL Industries, (b) a substantial
prepayment of the Loan was made from proceeds of a public debt offering made by
NL Industries and the maturity of the principal amount of the Loan that remained
outstanding after giving effect to such prepayment was extended, and (c) the
Original Agreement was amended in certain other respects.
During 1994, the Borrower notified the Agent of (a) the Borrower's
receipt of the Tentative Tax Refund (as hereinafter defined) relating to German
income taxes for the calendar year 1990 and (b) the Borrower's position that the
Tentative Tax Refund did not constitute the Tax Refund for purposes of the First
Restated Agreement. In addition, in consideration of the Agent, the Co-Agent and
the Banks not challenging that position and in accordance with the terms and
provisions of the Tentative Tax Refund Letter (as hereinafter defined), the
Borrower agreed to apply the amount of the Tentative Tax Refund as an optional
prepayment of the Revolving Portion and, notwithstanding Section 2.04 of the
First Restated Agreement, further agreed to not borrow all or any portion of the
Tentative Tax Refund Availability Amount (as hereinafter defined) except for the
purpose of (i) prior to the Final Determination Date (as defined in the
Tentative Tax Refund Letter), repaying amounts constituting the Tentative Tax
Refund which the Borrower became obligated to repay to the German tax
authorities in respect of German tax assessments or liabilities of the Borrower
and certain of its Consolidated Subsidiaries for calendar years 1989 and 1990 or
(ii) at the Borrower's election, treating the amount so borrowed as a portion of
the Tax Refund and prepaying the Loan pursuant to SECTION 8.01(D) of the First
Restated Agreement. During 1994, the Borrower paid DM 175,000,000 to the Agent
for application against the Revolving Portion in accordance with the Tentative
Tax Refund Letter.
On October 31, 1994, the Borrower drew down DM 50,000,000 of the
Revolving Portion from the Banks under the Tentative Tax Refund Availability
Amount and applied such amount (which constituted part of the Tax Refund) as a
prepayment of the Term Portion in accordance with SECTION 8.01(D) of the First
Restated Agreement.
2
During 1996, the Borrower notified the Agent of certain proposed
transactions involving its Subsidiaries, certain of which transactions were
required to be approved by the requisite Banks. As a result, the Second Approval
Agreement (as hereinafter defined) was executed and the transactions described
in the Second Approval Agreement have been or are in the process of being
consummated.
On October 22, 1996, the Borrower drew down DM 49,361,653 of the
Revolving Portion from the Banks under the Tentative Tax Refund Availability
Amount to pay German income taxes in accordance with the Tentative Tax Refund
Letter. On January 22, 1997, the Borrower repaid DM 1,649,238 of such amount
drawn on October 22, 1996, which DM 1,649,238 amount was applied to the
Revolving Portion and thereby increased the Tentative Tax Refund Availability
Amount by DM 1,649,238.
Immediately prior to the Second Restatement Date, (a) the outstanding
principal amount of the Term Portion was DM 395,537,463 and (b) the outstanding
principal amount of the Revolving Portion was DM 142,784,415. In addition,
immediately prior to the Second Restatement Date, the undrawn portion of the
Revolving Portion was DM 107,215,585, DM 77,287,585 of which constituted the
Tentative Tax Refund Availability Amount, the reborrowing of which was
restricted in accordance with the terms and provisions of the Tentative Tax
Refund Letter.
Notwithstanding that the Final Determination Date may not have occurred,
the Borrower, in consideration of the agreements of the Banks set forth in this
Agreement, is willing and desires to treat the amount of DM 77,287,585 as a
portion of the Tax Refund as of the Second Restatement Date subject to the terms
and conditions of this Agreement. Accordingly, in accordance with SECTION
8.01(D) of the First Restated Agreement and this Agreement, the Borrower shall,
on the Second Restatement Date, make a DM 77,287,585 prepayment of the Term
Portion, all of which shall be applied, on a pro rata basis as provided in
SECTION 8.01(D), to reduce the remaining Repayment Installments of the Term
Portion, with the proceeds of a drawdown of the Revolving Portion (in accordance
with the Tentative Tax Refund Letter) in the amount of DM 57,287,585 and with DM
20,000,000 of the proceeds of the NL Subordinated Loan referred to in the
immediately succeeding paragraph.
The Borrower, the Agent and the Banks have discussed, and desire to
provide for, (a) a DM 150,000,000 prepayment of the Term Portion of the Loan to
be made on the Second Restatement Date from a subordinated loan in the principal
amount of DM 260,000,000 to be made by NL Industries to the Borrower and (b)
certain other amendments to the First Restated Agreement. DM 20,000,000 of such
prepayment will be (as stated in the immediately preceding paragraph) applied,
on a pro rata basis, to reduce the remaining Repayment Installments of the Term
Portion as a mandatory prepayment of part of the Tax Refund in accordance with
SECTION 8.01(D) of the First Restated Agreement and this Agreement and the
remaining DM 130,000,000 of such prepayment will be applied as a mandatory
prepayment of the Term Portion in accordance with SECTION 8.01(H) of this
Agreement and will be applied to the outstanding Repayment
3
Installments of the Term Portion in the direct order of the maturities of such
installments. In order to accomplish the foregoing and to address additional
matters relating thereto, the Borrower, the Banks and the Agent now desire to
amend and restate the First Restated Agreement as provided in this Agreement.
NOW, THEREFORE, in consideration of the Original Agreement, the First
Restated Agreement, this Agreement and the mutual covenants and agreements
contained therein and herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and confessed, the
First Restated Agreement is hereby amended and restated in its entirety, and the
parties hereto hereby agree, as follows:
ARTICLE 1. DEFINITIONS
In this Agreement, unless the context otherwise requires:
"Adjusted Restricted Payments" means, without
duplication (a) the aggregate of all
Restricted Payments, plus (b) the
aggregate of all Deemed Restricted
Payments.
"Affiliate" means any individual, corporation,
partnership, joint venture, trust,
unincorporated organization or
association, mutual company, joint
stock company, estate, trust or
other organization, whether or not a
legal entity, which directly or
indirectly is in Control of, is
Controlled by, or is under common
Control with respect to, any Person.
"Affiliate License Agreements" means as set forth in SECTION 15.21.
"Agent" means Hypobank International S.A.,
its corporate successors or any
successor agent appointed pursuant
to ARTICLE 21.
"Agreement" means this Second Amended and
Restated Loan Agreement, including
all of the Schedules and the
Exhibits hereto, as amended or
supplemented from time to time.
"Assignment and Acceptance" means an assignment
and acceptance of a Bank's rights
and obligations with respect to a
Loan (or a Commitment relating
thereto) or a portion thereof in the
form attached hereto as EXHIBIT A.
4
"Assignment of Dividends" means an assignment of
dividends from Societe Industrielle
du Titane S.A. in the form delivered
in connection with the Original
Agreement, the First Restated
Agreement or this Agreement, as
amended or supplemented from time to
time.
"Bank" and "Banks" means any bank or
financial institution or all banks
or financial institutions as listed
on the signature pages of this
Agreement and on SCHEDULE 1 and any
bank(s) or financial institution(s)
which become(s) a Bank or Banks in
accordance with ARTICLE 24 of this
Agreement.
"Base Deutsche Mark Amount" means (a) with
respect to any advance of the Loan
originally borrowed in U.S. Dollars,
the amount of Deutsche Mark
specified in the Notice of Borrowing
of which the U.S. Dollar amount
advanced is the Equivalent Amount on
the Drawdown Date of such advance,
and (b) with respect to any advance
of the Loan or portion thereof to be
redenominated from Deutsche Mark to
U.S. Dollars, the amount of Deutsche
Mark specified in the Borrower's
request for redenomination pursuant
to SECTION 2.05 of which the U.S.
Dollar amount to be redenominated is
the Equivalent Amount as of the date
of redenomination.
"Borrower" means as set forth in the first
paragraph of the preamble of this
Agreement.
"Business Day" means a day on which banks are
required to be open for business in
London, Luxembourg, New York and
Munich.
"Canadian Dollars or Can. $" means lawful currency of Canada.
"Canadian Security Documents" mean a Deed of
Collateral Hypothec executed by
Kronos Canada, Inc. pursuant to
which a Lien affecting the real and
personal property of Kronos Canada
Inc. (including the plant located at
Varennes, Quebec, Canada, and bank
accounts but excluding stock of
Kronos World Services S.A./N.V. and
certain immaterial assets) is
created in favor of the
5
Agent, a Deed of Hypothec executed
by 2927527 Canada Inc. pursuant to
which a Lien affecting the personal
property of 2927527 Canada Inc.
(including bank accounts but
excluding certain immaterial assets)
is created in favor of the Agent, a
Deed of Hypothec executed by 2969157
Canada Inc. pursuant to which a Lien
affecting the personal property of
2969157 Canada Inc. (including the
Kronos Canada Note and bank accounts
but excluding certain immaterial
assets) is created in favor of the
Agent and other agreements,
documents and instruments relating
to the foregoing.
"Capital Expenditures" means any expenditure
by the Borrower or any Consolidated
Subsidiary for or with respect to an
asset which has a useful life of
more than one year, which
expenditure is properly classified,
in the consolidated financial
statements of the Borrower and in
accordance with German GAAP, as an
addition to equipment, real property
or improvements or similar types of
tangible fixed assets.
"Capital Leases" means rental obligations as
lessee under leases recorded as
capital leases in accordance with
German GAAP.
"Cash Pledge Agreements" means such
collateral assignments, security
agreements, pledge agreements and/or
similar agreements, in form and
substance reasonably satisfactory to
the Agent, pursuant to which Liens
are granted in favor of the Agent
affecting the cash balances of the
Borrower and its Canadian
Subsidiaries.
"Co-Agent" means Banque Paribas in its capacity
as Co-Agent for the Banks under the
Original Agreement and the First
Restated Agreement.
"Code" means the United States Internal
Revenue Code of 1986, as amended and
in effect from time to time.
6
"Collateral" means the Pledge Agreements, the
Canadian Security Documents, the
Nordenham Mortgage, the Cash Pledge
Agreements, the Guaranties and other
documents delivered or to be
delivered pursuant to SECTIONS
16.34, 17.01, 17.02, 17.03 and 17.04
of this Agreement, the Liens and
guaranties created thereby and any
and all property, real, personal,
tangible or intangible, which
secures the Borrower's obligations
under this Agreement.
"Commitment" or "Commitments" means, in relation
to each Bank, the several
obligations of such Bank, and in
relation to all Banks, the aggregate
obligations of such Banks, sub ject
to the terms of this Agreement, to
make available its portion of the
Loans (including, without
limitation, the Revolving Portion)
to be made under this Agreement up
to the aggregate principal amount
specified in SCHEDULE 1, to the
extent not reduced or canceled under
this Agreement, and includes,
without limitation, the "Revolving
Commitment" or "Revolving
Commitments", respectively.
"Company" or "Companies" means, individually,
any of the Borrower or any Major
Subsidiary and, collectively, the
Borrower and all Major Subsidiaries.
"Consolidated Equity" means, as of the date of
determination for the Borrower and
its Subsidiaries on a consolidated
basis in conformity with German
GAAP, (a) consolidated stockholder's
equity determined in accordance with
German GAAP, (b) plus any deductions
made for currency translation
adjustments and minus any additions
made for currency translation
adjustments, (c) plus an amount
equal to the outstanding principal
of and accrued and unpaid interest
on the Subordinated Debt, if any,
described in CLAUSES (A), (B) and
(C) of the definition of the term
"Subordinated Debt" in this
Agreement, (d) minus any increase,
or plus any decrease, in Net Income
resulting from the foreign currency
translation amount arising from the
translation of the Mirror Notes from
U.S. Dollars to Deutsche Mark since
the issuance of the Mirror Notes,
(e) minus the
7
Restricted Capital Amount, plus (f)
any deductions made for adjustments
to goodwill if and to the extent
that such adjustments have reduced
Net Income.
"Consolidated Subsidiary" means any Subsidiary the
accounts of which would be
consolidated with those of the
Borrower in its consolidated
financial statements.
"Contaminant" means any waste, pollutant,
hazardous substance, toxic
substance, hazardous waste or
material, special or toxic waste,
petroleum or petroleum derived
substance or waste, or any
constituent of any such substance or
waste, including, without
limitation, any such substance
defined in or pursuant to any
Environmental Law.
"Control" or "Controlled" means, with respect
to any Person, the power, directly
or indirectly:
(a) to vote more than fifty
percent (50%) of the voting
securities issued by such
Person for the election of
the board of directors (or
members of an equivalent
governing body) of such
Person; or
(b) otherwise to direct or cause
the direction of management
and policies of such Person.
"Controlled Group" means all members of a
controlled group of corporations and
all trades or businesses (whether or
not incorporated) under common
control which, together with the
Borrower, are treated as a single
employer under Section 414(b),
414(c), 414(m) or 414(o) of the
Code.
"Current Assets" means, for the Borrower and
its Subsidiaries on a consolidated
basis in conformity with German
GAAP, consolidated assets, excluding
intangibles and tangible fixed
assets, realizable within one year
of the date of determination.
"Current Liabilities" means, for the Borrower
and its Subsidiaries on a
consolidated basis in conformity
with German
8
GAAP, consolidated accruals and
liabilities due within one year of
the date of determination, excluding
Current Maturities.
"Current Maturities" means those portions of
Funded Debt due within one year of
the date of determination.
"Deemed Restricted Payments" means, without
duplication, any payments or other
transfers of value (irrespective of
the form of such payments or other
transfers) directly or indirectly
made by the Borrower or any of its
Subsidiaries to Kronos, NL
Industries, Kronos (US) or any other
Affiliate of the Borrower (other
than the Borrower or a Subsidiary of
the Borrower) for less than full and
fair consideration to the Borrower
or its Subsidiary (as applicable)
and, in any event, shall include,
without limitation, (a) all license
fees, royalties or other payments
for the use of technology or other
Intellectual Property Rights paid or
payable to such Affiliates, (b) all
amounts paid or payable to such
Affiliates constituting cost sharing
(excluding insurance expenses except
to the extent that such expenses
exceed the amount therefor that
would be paid or payable in a
comparable arm's length transaction
with a non-Affiliate), personnel
costs and other overhead, (c)
transfers of value resulting from
the sale or transfer of product or
other assets by the Borrower or any
of its Subsidiaries to such
Affiliates for consideration that is
less than the consideration (net of
reasonable transaction costs
incurred in the ordinary course of
business) that is obtained by such
Affiliates in connection with the
resale or subsequent transfer of
such product or other assets, (d)
transfers of value resulting from
the sale or transfer of product or
other assets by such Affiliates to
the Borrower or any of its
Subsidiaries for consideration that
is more than the cost of such
product or other assets to such
Affiliates (provided, however, that
such sales or other transfers by
such Affiliates of product in the
ordinary course of business shall be
excluded from this CLAUSE (D) except
to the extent that the consideration
received therefor is more than would
be paid or payable in a comparable
arm's
9
length transaction with a
non-Affiliate), and (e) payments in
the form of service charges to
compensate such Affiliates for
purchases of titanium ore and other
product or assets.
"Default" means an Event of Default or any
event, act or occurrence which, with
the giving of notice or passage of
time or both, unless cured or
waived, would become an Event of
Default.
"Deutsche Mark" or "DM" means the lawful
currency of Germany.
"Deutsche Mark Amount" means (a) in the case
of any amount denominated in
Deutsche Mark, the amount of
Deutsche Mark from time to time
outstanding, and (b) in the case of
any amount denominated or to be
denominated in U.S. Dollars, the
amount of Deutsche Mark which is
equivalent to a given amount of U.S.
Dollars as of the Relevant Date,
determined by using the Spot Rate on
the date two Business Days prior to
the Relevant Date (unless another
date is specified in this
Agreement).
"Disposition" means, with respect to any asset, to
sell, assign, lease, exchange,
transfer or otherwise dispose of
such asset.
"Drawdown Date" means (a) with respect to each
advance of the Loan prior to any
reborrowing pursuant to SECTION
2.04, the date set forth in the
Notice of Borrowing relating to such
advance (which date was a Business
Day on or before June 19, 1990), and
(b) with respect to any reborrowing
under the Revolving Portion pursuant
to SECTION 2.04, the date set forth
in the Notice of Borrowing relating
to such reborrowing, which date
shall be a Business Day on or before
August 15, 2000.
"Earnings Available for Fixed Charges" means,
for the preceding four fiscal
quarters and for the Borrower and
its Subsidiaries on a consolidated
basis in conformity with German
GAAP, Net Income plus Income Taxes
plus depreciation, depletion and
amortization plus Interest Expense
plus
10
rentals payable under leases (other
than Capital Leases) having an
initial non-cancelable lease term in
excess of one year plus, to the
extent included in determining Net
Income, the decrease resulting from
the foreign currency translation
amount arising from the translation
of the Mirror Notes from U.S.
Dollars to Deutsche Mark or minus,
to the extent included in
determining Net Income, the increase
resulting from the foreign currency
translation amount arising from the
translation of the Mirror Notes from
U.S. Dollars to Deutsche Mark.
"EBITDA" means, with respect to any fiscal
period, for the Borrower and its
Subsidiaries on a consolidated basis
in conformity with German GAAP or,
with respect to the third sentence
of SECTION 8.01(C) only, NL
Industries and its subsidiaries on a
consolidated basis in conformity
with generally accepted accounting
principles in the United States of
America, the sum of (a) net income,
excluding extraordinary gains and
losses, plus (b) interest expense
(including imputed interest expense
in respect of obligations under
capital leases, if any), income
taxes, depreciation, amortization
and other non-cash expenses to the
extent that any of such expenses are
deducted in determining net income,
minus (c) non-cash income to the
extent that such income is included
in determining net income.
"Employee Plan" means an employee benefit plan
within the meaning of Section 3(3)
of ERISA.
"Environmental Claim" means any written notice by
any state, federal, territorial,
provincial, local or other court or
govern mental authority, entity or
instrumentality alleging potential
liability for damage to the
environment, or by any Person
alleging potential liability for
personal injury (including sickness,
disease or death) or property damage
or damage of any other kind
resulting from or based upon:
(a) the presence or release
(including, without
limitation, sudden or
non-sudden, accidental
11
or non-accidental, leaks or
spills) of any Contaminant
at, in or from property,
whether or not owned by the
Borrower and/or any of its
Subsidiaries; or
(b) circumstances forming the
basis of any violation, or
alleged violation, of any
Environmental Law.
"Environmental Law" means any law, rule or
regulation pertaining to land use,
air, soil, surface water, ground
water (including the protection,
cleanup, removal, remediation or
damage thereof), public or employee
health or safety or any other
environmental matter, including,
without limitation, any of the above
promulgated by the EU, together with
any other non-U.S. or domestic laws
(federal, state, territorial,
provincial or local) relating to
emissions, discharges, releases or
threatened releases of any
Contaminant into ambient air, land,
surface water, groundwater, personal
property or structures, or otherwise
relating to the manufacture,
processing, distribution, use,
treatment, storage, disposal,
transportation, discharges or
handling of any Contaminant.
"Equivalent Amount" means the amount of U.S.
Dollars which is equivalent to a
given amount of Deutsche Mark as of
the Relevant Date, determined by
using the Spot Rate on the date two
Business Days prior to the Relevant
Date.
"ERISA" means the United States Employee
Retirement Income Security Act of
1974, as amended and in effect from
time to time.
"EU" means the European Union.
"Eurocurrency Liabilities" means as that term is
defined in Regulation D.
"Eurocurrency Rate Reserve Percentage" means the
reserve percentage applicable for
any Bank during any Interest Period
under regulations issued from time
to time by the Federal Reserve for
determining the maximum reserve
requirement
12
(including, without limitation, any
emergency, supplemental or other
marginal reserve requirement) for
such Bank with respect to
liabilities or assets consisting of
or including Eurocurrency
Liabilities having a term equal to
such Interest Period.
"Event of Default" means as set forth in ARTICLE 18.
"Excess Adjusted Restricted Payments" means,
without duplication, for the
applicable calendar year (or portion
thereof which has occurred as of any
date of determination), the amount
(if any) by which the aggregate
amount of Adjusted Restricted
Payments exceeds (a) DM 47,000,000
(Deutsche Mark Forty-Seven Million)
during calendar year 1996, (b) DM
39,000,000 (Deutsche Mark
Thirty-Nine Million) during calendar
year 1997, (c) DM 44,000,000
(Deutsche Mark Forty- Four Million)
during calendar year 1998, and (d)
DM 47,000,000 (Deutsche Mark
Forty-Seven Million) for any
calendar year thereafter; provided,
however, that if, within 30 (thirty)
days after the payment or other
making of any such excess amount,
the entire amount thereof is
contributed by NL Industries or any
of its subsidiaries (other than the
Borrower and its Subsidiaries) to
the Borrower (or a Subsidiary of the
Borrower as the Agent may approve,
which approval shall not be
unreasonably withheld) as a cash
equity capital contribution or as
Subordinated Debt (other than
Subordinated Debt referred to in
CLAUSE (A) of the definition of the
term "Subordinated Debt") made or
advanced, respectively, to the
Borrower or such Subsidiary, then
such excess amount previously paid
or otherwise made and thereafter so
contributed or advanced to the
Borrower (or its Subsidiary, as
applicable) shall not be deemed to
constitute an Excess Adjusted
Restricted Payment hereunder.
"Excess Cash Flow" means (a) Free Cash Flow
minus (b) Capital Expenditures for
the preceding four fiscal quarters
less any Indebtedness or
Subordinated Debt specifically
incurred to finance any such Capital
Expenditures during such fiscal
quarters minus
13
(c) the sum of (i) Fixed Charges and
(ii) repayments of Funded Debt,
exclusive of repayments of Funded
Debt from proceeds of the Tax
Refund, in the preceding four fiscal
quarters.
"Excess EBITDA" means, for the Borrower and
its Subsidiaries on a consolidated
basis and with respect to any fiscal
year, the positive remainder (if
any) of (a) (i) EBITDA for such
fiscal year, minus (ii) Income Taxes
paid in cash (exclusive of taxes
paid arising from assessments
received as a result of tax audits),
Capital Expenditures and Interest
Expense, other than non-cash
Interest Expense, for such fiscal
year, minus (b) the amount set forth
in the table below for such fiscal
year:
FISCAL YEAR ENDED AMOUNT
1997 Negative DM 90,000,000
1998 Negative DM 7,500,000
1999 DM 60,000,000
"Excess Term Prepayment" means DM 2,000,000
(Deutsche Mark Two Million), which
amount is the positive remainder of
(a) the amount of the First
Prepayment applied to the Term
Portion in accordance with SECTION
2.01(A) (expressed in Deutsche Mark)
minus (b) DM 400,000,000 (Deutsche
Mark Four Hundred Million).
"Excluded Taxes" means as set forth in SECTION 11.01.
"Federal Reserve" means the Board of
Governors of the Federal Reserve
System.
"Financial Covenants" means as set forth in SECTION 23.02.
"First Amendment Agreement" means as set
forth in the third paragraph of the
preamble of this Agreement.
"First Approval Agreement" means the
Approval Agreement dated as of April
6, 1993, among the Borrower, the
requisite Banks who are signatories
thereto, the Agent and the Co-Agent.
14
"First Prepayment" means the prepayment of
the Loan in the First Prepayment
Amount as referred to in SECTION
2.01(A).
"First Prepayment Amount" means DM
552,000,000 (Deutsche Mark Five
Hundred Fifty-Two Million), i.e.,
the amount, determined as of the
First Prepayment Date and expressed
in Deutsche Mark, equal to the
remainder of (a) the gross proceeds
of the NL Debt Offering minus (b)
the NL Debt Offering Expenses.
"First Prepayment Date" means October 21,
1993, the date upon which the First
Prepayment was received by the
Agent.
"First Restated Agreement" Means as set
forth in the ninth paragraph of the
preamble of this Agreement.
"First Restatement Date" means October 15,
1993, the date of the First Restated
Agreement.
"Fixed Charges" means, for the preceding
four fiscal quarters and for the
Borrower and its Subsidiaries on a
consolidated basis in conformity
with German GAAP, Interest Expense
(excluding Interest Expense on
Subordinated Debt payable in kind in
the form of Subordinated Debt and
excluding non-cash Interest Expense
on the Mirror Notes) plus rentals
payable under leases (other than
Capital Leases) having an initial
non-cancelable lease term in excess
of one year.
"Free Cash Flow" means, for the preceding
four fiscal quarters and for the
Borrower and its Subsidiaries on a
consolidated basis in conformity
with German GAAP, (a) Earnings
Available for Fixed Charges minus
(b) taxes paid in cash during such
fiscal quarters, plus (c) tax
refunds, exclusive of the Tax
Refund, received in cash during such
fiscal quarters, plus or minus, as
the case may be (d) any non-cash
additions or subtractions included
in the determination of Net Income
to the extent not already taken into
account in the definition of
Earnings Available for Fixed
Charges.
15
"Funded Debt" means, as of the date of any
calculation, (a) all Indebtedness of
the Borrower and its Subsidiaries to
the extent such Indebtedness has an
initial stated or final maturity of,
or by its terms is renewable or
extendable by the Borrower or its
Subsidiaries to, a date or a period
ending more than one year after the
date of any such calculation, (b)
plus Indebtedness of the Borrower
and its Subsidiaries comprised of or
liabilities in respect of unfunded
vested benefits under Non-U.S.
Employee Plans to the extent such
liabilities exceed DM 150,000,000
(Deutsche Mark One Hundred Fifty
Million), (c) minus unsecured
working capital Indebtedness of the
Borrower and its Subsidiaries
(including the aggregate face amount
of all funded and unfunded standby
and documentary letters of credit),
but only to the extent such
unsecured working capital
Indebtedness is Permitted
Indebtedness, (d) minus the increase
in Indebtedness resulting from the
foreign currency translation amount
arising from the translation of the
Mirror Notes from U.S. Dollars to
Deutsche Mark or plus the decrease
in Indebtedness resulting from the
foreign currency translation amount
arising from the translation of the
Mirror Notes from U.S. Dollars to
Deutsche Mark, and (e) plus (without
duplication) the Restricted Capital
Amount.
"Funded Debt Ratio" means, for the Borrower
and its Subsidiaries on a
consolidated basis, Funded Debt
divided by the sum of (a)
Consolidated Equity plus (b)
Subordinated Debt.
"German GAAP" means generally accepted
accounting principles for the
preparation of group accounts
pursuant to the provisions of the
relevant laws of Germany.
"Gross Proceeds" means, with respect to the
Disposition of Stock or any other
asset, cash or non-cash proceeds
actually received, directly or
indirectly by, or for the account
of, the Borrower or any Subsidiary.
"Guarantor" means NL Industries, Kronos Canada,
Inc., 2927527 Canada Inc., 2969157
Canada Inc. or any
16
Subsidiary, whether existing on the
Second Restatement Date or at any
time hereafter, which becomes a
Guarantor pursuant to SECTION 16.34.
"Guaranty" or "Guaranties" means a guaranty or
the guaranties executed or to be
executed by the Guarantors in
accordance with the Original
Agreement, the First Restated
Agreement or this Agreement
(including, without limitation,
SECTION 16.34 and ARTICLE 17), as
amended or supplemented from time to
time.
"Income Taxes" means, for the Borrower and
its Subsidiaries on a consolidated
basis, expense for income taxes in
accordance with German GAAP.
"Indebtedness" means, for any Person without
duplication, and excluding all
Subordinated Debt referred to in
CLAUSES (B), (C) and (D) of the
definition of the term "Subordinated
Debt":
(a) debt consisting of borrowed
money, including obligations
evidenced by bonds,
debentures, notes or similar
instruments, or the deferred
purchase price of property or
services (other than trade
payables incurred and payable
in the ordinary course of
business and on customary
terms);
(b) rental obligations under
Capital Leases;
(c) obligations under direct or
indirect guaranties in
respect of obligations
(contingent or otherwise) to
purchase or otherwise
acquire, or otherwise to
assure a creditor against
loss (such as, without
limitation, obligations under
an agreement to pay for
property or services
irrespective of whether or
not such property is
delivered or such services
are rendered), in respect of,
debt or obligations of others
of the kinds referred to in
CLAUSES (A) or (B) above;
17
(d) obligations (contingent or
otherwise) under letters of
credit (funded or unfunded)
not arising out of the import
of goods;
(e) liabilities in respect of
unfunded vested benefits
under (i) plans covered by
Title IV of ERISA and (ii)
any laws governing Non-U.S.
Employee Plans to the extent
such liabilities exceed DM
150,000,000 (Deutsche Mark
One Hundred Fifty Million);
and
(f) all obligations secured by
any Lien, other than Liens
described in CLAUSES (D), (E)
and (F) of the definition of
the term "Permitted Liens" in
this Agreement, to which any
property or asset owned by
the Borrower and/or its
Subsidiaries is subject,
whether or not the
obligations secured thereby
shall have been assumed by
the Borrower or its
Subsidiaries.
"Indentures" means that certain (a) Indenture
dated as of October 20, 1993,
between NL Industries and Chemical
Bank, as trustee, to be executed by
the parties thereto relating to the
senior secured notes due 2003 to be
issued by NL Industries and (b)
Indenture dated as of October 20,
1993, between NL Industries and
State Street Bank and Trust Company,
as trustee, to be executed by the
parties thereto relating to the
senior secured discount notes due
2005 to be issued by NL Industries.
"Intellectual Property Rights" shall mean all
material patents and patent
applications, technical information,
know-how and processes necessary for
or used in the current manufacturing
operations and all material trade
names, trademarks, trademark
registrations and applications used
in the marketing and sales
operations of the Borrower and its
Subsidiaries as of the Second
Restatement Date.
"Interbank Rate" means the rate per annum
determined by the Agent on the
Interest Determination Date to be
the
18
arithmetic mean (rounded upwards, if
necessary, to the nearest four
decimal places) of the rates
notified to the Agent by the
Reference Banks to be those at which
each Reference Bank, in accordance
with its normal practice, is able to
obtain deposits in Deutsche Mark,
with respect to that portion of the
Loan denominated in Deutsche Mark,
or deposits in U.S. Dollars, with
respect to that portion of the Loan
denominated in U.S. Dollars (or
other substitute currency agreed to
in accordance with the provisions of
ARTICLE 7) at or about 11:00 a.m.
London time in the London interbank
Euro-currency market for delivery on
the first day of the Interest Period
for the number of days comprised
therein, provided that, if a
Reference Bank shall fail to notify
the Agent of its rate, the Interbank
Rate shall be determined on the
basis of the quotation(s) of the
remaining Reference Bank(s).
"Interest Coverage Ratio" means, for the
preceding four fiscal quarters and
for the Borrower and its
Subsidiaries on a consolidated
basis, (a) the sum of (i) EBITDA,
plus (ii) the sum of (A) the amount,
if any, of contributions to the
equity of the Borrower in the form
of cash (as distinguished from the
conversion of debt to equity) made
by NL Industries or Kronos during
such period, plus (B) the amount, if
any, of loans made by NL Industries
or Kronos as Subordinated Debt
during such period, minus (iii) the
sum of (A) the increase in the
Restricted Capital Amount during
such period, plus (B) the aggregate
amount of Restricted Payments made
during such period pursuant to
SECTION 16.20(B), divided by (b)
Interest Expense (exclusive of
non-cash Interest Expense);
provided, however, that the amounts
referred to in clause (ii) preceding
that shall be counted for purposes
of the definition of "Interest
Coverage Ratio" shall be made during
no more than two separate fiscal
years of the Borrower during the
term of this Agreement and any such
amounts contributed or made during
any fiscal year shall be wholly
excluded for purposes of determining
the "Interest Coverage Ratio" during
any other fiscal year.
19
"Interest Determination Date" means, with
respect to any Interest Period, the
Business Day which is 2 (two)
Business Days prior to the first day
of such Interest Period.
"Interest Expense" means interest expense of
the Borrower and its Subsidiaries on
a consolidated basis in conformity
with German GAAP, and shall include
imputed interest expense in respect
of obligations under Capital Leases,
if any.
"Interest Payment Date" means the last day of
any Interest Period.
"Interest Period" means each of the successive
periods, determined in accordance
with this Agreement, into which the
period for which the Loan is
outstanding is divided and for which
a rate of interest is to be
established under this Agreement.
"Interest Rate Protection Agreement" means any
agreement evidencing an arrangement
designed to protect the Borrower
against fluctuations in interest
rates.
"Investment" means any investment of cash or cash
equivalents in any Person, whether
by means of share purchase, loan,
capital contribution or otherwise.
"Kroner" means the lawful currency of Norway.
"Kronos" means as set forth in the second
paragraph of the preamble of this
Agreement.
"Kronos Canada Note" means that certain
Amended Promissory Note dated
December 20, 1996, in the original
principal amount of Cdn. $89,000,000
made by Kronos Canada, Inc. payable
to the order of 2969157 Canada Inc.,
which promissory note amends and
replaces that certain Subordinated
Promissory Note dated May 28, 1993,
in the original principal amount of
Cdn. $123,000,000 made by Kronos
Canada, Inc. payable to the order of
Kronos S.A./N.V. and subsequently
assigned to 2969157 Canada Inc.
20
"Kronos Subordinated Loan" means the
unsecured and subordinated loan in
the principal amount of DM
25,000,000 (Deutsche Mark
Twenty-Five Million) made by Kronos
to the Borrower on December 31,
1996, pursuant to the Kronos
Subordinated Note and the
Subordination
Agreement.
"Kronos Subordinated Note" means that
certain Zero Coupon Subordinated
Promissory Note dated December 31,
1996, in the original principal
amount of DM 25,000,000 (Deutsche
Mark Twenty-Five Million) made by
the Borrower payable to the order of
Kronos which evidences the Kronos
Subordinated Loan.
"Kronos Titan" means Kronos Titan - GmbH, a
German corporation and an indirect
wholly-owned Subsidiary of the
Borrower.
"Kronos Titan Revolving Portion means as set
forth in SECTION 2.04(C).
"Kronos (US)" means as set forth in the
second paragraph of the preamble of
this Agreement.
"Kronos(US)/Kronos Flip" means the
transactions pursuant to which NL
Industries has assigned, contributed
or otherwise transferred the Stock
of Kronos (US) to Kronos and Kronos
(US) assigned or otherwise
transferred the Stock of Kronos to
NL Industries.
"Lending Office" means, as to each Bank, the
office(s) or branch(es) located at
the address(es) set forth on the
signature page(s) below or such
other office(s) or branch(es) of
such Bank as it may from time to
time designate pursuant to this
Agreement.
"Leverkusen Lease" means the lease agreement
(Erbbaurechtsvertrag zum Grundstueck
Gemarkung Wiesdorf, Flur 18,
Parzelle 108/2 mit Ergaenzungsabrede
zum Erbbaurechtsvertrag und
Errechnung des Erbbauzinses) between
Titangesellschaft GmbH and I.G.
Farbenindustrie Aktiengesellschaft
i.L. dated June 21, 1952, as amended
by Supplementary Agreement dated
June 21, 1952.
21
"Lien" means, with respect to the Borrower
or any Subsidiary (in each case,
whether the same is consensual or
nonconsensual or arises by
contractual obligation, operation of
law, legal process or otherwise,
existing on the Second Restatement
Date or at any time thereafter): any
mortgage, deed of trust, lien,
pledge, attachment, levy, charge or
other security interest or
encumbrance of any kind in respect
of any property now or hereafter
owned by the Borrower or any
Subsidiary, personal, real or
otherwise, or upon the proceeds,
income or profits therefrom. For
this purpose, the Borrower or any
Subsidiary shall be deemed to own,
subject to a Lien, any asset that it
has acquired or hereafter holds
subject to the interest of a vendor
or lessor under any conditional
sales agreement, Capital Lease,
reservation of title or other title
retention agreement relating to such
asset.
"Liquidity Undertaking" means the Second
Amended and Restated Liquidity
Undertaking dated as of the Second
Restatement Date among NL
Industries, Kronos, the Borrower and
the Agent.
"Liquidity Undertaking Credit" means, as of the
date of determination, an amount
equal to the aggregate amount, if
any, of the credits against the
"Maximum Required Investment
Amount", as such term is defined in
the Liquidity Undertaking,
designated by the Borrower by its
giving of written notice to the
Agent, at any time or from time to
time, provided, however, that the
Liquidity Undertaking Credit (a)
shall be zero prior to January 1,
2000, may not exceed DM 50,000,000
(Deutsche Mark Fifty Million) at any
time prior to July 1, 2000 and may
not exceed DM 75,000,000 (Deutsche
Mark Seventy-Five Million) at any
time after July 30, 2000, (b) shall
not, at any time, exceed the
aggregate amount of Restricted
Payments then permitted to be made
by the Borrower pursuant to Section
16.20(a) in the absence of any
Liquidity Undertaking Credit and (c)
once designated, may not thereafter
be reduced.
22
"Loan" or "Loans" means, with respect to
each Bank, at any time, the total of
all monies advanced by or owing to
each such Bank under the Original
Agreement, the First Restated
Agreement or this Agreement and
outstanding at any time, or the
aggregate of all monies so advanced
by or owing to all Banks and
outstanding at any time.
"Loan Documents" means the Original
Agreement, the First Restated
Agreement, this Agreement, the
Guaranties, the Pledge Agreements,
the Canadian Security Documents, the
Nordenham Mortgage, the Cash Pledge
Agreements, the Assignment of
Dividends, the Subordination
Agreement, the Technology
Undertaking, the Special Purpose
Account Agreement, the Liquidity
Undertaking, the First Approval
Agreement, the Second Approval
Agreement, the documents executed
pursuant to or specified or referred
to in CLAUSES (I)(A) through (I) of
SECTION 4.01(A) of the First
Restated Agreement, CLAUSES (I)(A)
through (N) of SECTION 4.01(B) and
SECTIONS 16.40, 17.01 (other than
17.01(J)), 17.02, 17.03, and 17.04,
any and all amendments to or
restatements of the foregoing Loan
Documents and any and all other
documents, instruments and
certificates executed and delivered
or to be executed and delivered by
the Borrower or any Affiliate
pursuant to the terms of this
Agreement or any amendment to this
Agreement (including, without
limitation, the documents,
instruments and certificates in the
forms attached as Exhibits to the
Original Agreement, the First
Restated Agreement or this
Agreement).
"Majority Banks" means, at any time when no
Loans are outstanding, the Banks
whose aggregate Commitments at any
time exceed 50% (fifty percent) of
the total aggregate Commitments of
all Banks and, at any time when
Loans are outstanding, the Banks
holding more than 50% (fifty
percent) of the aggregate unpaid
principal amount of the Loans.
23
"Majority Banks (662/3%)" means, at any time
when no Loans are outstanding, the
Banks whose aggregate Commitments at
any time exceed 66 2/3% (sixty-six
and two-thirds percent) of the total
aggregate Commitments of all Banks
and, at any time when Loans are
outstanding, the Banks holding more
than 66 2/3% (sixty-six and two
thirds percent) of the aggregate
unpaid principal amount of the
Loans.
"Major Subsidiaries" means the following
Subsidiaries (unless amended with
the consent of the Majority Banks):
(a) NL Industries (Deutschland)
GmbH;
(b) Kronos Titan - GmbH;
(c) Societe Industrielle du
Titane, S.A.;
(d) Kronos Europe S.A./N.V.;
(e) Kronos World Services
S.A./N.V.;
(f) Kronos Norge A/S;
(g) Kronos Titan A/S;
(h) Titania A/S;
(i) Kronos Limited;
(j) Kronos Canada, Inc.;
(k) 2969157 Canada Inc.;
and other Subsidiaries, whether
existing on the Second Restatement
Date or at any time thereafter, with
Total Assets for any such
Subsidiary, determined at the date
of presentation of its respective
quarterly unaudited or annual
audited financial statements, in
excess of DM 35,000,000 (Deutsche
Mark Thirty-Five Million).
24
"Margin" means, with respect to that portion
of the Loan that is denominated in
Deutsche Mark, 2.75% (two and
three-quarters of one percent) per
annum and, with respect to that
portion of the Loan that is
denominated in U.S. Dollars, 2.875%
(two and seven-eighths of one
percent) per annum.
"Material Adverse Effect" means a material adverse effect on:
(a) the financial condition,
business, operations or
properties of any specified
Person or a specified group
of Persons, taken as a whole;
or
(b) the ability of the Borrower
to meet its payment,
Collateral or Lien
obligations under this
Agreement or any other Loan
Document.
"Mirror Notes" means that certain (a)
Second-Tier Senior Mirror Note dated
as of October 20, 1993, in the
original principal amount of
$250,000,000 executed by the
Borrower payable to the order of
Kronos and (b) Second-Tier Discount
Mirror Note dated as of October 20,
1993, in the original principal
amount of $187,500,000 executed by
the Borrower payable to the order of
Kronos, in the forms attached hereto
as EXHIBIT B.
"Multiemployer Plan" means a multiemployer plan as
such term is defined in Section
4001(a)(3) of ERISA.
"Net Income" means net income of the
Borrower and its Subsidiaries on a
consolidated basis in conformity
with German GAAP.
"Net Proceeds" means, with respect to the
Disposition of Stock or any other
asset by any Person, Gross Proceeds
of such Disposition less (i) all
reasonable fees and expenses
actually incurred pursuant to an
arm's length agreement or
arrangement, including, without
limitation, customary brokerage
commissions, charges or fees, and
(ii) all taxes, excluding income
taxes.
25
"NL Debt Offering" means the offering of the NL Notes.
"NL Debt Offering Expenses" means the
reasonable fees and expenses
incurred relating to the NL Debt
Offering.
"NL Guaranty" means the Guaranty dated
as of the Second Restatement Date
executed by NL Industries to and in
favor of the Agent, as amended or
supplemented from time to time.
"NL Industries" means as set forth in
the second paragraph of the preamble
of this Agreement.
"NL/Kronos Guaranty" means the Guaranty dated
as of March 22, 1991, executed by NL
Industries and Kronos (US) (then
known as Kronos, Inc.) to and in
favor of the Agent.
"NL Notes" means the senior secured
notes due 2003 and the senior
secured discount notes due 2005
issued by NL Industries pursuant to
the Indentures.
"NL Subordinated Loan" means the
unsecured and subordinated loan in
the principal amount of DM
260,000,000 (Deutsche Mark Two
Hundred Sixty Million) made by NL
Industries to the Borrower on or
before the Second Restatement Date
pursuant to the NL Subordinated Note
and the Subordination Agreement.
"NL Subordinated Note" means that
certain Zero Coupon Subordinated
Promissory Note dated January 31,
1997, in the original principal
amount of DM 260,000,000 (Deutsche
Mark Two Hundred Sixty Million) made
by the Borrower payable to the order
of NL Industries which evidences the
NL Subordinated Loan.
"NL Undertaking" means the Amended and
Restated Undertaking of NL
Industries, Inc. dated as of First
Restatement Date among NL
Industries, the Agent and the Banks,
as amended or supplemented from time
to time.
"Non-U.S. Employee Plans" means all employee
pension benefit and welfare benefit
plans of the Borrower or any of its
26
Subsidiaries including, without
limitation, severance pay, plans,
policies, agreements or programs,
governed by laws other than the laws
of the United States applicable to
or covering current or former
employees or directors of the
Borrower or any Subsidiaries.
"Nordenham Mortgage" means Land Charges
executed by Kronos Titan pursuant to
which Liens affecting the real
properties (and plant) of Kronos
Titan located in Nordenham, Germany
are created in favor of the Agent
and other agreements, documents and
instruments relating thereto.
"Notice of Borrowing" means as set forth in
SECTION 4.02(C).
"Operating Subsidiaries" means as set forth in
SECTION 16.09(F).
"Original Agreement" means as set forth in the
third paragraph of the preamble of
this Agreement.
"Original Currency" means as set forth in SECTION 12.03.
"Other Currency" means as set forth in SECTION 12.03.
"PBGC" means the Pension Benefit Guaranty
Corporation, or any successor
thereto.
"Pension Benefit Plan" means an employee
pension benefit plan within the
meaning of Section 3(2) of ERISA.
"Permitted Indebtedness" means, with respect to
the Borrower and any Subsidiary:
(a) Indebtedness described on
SCHEDULE 2 attached hereto
(other than working capital
indebtedness of the Borrower
and any Subsidiary set forth
in CLAUSE (D) below and other
than Subordinated Debt);
(b) trade payables incurred and
payable in the ordinary
course of business and on
customary terms and rental
obligations under Capital
27
Leases relating solely to
personal property acquired by
the Borrower or any
Subsidiary in the ordinary
course of business;
(c) Indebtedness arising or
existing pursuant to this
Agreement;
(d) unsecured (except as provided
in this CLAUSE (D) below)
working capital Indebtedness
of the Borrower and its
Subsidiaries maturing in all
cases no more than 3 (three)
years from the date incurred
or issued, including, without
limitation, the aggregate
face amounts (funded or
unfunded) of all standby and
documentary letters of
credit; provided, however,
that such unsecured working
capital Indebtedness shall
not exceed in the aggregate
DM 80,000,000 (Deutsche Mark
Eighty Million) at any time
outstanding; and provided,
further, however, that any
such working capital
Indebtedness incurred by
Kronos Canada, Inc. shall not
exceed Cdn. $10,000,000 in
aggregate principal amount at
any time outstanding and may
be secured by the Lien
referred to in CLAUSE (H) of
the definition of the term
"Permitted Liens";
(e) any refinancing of the
Indebtedness in the foregoing
CLAUSES (A) through (D),
provided, however, that, with
respect to Indebtedness
described in CLAUSE (A) such
refinancing shall not: (i)
(A) include an increase in
Indebted ness, (B) include
any decrease, reduction or
shortening of the then
remaining term over which
such Indebtedness is
amortized, (C) include any
increase in the amount or
frequency of principal
payments of such
Indebtedness, and (ii) result
in a Default under this
Agreement, unless otherwise
approved in writing by the
Majority Banks in their
reasonable discretion;
28
(f) Indebtedness between or among
any of the Borrower and/or
its Subsidiaries;
(g) Indebtedness of the Borrower
evidenced by the Mirror
Notes; and
(h) Subordinated Debt as defined
in CLAUSE (A) of the
definition of the term
"Subordinated Debt."
"Permitted Liens" means:
(a) Liens existing on the Second
Restatement Date and set
forth in SCHEDULE 3;
(b) Liens existing on property at
the time of its acquisition
(other than any such Lien
created in contemplation of
or connection with such
acquisition);
(c) extensions, renewals and
replacements of Liens
referred to in CLAUSES (A)
and (B) above, provided that
any such extension, renewal
or replacement is limited to
the property or assets
covered by the Lien extended,
renewed or replaced and does
not secure any Indebtedness
in addition to that
originally secured, in the
case of Liens referred to in
CLAUSE (A) above, as of May
30, 1990 and, in the case of
Liens referred to in CLAUSE
(B) above, at the time when
such Liens are or were
originally created or
incurred;
(d) Liens imposed by law, such as
carriers', warehousemen's,
materialmen's, landlords',
and mechanics' Liens; zoning
restrictions; easements;
survey exceptions;
reservations; rights-of-way;
restrictions on use; and
other similar Liens that were
not incurred in con nection
with the borrowing of monies
or obtaining credit and that:
29
(i) do not in the
aggregate materially
detract from the
value, or materially
impair the use, of the
property or assets to
which such Liens
attach; or
(ii) are being contested in
good faith by
appropriate
proceedings, which
proceedings have the
effect of preventing
the forfeiture or sale
of the property or
assets subject to such
Lien;
(e) Liens securing taxes not yet
due or being contested in
good faith by appropriate
proceedings, which
proceedings have the effect
of preventing the forfeiture
or sale of the property or
assets subject to such Liens
and where adequate reserves
are established and
maintained if required in
accordance with German GAAP;
provided, however, that none
of the Liens referred to in
this CLAUSE (E) may, at any
time, attach or relate to any
property or assets of any
Subsidiary of the Borrower
except to the extent that the
taxes secured thereby are
attributable to and owed by
such Subsidiary or are owed
to the taxing authorities of
the country in which such
Subsidiary is organized;
(f) Liens arising in connection
with workman's compensation
laws or similar legislation
or progress payments under
government con tracts,
deposits to secure public or
statutory obligations of the
Borrower or any of its
Subsidiaries, or deposits as
security for contested import
duties;
(g) obligations under conditional
sale agreements, Capital
Leases or reservation of
title or other title
retention agreements relating
solely to personal property
acquired by the Borrower or
any Subsidiary in the
ordinary course of business;
30
(h) Liens affecting the property
of Kronos Canada, Inc.
securing working capital
Indebtedness not to exceed
Cdn. $10,000,000 in aggregate
principal amount at any time
outstanding;
(i) other Liens if approved by
the Majority Banks, in their
sole discretion; and
(j) Liens in favor of the Agent
and the Banks under the Loan
Documents.
"Person" means an individual, a corporation,
a partnership, joint venture, or a
trust, unincorporated organization
or association or mutual company,
joint stock company, estate, trust
or other organization, whether or
not a legal entity, including a
government or political subdivision
or an agency or instrumentality
thereof.
"Pledge Agreement"
or "Pledge Agreements" means the pledge agreement or pledge
agreements executed or to be
executed by NL Industries and the
Pledgors in accordance with the
Original Agreement, the First
Approval Agreement, the First
Restated Agreement, the Second
Approval Agreement or this Agreement
(including, without limitation,
SECTION 16.34 and ARTICLE 17), as
amended or supplemented from time to
time.
"Pledged Subsidiary"
or "Pledged Subsidiaries" means,
individually or collectively, each
of the following Subsidiaries of the
Borrower (unless amended with the
consent of the Majority Banks):
(a) NL Industries (Deutschland)
GmbH;
(b) Kronos Chemie GmbH;
(c) Societe Industrielle du
Titane, S.A.;
(d) Kronos Europe S.A./N.V.;
31
(e) Kronos Norge A/S;
(f) Kronos Limited;
(g) Kronos Canada, Inc.;
(h) 2927527 Canada Inc.;
(i) 2969157 Canada Inc.;
and any Subsidiaries, whether
existing on the Second Restatement
Date or at any time thereafter,
which become Pledged Subsidiaries
pursuant to SECTION
16.34.
"Pledgors" means the Borrower and those
Subsidiaries which have delivered or
will deliver a pledge of the Stock
of any of the Pledged Subsidiaries
pursuant to SECTION 16.34 and
ARTICLE 17.
"Primary Syndication Completion Date" means
the Primary Syndication Completion
Date as such term is defined in the
Original Agreement.
"Principal Shareholder" means, with respect to
the Borrower, any Person who owns
directly more than 50% (fifty
percent) of the voting Stock of the
Borrower (whether such Stock is held
in the name of such Person or is
held in the name of another Person
for the benefit of such Person), or
if no Person owns such percentage of
voting Stock, that Person who
directly owns an amount of the
Borrower's voting Stock which
exceeds the amount of such Stock
owned directly by any other
stockholder (whether such Stock is
held in the name of such Person or
is held in the name of another
Person for the benefit of such
Person).
"Reference Banks" means the principal London or
Luxembourg office of:
(a) Hypobank International S.A.;
(b) Bankers Trust Company; and
32
(c) Arab Banking Corporation;
provided that, if the Commitment of
any Reference Bank is terminated
pursuant to this Agreement or any
Reference Bank ceases to be a Bank
or ceases to act as a Reference
Bank, the Agent, with the consent of
the Borrower, which consent shall
not be unreasonably withheld or
delayed, shall select another Bank
to serve as a Reference Bank
hereunder.
"Regulation D" means Regulation D of the Federal
Reserve.
"Relevant Date" means, with respect to any
amounts denominated or to be
denominated in U.S. Dollars, a
Drawdown Date or the date of any
redenomination or payment pursuant
to this Agreement in U.S. Dollars or
the date of any other calculation
with respect to U.S. Dollars, as
applicable.
"Repayment Date" means each of the days for
repayment of the Loan or any portion
thereof referred to in ARTICLE 9,
provided that if any such day is not
a Business Day, the relevant
Repayment Date shall be the next
succeeding Business Day.
"Repayment Installment" means each installment
for repayment or amount of repayment
of the Loan or any portion thereof
required pursuant to or described in
ARTICLE 9.
"Restricted Capital Amount" means, as of the
date of determination, the aggregate
amount of Restricted Payments
permitted to be paid by the Borrower
on or after the date of
determination as Restricted Payments
pursuant to SECTION
16.20(B).
"Restricted Payments" means:
(a) with respect to any Stock
issued by any Person,
(i) the retirement,
redemption, purchase
or other acquisition
for value
33
(directly or
indirectly) of any
such Stock (except
Stock acquired upon
conversion into other
shares of such Stock);
and
(ii) the declaration or
payment of any
dividend or other
distribution,
including any
distribution of
assets, properties,
cash, rights,
obligations or
securities, but other
than dividends or
distributions payable
solely in shares of
such Stock, on or with
respect to any such
Stock;
(b) payments of principal or
interest on or with respect
to any Subordinated Debt;
(c) Investments by the Borrower
or any Subsidiary in an
Affiliate, other than the
Borrower or any Subsidiary,
consisting of investments in
the capital stock of such
Affiliate or loans to such
Affiliate (exclusive of trade
payables and contractual
obligations not for borrowed
money incurred by such
Affiliate in the ordinary
course of business); and
(d) for purposes of SECTION
16.20(A) only, the Liquidity
Undertaking Credit.
"Revolving Commitment"
or "Revolving Commitments" means, in relation to
each Bank, the several obligations
of such Bank, and in relation to all
Banks, the aggregate obligations of
such Banks, subject to the terms of
this Agreement, to make available
its portion of the Revolving Portion
to be made under this Agreement up
to the aggregate principal amount
specified in SCHEDULE 1, to the
extent not reduced or canceled under
this Agreement.
"Revolving Portion" means that portion of the
principal of the Loan in the maximum
amount of (a) DM 230,000,000
(Deutsche
34
Mark Two Hundred Thirty Million) for
the period from the Second
Restatement Date through March 14,
2000 or (b) DM 105,000,000 (Deutsche
Mark One Hundred Five Million) for
the period from March 15, 2000
through September 14, 2000, which
portion includes the Kronos Titan
Revolving Portion and may be, from
time to time, prepaid pursuant to
SECTION 8.02 and reborrowed pursuant
to SECTION 2.04; provided, however,
that each of the amounts set forth
in CLAUSES (A) and (B) preceding
shall be automatically reduced by an
aggregate amount equal to 300%
(three hundred percent) of the
cumulative total of the Excess
Adjusted Restricted Payments which
have been, as of any date but
subject to the 30 (thirty) day cure
period specified in the definition
of "Excess Adjusted Restricted
Payments", paid or made or have
otherwise arisen or existed on or
after January 1, 1996, which
reduction in the Revolving Portion
shall occur automatically upon
expiration of the 30 (thirty) day
cure period applicable to the
payment, making, arising or other
existence of each such Excess
Adjusted Restricted Payment.
"Revolving Portion Availability" means, at any
time, the principal amount of the
Revolving Portion that has been
prepaid pursuant to SECTION 2.04 and
is not then outstanding.
"Second Amendment Agreement" means as set
forth in the third paragraph of the
preamble of this Agreement.
"Second Approval Agreement" means the
Approval Agreement dated as of June
21, 1996, among the Borrower, the
requisite Banks who are signatories
thereto, the Agent and the Co-Agent.
"Second Prepayment" means the prepayment of
the Loan in the Second Prepayment
Amount pursuant to SECTION 2.01(B).
"Second Prepayment Amount" means DM
150,000,000 (Deutsche Mark One
Hundred Fifty Million).
"Second Restatement Date" means January 31,
1997, the date of this Agreement (as
unamended).
35
"Service Contract" means the agreement
between Bayer AG, Leverkusen and
Kronos Titan - GmbH, Leverkusen,
dated June 21, 1952, as amended on
September 9, 1971 and as
supplemented on December 29, 1983,
and as supplemented on June 30,
1995.
"Special Purpose Account" has the meaning set
forth in the Special Purpose Account
Agreement.
"Special Purpose Account Agreement" means the
Amended and Restated Special Purpose
Account Agreement dated as of the
First Restatement Date among NL
Industries, Kronos, the Borrower and
the Agent, as amended or
supplemented from time to time.
"Spot Rate" means, with respect to any
day, the rate determined on such
date on the basis of the offered
rates, as reflected on the
appropriate BHFX display of the
Reuter Monitor Money Rates Service
at or about 1:00 p.m. Frankfurt time
(a) with respect to the
determination of the Deutsche Mark
Amount, to purchase Deutsche Mark
with U.S. Dollars and (b) with
respect to the determination of the
Equivalent Amount, to purchase U.S.
Dollars with Deutsche Mark, provided
that, if at least two such offered
rates appear on such display, the
rate shall be the arithmetic mean of
such offered rates and, if no such
offered rates are so displayed, the
Spot Rate shall be determined by the
Agent on the basis of the arithmetic
mean of such offered rates notified
to the Agent by the Reference Banks
in accordance with their normal
practice.
"Stock" means, with respect to any Person,
any capital stock or other equity
rights, bonds, notes or other
instruments convertible into capital
stock or other equity interests, and
options, warrants or other rights to
acquire capital stock or other
equity interests.
"Subordinated Debt" means the following
Indebtedness (exclusive of the
Indebtedness of the Borrower to
Kronos evidenced by the Mirror
Notes):
36
(a) Indebtedness (if any) owed by
the Borrower to Kronos and/or
NL Industries in respect of
loans to the Borrower from
Kronos and/or NL Industries
made after the First
Prepayment Date if and to the
extent that (i) the proceeds
of such loans are deposited
by Kronos and/or NL
Industries into the Special
Purpose Account (or, if so
agreed by the Agent, into
another special, restricted
account of the Borrower
maintained at, and acceptable
to, the Agent from which the
Borrower may not make
withdrawals or otherwise
direct distributions except
with respect to any interest
to accrue thereon), and (ii)
such proceeds are applied to
the Loans in accordance with
the Special Purpose Account
Agreement;
(b) Indebtedness (if any) owed by
the Borrower to Kronos and/or
NL Industries in respect of
loans to the Borrower from
Kronos and/or NL Industries
made after the First
Prepayment Date obtained for
general corporate purposes or
made to comply with the
obligations of Kronos and/or
NL Industries under the
Liquidity Undertaking, which
Indebtedness is not otherwise
permitted under the
definition of "Permitted
Indebtedness" or described in
CLAUSE (A) of this definition
of "Subordinated Debt";
(c) the Kronos Subordinated Loan
and the NL Subordinated Loan;
and
(d) other Indebtedness approved
by the Majority Banks as
Subordinated Debt.
"Subordinated Loan Documents" means the
Subordination Agreement, the NL
Subordinated Note and the Kronos
Subordinated Note, true, correct and
complete photocopies of which (other
than the Subordination Agreement)
are attached hereto as EXHIBIT C.
37
"Subordination Agreement" means the Amended and
Restated Subordination and
Contribution Agreement dated as of
the First Restatement Date among NL
Industries, Kronos, the Borrower and
the Agent, as amended or
supplemented from time to time.
"Subsidiary" means any Person Controlled directly
or indirectly by the Borrower.
"Tax Refund" means the German income
taxes to be refunded to the
Borrower, if any, pursuant to its
1990 German federal corporate income
tax returns for calendar year 1990
claiming refunds aggregating more
than DM 150,000,000 of German income
taxes previously paid by the
Borrower and certain Consolidated
Subsidiaries for calendar years
1988, 1989 and 1990.
"Taxes" shall have the meaning set forth in
SECTION 11.01.
"Technology Undertaking" means the Amended and
Restated Technology and Trademark
Undertaking dated as of the First
Restatement Date among Kronos,
Kronos (US) and the Agent, as
amended or supplemented from time to
time.
"Temporary Cash Investment" means any
Investment in (i) direct obligations
of, or obligations guaranteed by,
the governments of Belgium, Canada,
Germany, France, Norway, the United
Kingdom or the United States or any
agency of any of the foregoing, (ii)
commercial paper (including, without
limitation, Eurocommercial paper)
rated in the highest grade by an
internationally recognized credit
rating agency, (iii) time deposits
(including, without limitation,
Euro-deposits and certificates of
deposit), with prime commercial
banks of international standing, and
(iv) bonds issued by corporations
and financial institutions with
obligations rated at least "AA" by
an internationally recognized credit
rating agency; provided, however, in
each case, that such Investment
matures within one year from the
date of
38
acquisition thereof by the Borrower
or its Subsidiary.
"Tentative Tax Refund" means as set forth in
the Tentative Tax Refund Letter.
"Tentative Tax Refund
Availability Amount" means as set forth in the
Tentative Tax Refund Letter.
"Tentative Tax Refund Letter" means that
certain letter dated May 27, 1994,
from the Borrower to the Agent.
"Term Portion" means that portion of the
principal of the Loan other than the
Revolving Portion.
"Third Amendment Agreement" means as set
forth in the third paragraph of the
preamble of this Agreement.
"Third Party License Agreements" shall have
the meaning set forth in SECTION
15.21.
"Total Assets" means total assets of the
Borrower and its Subsidiaries on a
consolidated basis in conformity
with German GAAP.
"Underwriting Agreement" means the Underwriting
Agreement dated as of October 13,
1993, between NL Industries and
Salomon Brothers Inc. executed by
the parties thereto in connection
with the underwriting of the NL
Notes.
"U.S. Dollars or U.S. $" means lawful
currency of the United States of
America.
When used in this Agreement:
(a) A reference to a law, rule or regulation includes any amendment,
supplement or modification to such law, rule or regulation and
any successor to such law, rule or regulation;
(b) A reference to an agreement, instrument or document shall include
such agreement, instrument or document as the same may be
amended, modified, supplemented or restated from time to time in
accordance with its terms and as permitted by this
39
Agreement or has been amended, modified, supplemented or restated
in accordance with its terms;
(c) All article and section headings in this Agreement are for ease
of reference only and shall be disregarded in the construction of
this Agreement; and
(d) A reference to a Person shall, unless otherwise provided, include
its successors.
ARTICLE 2. THE FACILITY
2.01 (a) The Banks (or their predecessors in interest) previously
granted, through their respective Lending Offices, to the
Borrower, upon the terms and subject to the conditions of the
Original Agreement (as and to the extent amended by this
Agreement), the Loan in the maximum aggregate principal amount of
DM 1,600,000,000 (Deutsche Mark One Billion Six Hundred Million),
of which DM 1,100,000,000 (Deutsche Mark One Billion One Hundred
Million) was outstanding as of the First Restatement Date (prior
to giving effect to the First Prepayment). On the First
Prepayment Date and in accordance with SECTION 2.01 of the First
Restated Agreement, but immediately prior to the making of the
First Prepayment, the Loan was deemed to be divided into two
portions, the Term Portion in the outstanding principal amount of
DM 850,000,000 (Deutsche Mark Eight Hundred Fifty Million) and
the Revolving Portion in the outstanding principal amount of DM
250,000,000 (Deutsche Mark Two Hundred Fifty Million). On the
First Prepayment Date and in accordance with SECTION 2.01 of the
First Restated Agreement, and promptly upon the consummation of
the NL Debt Offering, NL Industries or Kronos wire transferred to
the Agent (to the Agent's account specified in SECTION 11.04)
immediately available funds in the amount equal to the First
Prepayment Amount. The Borrower agreed that it had absolutely no
control over such funds used to make the First Prepayment and
that its estate was not, in any way, diminished as a result of
such transfer of funds or the First Prepayment. Immediately upon
the Agent's receipt of the First Prepayment, the First Prepayment
was applied in accordance with SECTION 2.1 of the First Restated
Agreement as a prepayment of the principal of the Loan, as
follows:
(i) first, DM 400,000,000 (Deutsche Mark Four Hundred Million)
of the First Prepayment Amount was applied to the Term
Portion;
(ii) second, DM 150,000,000 (Deutsche Mark One Hundred Fifty
Million) of the First Prepayment Amount was applied to the
Revolving Portion as a prepayment of the Loans pursuant to
SECTION 8.02; and
(iii) third, an amount equal to DM 2,000,000 (Deutsche Mark Two
Million) of the First Prepayment Amount was applied to the
Term Portion.
40
After giving effect to such application of the First Prepayment
and other prepayments made in accordance with the First Restated
Agreement, the outstanding principal balance of the Term Portion
was, immediately prior to the Second Restatement Date, DM
395,537,463 (Deutsche Mark Three Hundred Ninety-Five Million Five
Hundred Thirty-Seven Thousand Four Hundred Sixty-Three).
(b) The Banks shall continue to maintain the Loan in accordance with
and subject to the terms and provisions of this Agreement. On or
before the Second Restatement Date, NL Industries shall wire
transfer to the Agent's account with respect to payments in
Deutsche Mark specified in SECTION 11.04, in immediately
available funds, proceeds of the NL Subordinated Loan in the
amount equal to the Second Prepayment Amount. The Borrower agrees
that it shall have absolutely no control over such funds used to
make the Second Prepayment and that its estate shall not be, in
any way, diminished as a result of such transfer of funds or the
Second Prepayment. Immediately upon the Agent's receipt of the
Second Prepayment, the Second Prepayment shall be promptly and
automatically applied by the Agent as a prepayment of the
principal of the Term Portion of the Loan as follows: first, DM
20,000,000 (Deutsche Mark Twenty Million) of the Second
Prepayment Amount shall be applied as a mandatory prepayment of a
portion of the amount equal to the Tax Refund in accordance with
SECTION 8.01(D) and, second, DM 130,000,000 (Deutsche Mark One
Hundred Thirty Million) of the Second Prepayment Amount shall be
applied as a mandatory prepayment pursuant to SECTION 8.01(H).
Also concurrently herewith, the Borrower shall cause NL
Industries to wire transfer to the Borrower's account number
5803610284 maintained at Bayerische Hypotheken-und Wechselbank
AG, Munich, in immediately available funds, the remainder of the
proceeds of the NL Subordinated Loan in the amount of DM
110,000,000 (Deutsche Mark One Hundred Ten Million), which
proceeds shall be available for general corporate purposes of the
Borrower without any restriction on use of proceeds imposed by
any Affiliate of the Borrower. The proceeds of the Kronos
Subordinated Loan in the amount of DM 25,000,000 (Deutsche Mark
Twenty-Five Million) also shall be available for working capital
purposes of the Borrower without any restriction on use of
proceeds imposed by any Affiliate of the Borrower.
2.02 Upon the terms and subject to the conditions of this Agreement, the
Revolving Portion shall be made available to the Borrower severally by
each Bank in the amount of such Bank's Revolving Commitment under this
Agreement.
2.03 The failure of any Bank to perform its obligations under this Agreement
shall not affect the obligations of the Borrower toward the Agent or any
other Bank or the obligations of any other Bank toward the Borrower, nor
shall the Agent or any other Bank be liable for the failure of such Bank
to perform its obligation under this Agreement.
41
2.04 (a) The Revolving Portion may be, from time to time, prepaid in
whole or in part at the option of the Borrower pursuant to
SECTION 8.02 and thereafter the amounts so prepaid may be
reborrowed pursuant to, and in compliance with all terms and
conditions of, SECTION 2.04 and the other provisions of this
Agreement. Notwithstanding anything to the contrary contained in
SECTION 2.04 or elsewhere in this Agreement, the amount of the
Loan that may be reborrowed by the Borrower pursuant to SECTION
2.04 at any time shall not exceed the Revolving Portion
Availability at such time. The Borrower may not reborrow any
amounts prepaid pursuant to SECTION 8.01 or any other provision
of this Agreement (other than SECTION 8.02, to the extent
permitted in the immediately preceding sentences). The Borrower
and the Banks hereby acknowledge and agree that, as of the Second
Restatement Date and after giving effect to the prepayment in an
amount equal to the Tax Refund as referred to in SECTION 8.01(D),
the Revolving Portion Availability is DM 29,928,000 (Deutsche
Mark Twenty-Nine Million Nine Hundred Twenty-Eight Thousand)
(i.e., the remainder of DM 230,000,000, the maximum principal
amount of the Revolving Portion as of the Second Restatement
Date, minus DM 200,072,000, the outstanding principal amount of
the Revolving Portion as of the Second Restatement Date).
(b) Upon the terms and subject to the conditions set forth in this
SECTION 2.04 and elsewhere in this Agreement (including, without
limitation, the Borrower's satisfaction of all conditions
precedent to such reborrowing), and upon request of the Borrower
made pursuant to a Notice of Borrowing delivered to the Agent in
compliance with SECTION 4.02(C), each Bank agrees, severally and
not jointly, to make advances of the Revolving Portion (including
the Kronos Titan Revolving Portion) to or for the account of the
Borrower from the First Prepayment Date to August 15, 2000, by
making such amounts available to the Agent on the respective
Drawdown Dates therefor pursuant to SECTION 11.06; provided,
however, that (i) the principal amount of each advance of the
Revolving Portion made by each Bank pursuant to this SECTION 2.04
at any time may not exceed such Bank's pro rata share (based upon
its Revolving Commitment as a percentage of the aggregate
Revolving Commitments of all Banks) of the Revolving Portion
Availability at such time and the aggregate principal amount of
all advances of the Revolving Portion made by each Bank pursuant
to this SECTION 2.04 and outstanding from time to time may not
exceed such Bank's pro rata share (based upon its Revolving
Commitment as a percentage of the aggregate Revolving Commitments
of all Banks) of the Revolving Portion and (ii) the aggregate
principal amount of all advances of the Revolving Portion made by
all Banks pursuant to this SECTION 2.04 at any time may not
exceed the Revolving Portion Availability at such time and the
aggregate principal amount of all advances of the Revolving
Portion made by all Banks pursuant to this SECTION 2.04 and
outstanding from time to time may not exceed the aggregate
Revolving Commitments of all Banks. Unless the Agent
42
determines that any applicable condition precedent to any such
reborrowing has not been satisfied, the Agent shall make the
funds so received from the Banks available to the Borrower
pursuant to SECTION 11.05; provided, however, that such funds
consisting of drawdowns under the Kronos Titan Revolving Portion
requested by Kronos Titan (together with the Borrower) shall be
made available directly to Kronos Titan in accordance with
SECTION 2.04(C). Each advance of the Revolving Portion made
pursuant to this SECTION 2.04 shall be made as a part of a
borrowing consisting of advances made by the Banks in accordance
with their respective pro rata shares thereof; provided, however,
that the failure of any Bank to advance its pro rata share of any
such advance shall not in itself relieve any other Bank of its
obligation under this SECTION 2.04 (it being agreed, however,
that no Bank shall be responsible for the failure of any other
Bank to do so). Prior to August 15, 2000, the Borrower may repay
and reborrow under this SECTION 2.04 and the Banks shall make
advances in accordance with the terms of this Agreement. The
Banks shall not be obligated to make any advances of the
Revolving Portion under this SECTION 2.04 subsequent to the
August 15, 2000.
(c) It is acknowledged and agreed by the parties hereto that Kronos
Titan may utilize certain proceeds of drawdowns under the
Revolving Portion. Accordingly, as of the Second Restatement
Date, an amount of the Revolving Portion not to exceed DM
20,000,000 (Deutsche Mark Twenty Million) shall be designated as
the "Kronos Titan Revolving Portion". The Kronos Titan Revolving
Portion is, and shall be deemed to be for all purposes of this
Agreement, a part of the Revolving Portion and is available to be
drawn down by the Borrower in accordance with this Agreement. The
Borrower and Kronos Titan agree that, notwithstanding anything to
the contrary contained in this SECTION 2.04, the Borrower shall
use its best efforts to ensure that the proceeds of all drawdowns
under the Revolving Portion that are to be utilized by Kronos
Titan, unless the Kronos Titan Revolving Portion is then fully
drawn, shall be requested by Kronos Titan (together with the
Borrower) to be advanced by the Agent directly to Kronos Titan.
Notwithstanding anything to the contrary contained in this
Agreement or any other Loan Document, each of the Borrower and
Kronos Titan hereby jointly and severally agrees to repay the
principal of the Kronos Titan Revolving Portion, to pay all
interest accrued on such principal that is outstanding from time
to time and to pay all fees accrued with respect to the Kronos
Titan Revolving Portion from time to time, all in accordance with
the terms and provisions of this Agreement; provided, however,
that Kronos Titan so agrees only if and to the extent that such
indebtedness, liabilities and obligations relate to advances
under the Kronos Titan Revolving Portion advanced directly to
Kronos Titan. Furthermore, the Borrower acknowledges and agrees
that advances of the Kronos Titan Revolving Portion to Kronos
Titan shall directly benefit the Borrower to the same extent as
if such advances had been made directly to the Borrower, and that
the indebtedness, liabilities and obligations of the Borrower
with respect to the Kronos Titan Revolving Portion shall be
identical to
43
the Borrower's indebtedness, liabilities and obligations with
respect to the portion of the Revolving Portion that is not the
Kronos Titan Revolving Portion.
2.05 The Borrower may, in connection with and concurrently with any Notice of
Borrowing with respect to any reborrowing of the Revolving Portion
pursuant to SECTION 2.04 and in connection with and concurrently with
any selection of a new Interest Period pursuant to SECTION 5.02, deliver
to the Agent a written request that such reborrowing or such portion of
the Loan subject to such new Interest Period, as the case may be, be
denominated or redenominated (as the case may be) in U.S. Dollars (as
opposed to Deutsche Mark), provided, however, that the aggregate
principal amount of the Loan at any time outstanding that is denominated
in U.S. Dollars may not, without the prior written consent of the Banks
that hold at least 80% (eighty percent) of the aggregate unpaid
principal amount of the Loans, immediately upon giving effect to any
such reborrowing or any such Interest Period, exceed the Base Deutsche
Mark Amount of DM 350,000,000 (Deutsche Mark Three Hundred Fifty
Million). Each such written request for a U.S. Dollar denominated
tranche shall specify the Base Deutsche Mark Amount of such tranche. If
such a written request for a U.S. Dollar denominated tranche is not
received by the Agent at least five (5) Business Days prior to the
proposed Drawdown Date, with respect to a Notice of Borrowing, or no
later than 10:00 a.m., Luxembourg time, on the fourth (4th) Business Day
prior to the beginning of the relevant Interest Period, with respect to
the selection of a new Interest Period, then the tranche shall be
denominated in Deutsche Mark, provided, however, that if the
corresponding tranche for the Interest Period then ending is denominated
in U.S. Dollars, then the tranche for the next succeeding Interest
Period shall also be denominated in U.S. Dollars unless the Borrower
notifies the Agent, pursuant to SECTION 5.02, that such tranche shall be
redenominated in Deutsche Mark for the next succeeding Interest Period.
Any agreement or obligation of the Banks to provide any portion of the
Loan in Deutsche Mark or U.S. Dollars pursuant to this Agreement shall
in all cases be subject to the condition that no circumstance described
in SECTION 7.01 shall have occurred (as determined in good faith by the
Agent) in the London interbank Euro-currency market or otherwise after
request therefor by the Borrower and before the relevant Drawdown Date
or the first day of the relevant Interest Period, as the case may be. If
the Agent has determined that such a change has occurred, then it shall
forthwith give notice thereof to the Borrower and each Bank and the
procedures set forth in ARTICLE 7 shall be applicable.
2.06 (a) If the Borrower requests (pursuant to SECTION 2.05) that any
reborrowing of the Revolving Portion (pursuant to SECTION 2.04)
be denominated in U.S. Dollars, the Banks shall, subject to
compliance by the Borrower with SECTION 2.05 and the other terms
and conditions of this Agreement, make their advances of the
reborrowing in U.S. Dollars in an aggregate amount equal to the
Equivalent Amount of the Base Deutsche Mark Amount of the
advances to be funded in U.S.
Dollars.
44
(b) In the event of any advance of the Loan being redenominated in
whole or in part in U.S. Dollars for the next succeeding Interest
Period and such advance having been denominated in Deutsche Mark
during the Interest Period then ending, each Bank will make an
amount equal to the Equivalent Amount in U.S. Dollars of the Base
Deutsche Mark Amount of its advance (or the relevant portion
thereof) to be denominated in U.S. Dollars during the next
succeeding Interest Period available to the Agent on the first
day of such next succeeding Interest Period. The Agent shall,
subject to the provisions of SECTION 2.06(F), make each such
amount of U.S. Dollars available to the Borrower on such date and
in like currency and funds as received by the Agent from the
Banks in the manner provided in SECTION 11.06, and the Borrower
on the last day of the Interest Period then ending shall repay
the amount of such advance (or the relevant portion thereof)
outstanding in Deutsche Mark during the Interest Period then
ending (with accrued interest thereon in Deutsche Mark).
(c) In the event that (i) any advance of the Loan denominated in U.S.
Dollars is to continue to be denominated in U.S. Dollars for the
next succeeding Interest Period, and (ii) as of the last day of
the Interest Period then ending, the aggregate Deutsche Mark
Amount of all outstanding advances of the Loan then denominated
in U.S. Dollars is more than one hundred and five percent (105%)
of the aggregate Base Deutsche Mark Amount of all outstanding
advances of the Loan then denominated in U.S. Dollars, then the
Borrower shall repay to the Agent, on the last day of such
Interest Period then ending, an amount of U.S. Dollars as will
result in (after giving effect to such repayment) the aggregate
Deutsche Mark Amount of all outstanding advances of the Loan then
denominated in U.S. Dollars, as of the last day of the Interest
Period then ending, being equal to one hundred percent (100%) of
the aggregate Base Deutsche Mark Amount of all outstanding
advances of the Loan then denominated in U.S. Dollars. The amount
to be repaid by the Borrower pursuant to this SECTION 2.06(C)
shall be in addition to any Repayment Installment or other amount
due and payable by the Borrower on the last day of such Interest
Period then ending. In the event that (A) any advance of the Loan
denominated in U.S. Dollars is to continue to be denominated in
U.S. Dollars for the next succeeding Interest Period, (B) as of
the last day of the Interest Period then ending, the aggregate
Deutsche Mark Amount of all outstanding advances of the Loan then
denominated in U.S. Dollars is less than ninety-five percent
(95%) of the aggregate Base Deutsche Mark Amount of all
outstanding advances of the Loan then denominated in U.S.
Dollars, and (C) no Default shall have occurred and be continuing
as of the last day of the Interest Period then ending, then each
Bank shall make available to the Agent, and the Agent shall make
available to the Borrower, on the last day of such Interest
Period then ending, such Bank's pro rata share (based upon its
Commitment as a percentage of the aggregate Commitments of all
Banks) of an amount of U.S. Dollars as will result in (after
giving effect to the delivery of such amount to the Borrower) the
aggregate Deutsche Mark
45
Amount of all outstanding advances of the Loan then denominated
in U.S. Dollars, as of the last day of the Interest Period then
ending, being equal to one hundred percent (100%) of the
aggregate Base Deutsche Mark Amount of all outstanding advances
of the Loan then denominated in U.S. Dollars. The obligation of
the Banks and the Agent to make such additional amounts available
to the Agent and the Borrower, respectively, shall be subject, in
all respects, to the condition precedent that no circumstances
described in SECTION 7.01, as determined in good faith by the
Agent, shall have occurred in the London interbank Euro-currency
market or otherwise on or about the last day of such Interest
Period then ending.
(d) In the event of any advance of the Loan being redenominated in
whole or in part in Deutsche Mark for the next succeeding
Interest Period and such advance having been denominated in U.S.
Dollars during the Interest Period then ending, each Bank will
make its advance in Deutsche Mark in an amount equal to such
Bank's pro rata share of the Base Deutsche Mark Amount of the
aggregate advance to commence on the first day of such next
succeeding Interest Period. The Agent shall, subject to the
provisions of SECTION 2.06(F), make each such amount of Deutsche
Mark available to the Borrower on such date and in like currency
and funds as received by the Agent in the manner provided in
SECTION 11.06, and the Borrower on the last day of the Interest
Period then ending shall repay the amount of such advance (or the
relevant portion thereof) outstanding in U.S. Dollars during the
Interest Period then ending (with accrued interest therein on
U.S. Dollars).
(e) In the event that, with respect to any tranche requested to be
denominated in U.S. Dollars, any of the events specified in
SECTION 7.01 shall occur relating to U.S. Dollar deposits, then
the Agent, with the consent of Majority Banks and by the giving
of notice to the Borrower, may require that (i) each advance
shall be made to the Borrower in Deutsche Mark in an amount equal
to such Bank's pro rata share of the Base Deutsche Mark Amount of
the aggregate advance requested to be made in U.S. Dollars, (ii)
each advance which shall have been denominated in Deutsche Mark
during the Interest Period then ending shall continue to be
denominated in Deutsche Mark and (iii) each Bank shall make
available to the Agent in Deutsche Mark the Base Deutsche Mark
Amount of its advance which shall have been outstanding in U.S.
Dollars during the Interest Period then ending on the first day
of the next succeeding Interest Period. The Agent shall, subject
to the provisions of SECTION 2.06(F), make such Base Deutsche
Mark Amount available to the Borrower on the same date and in
like currency and funds as received by the Agent from such Bank
in the manner provided in SECTION 11.06 and the Borrower on the
last day of the Interest Period then ending shall repay the
amount of such advance denominated in U.S. Dollars during the
Interest Period then ending (with accrued interest thereon in
U.S. Dollars).
46
(f) In the event the Borrower is required to repay any amounts on the
last day of any Interest Period pursuant to this SECTION 2.06,
the Agent shall make any amounts to be advanced by the Banks
available to the Borrower on the first day of the next succeeding
Interest Period only if the Agent receives, concurrently
therewith in accordance with this Agreement, the relevant amounts
to be repaid by the Borrower pursuant to this SECTION 2.06. The
Borrower hereby agrees that it shall indemnify the Agent and each
Bank, and hold the Agent and each Bank harmless from and against,
any and all funding or foreign exchange costs, losses or expenses
that the Agent and the Banks may suffer, sustain or incur as a
consequence of a failure by the Borrower to promptly pay, when
due, any amounts required to be paid by the Borrower.
ARTICLE 3. PURPOSE OF THE LOAN
The Borrower represents and warrants that the proceeds of the Loan
initially were used to refinance all of its then outstanding bank indebtedness
and certain of its then existing indebtedness (including principal and accrued
interest) to Kronos (US) (then known as Kronos, Inc.), and that the remaining
proceeds of the Loan in excess of the amount needed to refinance such
indebtedness were used exclusively for its general corporate purposes. The
Borrower shall use the entire proceeds of each reborrowing under the Revolving
Portion exclusively for its general corporate purposes (including, without
limitation, to make Restricted Payments permitted under SECTION 16.20).
ARTICLE 4. CONDITIONS PRECEDENT AND NOTICE OF BORROWING
4.01 (a) Reference is hereby made to Sections 4.01(a), 4.01(b) and
4.01(c) of the First Restated Agreement, which Section 4.01(a)
contains certain conditions of the First Restated Agreement, and
which Sections 4.01(a), 4.01(b) and 4.01(c) are incorporated
herein by reference.
(b) Notwithstanding anything to the contrary contained in this
Agreement or in any other Loan Document, this Agreement shall
become effective when (and shall not become effective unless and
until) each of the following conditions precedent are satisfied
to the reasonable satisfaction of the Agent:
(i) The Agent shall have received the following documents, as
appropriately executed, delivered and (where applicable)
completed to its reasonable satisfaction (except that any
such condition precedent set forth in this CLAUSE (I) may
be waived by the Agent, subject to any post-closing
documentation requirements imposed by the Agent):
(A) amendment and restatement, amendment and/or
reaffirmation of each of the Pledge
Agreements executed by
47
the Borrower or, with respect to the Pledge
Agreement relating to the Stock of NL
Industries (Deutschland) GmbH pledged by NL
Industries, executed by NL Industries, each
of which amendments and restatements,
amendments and/or reaffirmations shall be in
the applicable form attached hereto as
EXHIBIT D, together with such agreements,
documents and instruments as may reasonably
be required by the Agent in connection what
the Pledge Agreements;
(B) amendment and/or reaffirmation of each of
the Guaranties (other than the NL/Kronos
Guaranty which has been fully performed)
executed by Kronos Canada, Inc., 2927527
Canada Inc. and 2969157 Canada Inc., each of
which amendments and/or reaffirmations shall
be in the applicable form attached hereto as
EXHIBIT E;
(C) Second Amended and Restated Technology and
Trademark Undertaking executed by Kronos and
Kronos (US), which agreement shall be in the
form attached hereto as EXHIBIT F;
(D) amendment and restatement, amendment and/or
reaffirmation of the Amended and Restated
Subordination and Contribution Agreement
executed by NL Industries, Kronos and the
Borrower, which amendment and restatement,
amendment and/or reaffirmation shall be in
the form attached hereto as EXHIBIT G;
(E) amendment and restatement, amendment and/or
reaffirmation of the Amended and Restated
Liquidity Undertaking executed by NL
Industries, Kronos and the Borrower, which
amendment and restatement, amendment and/or
reaffirmation shall be in the form attached
hereto as EXHIBIT H;
(F) amendment and restatement, amendment and/or
reaffirmation of (i) each of the agreements
executed by the Borrower, NL Industries and
Kronos pursuant to which it appoints Dr.
Wienand Meilicke to accept service of
process in Germany pursuant to the
applicable Loan Documents, and (ii) each of
the agreements executed by Prentice-Hall
Corporation System, Inc. pursuant to which
it agrees to act as agent for the Borrower,
NL Industries and Kronos to accept service
of process in New York pursuant to the
48
applicable Loan Documents, which amendments
and restatements, amendments and/or
reaffirmations shall be in form and
substance reasonably satisfactory to the
Agent;
(G) an Acknowledgment of Limitation of Special
Damages executed by Kronos World Services
S.A./N.V., which acknowledgment shall be in
the form attached hereto as EXHIBIT I;
(H) the NL Guaranty, which Guaranty shall be in
the form attached hereto as EXHIBIT J;
(I) the Canadian Security Documents executed by
Kronos Canada, Inc., 2927527 Canada Inc. and
2969157 Canada Inc., which Canadian Security
Documents shall be in the forms attached
hereto as EXHIBIT K;
(J) the Nordenham Mortgage executed by Kronos
Titan, which Nordenham Mortgage shall secure
only the indebtedness, liabilities and
obligations of Kronos Titan relating to the
Kronos Titan Revolving Portion and shall be
in the form attached hereto as EXHIBIT L;
(K) the Cash Pledge Agreements executed by the
Borrower, which Cash Pledge Agreements shall
be in the forms attached hereto as EXHIBIT
M;
(L) the Cash Pledge Agreements executed by
Kronos Canada, Inc., 2927527 Canada Inc. and
2969157 Canada Inc., which Cash Pledge
Agreements shall be in the forms attached
hereto as EXHIBIT N;
(M) a certificate of the Secretary, Assistant
Secretary or other appropriate officer,
director or other representative of each of
the Borrower, its Subsidiaries, NL
Industries, Kronos and Kronos (US) (as
applicable) as to the authorization of the
Loan Documents to be executed by such Person
pursuant to this Agreement and as to other
corporate matters;
(N) a true and correct photocopy of each of the
Subordinated Loan Documents as executed by
all parties thereto, which photocopies shall
be certified by the Secretary or an
Assistant Secretary of each of the parties
thereto as being
49
true, correct and complete photocopies
thereof, all of which Subordinated Loan
Documents shall be in form and substance
satisfactory to the Agent;
(O) such legal opinions of counsel to the
Borrower and its Subsidiaries and counsel to
the Agent as the Agent may require, all of
which opinions shall be in form and
substance reasonably satisfactory to the
Agent;
(P) such other agreements, documents and
instruments relating to the Loan Documents
and/or the parties thereto as the Agent may
reasonably request.
(ii) Any and all invoiced fees, costs or expenses to be paid or
reimbursed, as of the Second Restatement Date, by the
Borrower to the Agent or any Bank with respect to this
Agreement or any other Loan Document or any transaction
contemplated hereby or thereby (including, without
limitation, charges and expenses for which the Borrower is
obligated pursuant to the Original Agreement, the First
Restated Agreement and/or this Agreement), shall have been
paid in full.
(iii) All corporate proceedings taken in connection with the
transactions contemplated by this Agreement, and all legal
matters incident to this Agreement, shall be reasonably
satisfactory to the Agent.
(iv) The Borrower shall have paid to the Agent all fees
required to be paid to the Agent or any Bank on or before
the Second Restatement Date pursuant to SECTION 19.01 and
SECTION 19.02.
(v) The NL Subordinated Loan shall have been made in
accordance with the terms and provisions of the
Subordinated Loan Documents.
(vi) DM 57,287,585 (Deutsche Mark Fifty-Seven Million Two
Hundred Eighty-Seven Thousand Five Hundred Eighty-Five) of
the Tax Refund shall have been drawn under the Tentative
Tax Refund Availability Amount of the Revolving Portion
Availability and paid to the Agent to be applied to the
Term Portion in accordance with SECTION 8.01(D).
(vii) The Agent shall have received (A) from NL Industries and
for the account of the Banks ratably in proportion to
their portion of the Loan and for application against the
outstanding principal amount of the Term Portion of the
Loan in accordance with SECTION 2.01(B), the Second
Prepayment from the proceeds of the NL Subordinated Loan,
and (B) a Solvency Certificate
50
executed by NL Industries and Kronos, which certificate
shall be in the form attached hereto as EXHIBIT O.
(viii) The Borrower shall have received DM 110,000,000 (Deutsche
Mark One Hundred Ten Million) of the proceeds of the NL
Subordinated Loan (i.e., the entirety of the proceeds of
the NL Subordinated Loan in excess of the Second
Prepayment Amount) in accordance with SECTION 2.01(B).
(c) The Borrower shall (except to the extent waived as permitted by
this Agreement) cause the conditions precedent set forth in
SECTION 4.01(B) to be satisfied concurrently with the Borrower's
execution of this Agreement, and the Borrower shall, concurrently
with its execution of this Agreement, so certify to the Agent and
the Banks.
4.02 Each Drawdown of the Revolving Portion (including, without limitation,
the Kronos Titan Revolving Portion) is subject to:
(a) no Default having occurred;
(b) all representations and warranties made by the Borrower and/or
any Affiliate in the Loan Documents being true and correct as of
the Drawdown Date (other than the representations and the
warranties that are expressly made only in reference to another
specific date);
(c) the receipt by the Agent of a notice of borrowing in the form set
forth in EXHIBIT P ("Notice of Borrowing"), duly completed, not
less than 5 (five) Business Days prior to the proposed Drawdown
Date;
(d) the conditions that (i) immediately prior to giving effect to
such drawdown, the outstanding principal amount of the Loan is
not less than DM 100,000 (Deutsche Mark One Hundred Thousand),
(ii) the Agent, as Agent for the Banks, shall have a first
priority perfected security interest in the Stock of the
respective Subsidiaries pledged under the Pledge Agreements as
security for the Loan (including, without limitation, the
Revolving Portion and any reborrowings of the Revolving Portion
to be advanced on the date of any drawdown thereof), which Stock
shall be free and clear of all Liens (other than such security
interest securing the Loan) except for any Permitted Liens
referred to in CLAUSE (D), (E), (F) OR (I) of the definition of
such term in this Agreement, and (iii) the Agent, as Agent for
the Banks, shall have the additional Liens as security for the
Loans (including, without limitation, the Revolving Portion and
any reborrowings of the Revolving Portion to be advanced on the
date of any drawdown thereof) provided in SECTION 17.05, which
Liens shall have the priority specified in such SECTION 17.05;
and
51
(e) the condition that no Excess Adjusted Restricted Payments have
been directly or indirectly paid or made by the Borrower or any
of its Subsidiaries to any Affiliate of the Borrower (other than
the Borrower or Subsidiaries of the Borrower) from and after
January 1, 1996 (subject to the 30 (thirty) day cure period
specified in the definition of "Excess Adjusted Restricted
Payments").
4.03 Each Notice of Borrowing shall be irrevocable and the Borrower shall be
bound to borrow in accordance with such notice.
4.04 Upon the Agent's receipt of each (a) Notice of Borrowing, (b) notice of
selection of a new Interest Period pursuant to SECTION 5.02 or (c)
request that any tranche be denominated (or redenominated) in U.S.
Dollars pursuant to SECTION 2.05, the Agent shall promptly notify each
Bank of the contents thereof and, if applicable, of such Bank's pro rata
share of any advance of the Loan to be made. Furthermore, upon the
determination of the interest rate applicable to any tranche, the Agent
shall promptly notify each Bank of such interest rate.
ARTICLE 5. INTEREST PERIODS
5.01 The Loan proceeds shall be made available to the Borrower in no more
than 4 (four) tranches for Interest Periods of 1 (one), 3 (three), 6
(six) or 12 (twelve) months with respect to each such tranche, except as
provided in SECTION 5.04 and provided that the Borrower may select
Interest Periods of 1 (one) month or 3 (three) months only with respect
to any tranche denominated or to be denominated in U.S. Dollars. Each
tranche shall be in a minimum principal amount of DM 100,000,000
(Deutsche Mark One Hundred Million) and integral multiples of DM
10,000,000 (Deutsche Mark Ten Million) in excess thereof (or the
Equivalent Amount thereof in U.S. Dollars); provided, however, that any
tranche evidencing a reborrowing of the Revolving Portion pursuant to
SECTION 2.04 shall be in a minimum principal amount of DM 5,000,000
(Deutsche Mark Five Million) and integral multiples of DM 1,000,000
(Deutsche Mark One Million) in excess thereof (or the Equivalent Amount
thereof in U.S. Dollars) and provided, further, however, that any
concurrent reborrowing under the Kronos Titan Revolving Portion and
reborrowing under the Revolving Portion that does not constitute the
Kronos Titan Revolving Portion shall be aggregated for purposes of the
immediately preceding proviso. Each tranche shall be denominated in
Deutsche Mark or, if permitted by SECTION 2.05 and upon compliance by
the Borrower with SECTION 2.05, U.S. Dollars, provided, however, that
each tranche shall be entirely denominated in either Deutsche Mark or
U.S. Dollars.
5.02 The Borrower shall inform the Agent no later than 10:00 a.m., Luxembourg
time, on the 4th (fourth) Business Day prior to the beginning of the
relevant Interest Period of the tenor of the next Interest Period,
including, without limitation, the duration of such Interest Period and
the currency (whether Deutsche Mark or U.S. Dollars) in which the
tranche to be outstanding during such Interest Period is to be
denominated. Unless the Agent is notified to the contrary by such time,
the relevant Interest Period shall have a duration of
52
1 (one) month and the currency in which the tranche to be outstanding
during such Interest Period is to be denominated shall be the same
currency in which the corresponding tranche was denominated for the
Interest Period then ending.
5.03 Each Interest Period for any tranche, other than the initial Interest
Period, shall commence on the expiration of the immediately preceding
Interest Period for such tranche. If an Interest Period would end on a
day which is not a Business Day, such Interest Period shall be extended
to the next succeeding Business Day unless such day falls into the next
calendar month, in which event such Interest Period shall end on the
immediately preceding Business Day. If any other date on which interest
is payable under this Agreement is not a Business Day, then payment
shall be due on the next succeeding Business Day unless such day falls
into the next calendar month, in which event payment shall be due on the
immediately preceding Business Day.
5.04 The Borrower may not select an Interest Period which begins prior to a
Repayment Date and ends after such Repayment Date unless the aggregate
amount of the tranches which have Interest Periods ending on or prior to
such Repayment Date shall at least equal the principal amount of the
Loan required to be paid on such Repayment Date. Notwithstanding
anything herein to the contrary, the Borrower may select an Interest
Period other than one, three or six months, but not to exceed six months
(subject to the ability of the Reference Banks to determine the
Interbank Rate for such period), for that portion of the Loan not in
excess of the amount of the Loan which is scheduled to come due pursuant
to ARTICLE 9 within six months of the first day of such Interest Period
and which Interest Period shall end on such scheduled Repayment Date.
ARTICLE 6. INTEREST
6.01 On each Interest Payment Date, the Borrower shall pay to the Agent for
the account of the Banks for the Interest Period ending thereon, accrued
interest, on the applicable tranche as provided in this Agreement,
provided, however, that if any Interest Period is longer than 3 (three)
months, accrued interest shall be payable (a) on the date in the third
succeeding calendar month numerically corresponding to the commencement
date of such Interest Period, or, if there exists no date numerically
corresponding to the commencement date of such Interest Period in any
such third succeeding month, such accrued interest shall be payable on
the last Business Day of such third succeeding calendar month after the
first day of such Interest Period and (b) on the Interest Payment Date.
Interest shall be paid in the currency in which the applicable tranche
is denominated on the applicable Interest Payment Date.
6.02 The rate of interest applicable to each tranche of the Loan during any
Interest Period relating thereto shall be the Interbank Rate plus the
Margin.
53
6.03 Interest payable pursuant to this Agreement shall be calculated for the
actual number of days elapsed on the basis of a 360 (three hundred
sixty) day year.
6.04 The Agent shall promptly notify the Borrower and each Bank of each
determination of an interest rate made by the Agent under this
Agreement.
6.05 All agreements between the Borrower, the Agent and the Banks, whether
now existing or hereafter arising and whether written or oral, are
hereby limited so that in no contingency, whether by reason of
acceleration of the maturity of the Loan or otherwise, shall the
interest contracted for, charged or received by the Agent, the Banks or
any of them from the Borrower exceed the maximum amount permissible
under applicable law. If, from any circumstance whatsoever, interest
would otherwise be payable to the Agent, the Banks or any of them in
excess of the maximum lawful amount, the interest payable to the Agent,
the Banks or any of them shall be reduced to the maximum amount
permitted under applicable law; and if from any circumstance the Agent,
the Banks or any of them shall ever receive anything of value deemed
interest by applicable law in excess of the maximum lawful amount, an
amount equal to any excessive interest shall be applied to the reduction
of the principal of the Loan and to the payment of interest, or if such
excessive interest exceeds the unpaid principal balance of the Loan,
such excess shall be refunded to the Borrower. All interest paid or
agreed to be paid to the Agent, the Banks or any of them shall, to the
extent permitted by applicable law, be amortized, prorated, allocated
and spread throughout the full period until payment in full of the
principal (including the period of any renewal or extension hereof) so
that the interest on the Loan for such full period shall not exceed the
maximum amount permitted by applicable law. This paragraph shall control
all agreements between the Borrower, the Agent, the Banks or any of
them.
ARTICLE 7. SUBSTITUTE BASIS
7.01 If any of the following should occur:
(a) the Reference Banks determine and notify the Agent that, at or
about 11:00 a.m. (London time) on the Interest Determination Date
for an Interest Period, no Deutsche Mark deposits (as to the
portion of the Loan proposed to be denominated in Deutsche Mark)
or no U.S. Dollar deposits (as to the portion of the proposed
Loan to be denominated in U.S. Dollars) in the required amount
for the required Interest Period are being offered to the
Reference Banks by prime banks in the London interbank
Euro-currency market;
(b) before the close of business in Luxembourg on the Interest
Determination Date for an Interest Period, the Majority Banks
determine and notify the Agent that the rate at which such
deposits were being so offered does not accurately reflect the
cost to them of obtaining such deposits; or
54
(c) the Reference Banks shall determine and notify the Agent that, by
reason of circumstances affecting the London interbank
Euro-currency market generally, such deposits are not available
to banks in such market or that adequate and reasonable means do
not or will not exist for ascertaining the interest rate
applicable to the next succeeding Interest Period;
then, notwithstanding the provisions of ARTICLES 5 and 6, the Agent
shall forthwith give notice of any such event to the Borrower and each
Bank.
7.02 With respect to the circumstances described in SECTIONS 7.01(A) or
7.01(B) above, the Borrower may, subject to the rights of the Agent and
the Banks pursuant to SECTION 2.06(E):
(a) elect to prepay the applicable portion of the Loan, without
premium or penalty, at the end of the then current Interest
Period; or
(b) select an alternative Interest Period, to the extent available as
determined by the Reference Banks 2 (two) Business Days prior to
the first day of the next succeeding Interest Period, during
which Interest Period the applicable interest rate for the
applicable portion of the Loan shall be the Interbank Rate, if
available for such alternative Interest Period, plus the
applicable Margin; or
(c) request that the Agent, on behalf of the Banks, enter into
negotiations regarding the applicable interest rate, in which
event the Interest Period for the applicable portion of the Loan
shall be one month and during such Interest Period the Agent, on
behalf of the Banks, and the Borrower shall negotiate in good
faith to agree upon an interest rate that will adequately reflect
the cost to the Banks of maintaining or funding the applicable
portion of the Loan for such Interest Period, and if the Borrower
and the Majority Banks (662/3%) are able to agree on such
interest rate, the interest rate that shall apply to the
applicable portion of the Loan for such Interest Period shall be
the sum of the applicable Margin and the interest rate so agreed.
If the Borrower and the Agent, on behalf of the Banks, are unable
to agree upon an interest rate by the day which is 2 (two)
Business Days before the end of the one-month Interest Period
referred to above, the interest rate that shall apply to the Loan
for such Interest Period shall be (i) the rate determined by the
Agent to be the arithmetic mean (rounded upwards, if necessary,
to the nearest four decimal places) per annum of the respective
rates notified to the Agent by each Reference Bank as that which
expresses as a percentage rate per annum the cost to such
Reference Bank of obtaining such deposits from such sources as it
may select having reasonable regard to the interests of the
Borrower, plus (ii) the applicable Margin.
55
7.03 With respect to circumstances described in SECTION 7.01(C) above, the
duration of such next succeeding Interest Period shall be one month or,
if the period until the next Repayment Date is less than one month,
shall end on the next Repayment Date and, during such Interest Period,
the Borrower and the Agent, on behalf of the Banks and subject to the
consent of the Majority Banks (662/3%), shall negotiate in good faith in
order to redenominate the applicable portion of the Loan in an
alternative currency which is freely convertible into Deutsche Mark
(which alternative currency may include, without limitation, Deutsche
Mark as to the portion of the Loan proposed to be denominated in U.S.
Dollars) and in which deposits are available to the Reference Banks for
determining the interest rate from time to time applicable thereto (but
excluding any such currency for which any central bank or other
governmental authorization in the country of issue is required to permit
use of such currency by a Bank for lending hereunder, if such authori
zation has not been obtained and any currency the use of which as
contemplated hereunder is restricted or prohibited pursuant to any
request, directive, regulation or guideline of any governmental
authority (whether or not having the force of law) with which any Bank
is accustomed to act), and the interest rate that shall apply to the
applicable portion of the Loan for such Interest Period shall be the sum
of the applicable Margin and the interest rate for the alternative
currency so agreed. If the Borrower and the Agent, on behalf of the
Banks and with the consent of the Majority Banks (662/3%), are unable to
agree on such alternative currency or an interest rate for such
alternative currency by the day which is 2 (two) Business Days before
the end of the Interest Period referred to above, the Borrower shall
repay the applicable portion of the Loan together with accrued interest
thereon at the rate determined by the Agent to be the arithmetic mean
(rounded upwards, if necessary to the nearest four decimal places) of
the respective rates notified to the Agent by each Reference Bank as
being that which expresses as a percentage rate per annum the cost to
such Reference Bank of obtaining such deposits from such sources as it
may select having reasonable regard to the interests of the Borrower,
plus the applicable Margin, on the next Interest Payment Date, without
premium or penalty except as otherwise provided in SECTION 12.04.
7.04 During the period when any alternative interest rate or Interest Period
or redenomination of the Loan or any applicable portion thereof is in
force pursuant to SECTION 7.02 or 7.03 above, the Agent, in consultation
with the Banks, shall periodically review whether circumstances are such
that an Interbank Rate may again be determined in accordance with
ARTICLES 5 and 6. If such a determination may again be made, the Agent
shall forthwith give written notice thereof to the Borrower and each
Bank and the Interbank Rate, plus the applicable Margin, shall be the
applicable interest rate commencing with the beginning of the next
Interest Period for the Loan or the applicable portion thereof.
ARTICLE 8. PREPAYMENT
8.01 From and after the Prepayment Date, the Borrower shall make mandatory
prepayments of the Loan as follows:
56
(a) An amount equal to the Net Proceeds (with respect to CLAUSES (2)
and (3) below, only to the extent that the aggregate Net Proceeds
exceed DM 15,000,000 (Deutsche Mark Fifteen Million) during any
calendar year, from:
(1) the Disposition by the Borrower or any of its Subsidiaries
of any Stock of any Subsidiary, other than:
(i) Dispositions of Stock of any of the Subsidiaries
from the Borrower to any Subsidiary, from a
Subsidiary to the Borrower, or between
Subsidiaries; or
(ii) Dispositions which constitute Restricted Payments
permitted in accordance with SECTION 16.20 or
Dispositions permitted in accordance with SECTION
16.15(C);
(2) the Disposition by the Borrower or any of its Subsidiaries
of any assets, individually or in the aggregate, or of any
Stock of any Subsidiary (other than a Major Subsidiary or
a Pledged Subsidiary), other than:
(i) Dispositions of assets in the ordinary course of
business;
(ii) Dispositions from the Borrower to any Subsidiary,
from a Subsidiary to the Borrower or between
Subsidiaries;
(iii) Dispositions which constitute Restricted Payments
permitted in accordance with SECTION 16.20 or
Dispositions permitted in accordance with SECTION
16.15(C);
(iv) Dispositions which constitute interest payments on
Subordinated Debt permitted in accordance with
SECTION 16.09(D);
(v) Dispositions or other events described in CLAUSES
(1) or (3) of SECTION 8.01(A); or
(vi) Dispositions prior to the Second Restatement Date
of the distributorship/marketing arrangements
existing as of the First Restatement Date between
Rheox, Inc. and/or its subsidiaries and certain
Subsidiaries of the Borrower; and/or
(3) the Disposition, termination, shortening or other
modification of the Leverkusen Lease or any agreement
providing for the Disposition, termination, shortening or
other modification of the Leverkusen Lease;
57
shall be used, to the extent permitted by law, to prepay the
Loan, without premium or penalty except as set forth in SECTION
12.04, on the Interest Payment Date(s) immediately following the
receipt by the Borrower or any Subsidiary of such Net Proceeds,
in accordance with SECTION 8.01(B). If the Net Proceeds from the
aforementioned Dispositions described in CLAUSES (2) or (3) of
this SECTION 8.01(A) or from other transactions described in
CLAUSE (3) of this SECTION 8.01(A) exceed DM 15,000,000 (Deutsche
Mark Fifteen Million) in any calendar year, or, if there are any
Net Proceeds from the aforementioned Dispositions described in
CLAUSE (1) of this SECTION 8.01(A), then the Borrower shall in
accordance with SECTION 8.01(B) make a mandatory prepayment in
cash equal to the amount of such excess in the case of CLAUSES
(2) and (3) or equal to the amount of such Net Proceeds in the
case of CLAUSE (1), in each case whether or not the Net Proceeds
are comprised of cash or non-cash proceeds. For purposes of this
SECTION 8.01(A), the value of the non-cash proceeds received
shall be determined in good faith by the chief financial officer
of the Borrower.
(b) Amounts payable under SECTION 8.01(A) shall be deposited promptly
into an interest bearing account maintained in the name of the
Banks with the Agent for the benefit of the Banks and shall
remain on deposit with the Agent until the next Interest Payment
Date(s), at which time such amounts together with interest
thereon shall be applied at the Borrower's request to interest
or, on a pro-rata basis, to reduce the remaining Repayment
Installments of the Term Portion or, after such installments are
paid in full, to permanently reduce the Revolving Portion.
(c) On the Interest Payment Date(s) immediately following delivery of
the financial statements in accordance with SECTION 16.01(A), the
Borrower shall prepay the Loan, without premium or penalty except
as set forth in SECTION 12.04, in an amount equal to 70% (seventy
percent) of the amount by which Excess Cash Flow for the
immediately preceding fiscal year exceeds DM 20,000,000 (Deutsche
Mark Twenty Million); provided, however, that this sentence shall
apply only to Excess Cash Flow for fiscal year 1996 and fiscal
years prior thereto. On the earlier to occur of (a) 5 (five) days
after the date upon which EBITDA for the immediately preceding
fiscal year (commencing with the fiscal year 1997) has been
finally determined or (b) 90 (ninety) days after the immediately
preceding fiscal year end, the Borrower shall prepay the Loan,
without premium or penalty except as set forth in SECTION 12.04,
in an amount equal to 70% (seventy percent) of Excess EBITDA for
the immediately preceding fiscal year. In addition, on or before
March 31, 1997, the Borrower shall prepay the Loan, without
premium or penalty except as set forth in SECTION 12.04, in an
amount equal to the amount (if any) by which EBITDA of NL
Industries and its subsidiaries for fiscal year 1996 exceeds
$140,000,000 (One Hundred Forty Million Dollars). All such
prepayments shall be applied to the Repayment Installments of the
Term Portion in the inverse order
58
of the maturities of such installments or, after such
installments are paid in full, to permanently reduce the
Revolving Portion.
(d) An amount equal to the amount of each payment received by the
Borrower with respect to the Tax Refund at any time shall be used
by the Borrower to prepay the Loan, without premium or penalty
except as set forth in SECTION 12.04, on the Interest Payment
Date(s) immediately following the date(s) upon which such
payment(s) is (are) received by the Borrower. Amounts payable
under this SECTION 8.01(D) shall be deposited promptly into an
interest bearing account maintained in the name of the Banks with
the Agent for the benefit of the Banks and shall remain on
deposit until the next Interest Payment Date(s), at which time
such amounts together with interest thereon shall be applied, on
a pro-rata basis, to reduce the remaining Repayment Installments
of the Term Portion or, after such installments are paid in full,
to permanently reduce the Revolving Portion. The Borrower
represents and warrants to the Agent and the Banks that all
amounts drawn under the Tentative Tax Refund Availability Amount
prior to the Second Restatement Date have been used to pay German
income taxes or have been paid to the Agent and applied to reduce
the Revolving Portion in accordance with paragraph 2 of the
Tentative Tax Refund Letter. Accordingly, the Borrower, the Agent
and the Banks hereby agree that (although the Final Determination
Date may not yet have occurred) DM 77,287,585 (Deutsche Mark
Seventy-Seven Million Two Hundred Eighty-Seven Thousand Five
Hundred Eighty-Five) shall be deemed to be the remaining amount
of the Tax Refund received by the Borrower as of the Second
Restatement Date and not previously applied to prepay the Term
Portion and that, on the Second Restatement Date, DM 57,287,585
(Deutsche Mark Fifty-Seven Million Two Hundred Eighty-Seven
Thousand Five Hundred Eighty-Five) of the Tax Refund shall be
drawn under the Tentative Tax Refund Availability Amount of the
Revolving Portion Availability and applied to the Term Portion in
accordance with this SECTION 8.01(D) and DM 20,000,000 (Deutsche
Mark Twenty Million) of the proceeds of the Second Prepayment
shall be applied to the Term Portion in accordance with this
SECTION 8.01(D). As of the Second Restatement Date, DM 20,000,000
(Deutsche Mark Twenty Million) of the Tentative Tax Refund
Availability Amount shall be deemed to have been cancelled by
virtue of the reduction in the maximum principal amount of the
Revolving Portion from DM 250,000,000 (Deutsche Mark Two Hundred
Fifty Million) to DM 230,000,000 (Deutsche Mark Two Hundred
Thirty Million).
(e) On March 15, 2000, the Borrower shall prepay, and permanently
reduce, the Revolving Portion in an amount equal to the positive
remainder (if any) of (i) the then outstanding principal amount
of the Revolving Portion minus (ii) DM 125,000,000 (Deutsche Mark
One Hundred Twenty-Five Million).
59
(f) Upon the occurrence of a "Change of Control", as such term is
defined in either of the Indentures, the Borrower shall promptly
so notify the Agent and each of the Banks of such occurrence and
shall (whether or not the Borrower complies with its obligation
to give such notice) prepay the Loans, and all accrued and unpaid
interest thereon to the date of the prepayment, in full on the
date upon which the holders of any of the NL Notes may receive
prepayment of any of the NL Notes as a result of such Change of
Control (assuming such holders elect to receive such prepayment
but whether or not such holders so elect) unless the Majority
Banks (662/3%) shall have expressly waived such right of
prepayment on or before the date upon which such prepayment is
required to be made.
(g) On or before 2 (two) Business Days after the last day of each
calendar month upon which the aggregate cash balances of the
Borrower and its Subsidiaries (excluding any cash balances of the
Borrower and its Canadian Subsidiaries which are pledged to the
Agent as security for the Loans and excluding U.S. Dollar cash
balances held in the ordinary course of business) exceed DM
40,000,000 (Deutsche Mark Forty Million) (or the equivalent
amount in any currency), the Borrower shall prepay, without
premium or penalty except as set forth in SECTION 12.04, the
outstanding principal amount of the Revolving Portion by the
entire amount of such excess; provided, however, that the cash
balances held by the Borrower immediately prior to a Repayment
Date or a date upon which payments are required to be made on the
Mirror Notes which are to be applied and are actually applied to
make repayments of the Loan or such required payments on the
Mirror Notes, respectively, shall be excluded for purposes of
determining the cash balances of the Borrower and its
Subsidiaries pursuant to this SECTION 8.01(G). For purposes of
this SECTION 8.01(G) and SECTION 16.40, "cash balances" shall
mean the aggregate of the collected cash balance in bank accounts
(net of checks issued and uncleared), other cash (exclusive of
petty cash maintained in reasonable amounts in the ordinary
course of business) and Temporary Cash Investments. Amounts
payable under this SECTION 8.01(G) shall be deposited, within
such 2 (two) Business Days, into an interest bearing account
maintained in the name of the Banks with the Agent for the
benefit of the Banks and shall remain on deposit with the Agent
until the next Interest Payment Date(s), at which time such
amounts together with interest thereon shall be applied to the
Revolving Portion as provided herein. The Borrower covenants and
agrees that it will not, and will not permit any of its
Subsidiaries to, convert non-U.S. Dollar cash balances to U.S.
Dollar cash balances except to the extent reasonably necessary in
the ordinary conduct of their business.
(h) On the Second Restatement Date, the Borrower shall prepay the
Loan, without premium or penalty except as set forth in SECTION
12.04, in the amount of DM 130,000,000 (Deutsche Mark One Hundred
Thirty Million). Such prepayment
60
shall be applied to the Repayment Installments of the Term
Portion in the direct order of the maturities of such
installments.
8.02 The Borrower may make optional prepayments (including the portion of the
First Prepayment applied toward the Revolving Portion pursuant to
SECTION 2.01(A) and optional prepayments deemed made with funds provided
by NL Industries and/or Kronos resulting from capital contributions made
or Subordinated Debt, other than the Kronos Subordinated Loan and the NL
Subordinated Loan, extended by NL Industries and/or Kronos to the
Borrower) as follows:
On giving not less than 5 (five) days prior written notice to the Agent,
the Borrower may prepay all or any part (but in any case not less than
DM 5,000,000 (Deutsche Mark Five Million) (or the Equivalent Amount
thereof in U.S. Dollars) and in integral multiples of DM 1,000,000
(Deutsche Mark One Million) (or the Equivalent Amount thereof in U.S.
Dollars) in excess thereof per prepayment) of the Loan on any Interest
Payment Dates, without premium or penalty, except as otherwise provided
in SECTION 12.04, provided that:
(a) except as expressly permitted by SECTION 2.04 with respect to the
Revolving Portion, each prepayment made under this Agreement may
not be reborrowed under this Agreement;
(b) unless the Borrower expressly informs the Agent, in connection
with the aforesaid notice of such prepayment, that such
prepayment shall be applied to the Revolving Portion, any
prepayment under this SECTION 8.02 shall be applied to the
outstanding Repayment Installments of the Term Portion in inverse
order of the maturities of such installments; and
(c) notice of prepayment given by the Borrower shall be irrevocable
and the Borrower shall be bound to prepay in accordance with each
such notice.
8.03 To the extent that the amounts available to prepay the Loan pursuant to
SECTIONS 8.01 or 8.02 shall exceed the principal of the tranche relating
to the immediately following Interest Payment Date, such amounts shall
be applied to prepay the principal of such tranche and the remainder, if
any, shall be applied to prepay the principal of the tranche relating to
the next immediately following Interest Payment Date or Dates, as the
case may be, until all amounts allocated for prepayment have been
applied. The requirement that prepayments be applied pro rata under
SECTION 8.01(B) or 8.01(D), in inverse order of maturity under SECTION
8.01(C) and SECTION 8.02 or in direct order of maturity under SECTION
8.01(H) shall not be affected by the fact that prepayments may be made
on an Interest Payment Date which is also a Repayment Date.
61
ARTICLE 9. REPAYMENT
Subject to the prepayment provisions set forth in ARTICLE 8, the Term
Portion shall be repaid in 6 (six) installments due and payable on each of the
following Repayment Dates in the following amounts:
REPAYMENT DATE REPAYMENT INSTALLMENT
March 15, 1997 DM 50,000,000
September 15, 1997 DM 50,000,000
March 15, 1998 DM 75,000,000
September 15, 1998 DM 75,000,000
March 15, 1999 DM 100,000,000 minus 50% (fifty percent) of the
Excess Term Prepayment (if any)
September 15, 1999 DM 100,000,000 minus 50% (fifty percent) of the
Excess Term Prepayment (if any)
Subject to the prepayment provisions set forth in ARTICLE 8, the Revolving
Portion (which shall be reduced to DM 105,000,000 (Deutsche Mark One Hundred
Five Million) on March 15, 2000) shall be repaid (as provided in SECTION
8.01(E)) on March 15, 2000 to the extent necessary to cause the outstanding
principal amount of the Revolving Portion, after giving effect to such
repayment, to equal DM 105,000,000 (Deutsche Mark One Hundred Five Million), and
shall be repaid in full on September 15, 2000. All amounts owed under this
Agreement with respect to the Term Portion shall be due and payable on or before
September 15, 1999, in accordance with the terms of this Agreement, and all
amounts owed under this Agreement with respect to the Revolving Portion shall be
due and payable on or before September 15, 2000, in accordance with the terms of
this Agreement.
After giving effect to the mandatory prepayments to be made on the
Second Restatement Date pursuant to SECTIONS 8.01(D) and 8.10(H) (including the
Second Prepayment), (a) the Repayment Installments of the Term Portion
previously (immediately prior to the Second Amendment Date) due on each of March
15, 1997, September 15, 1997, and March 15, 1998 shall have been paid in full
and (b) the Repayment Installments of the Term Portion previously (immediately
prior to the Second Amendment Date) due on each of September 15, 1998, March 15,
1999, and September 15, 1999, shall have been paid in part. Accordingly, after
giving effect to such prepayments, the remaining outstanding Term Portion shall
be payable in 3 (three) installments due and payable on the following Repayment
Dates in the following amounts:
62
REPAYMENT DATE REMAINING REPAYMENT INSTALLMENT
September 15, 1998 DM 48,751,048
March 15, 1999 DM 70,785,415
September 15, 1999 DM 68,713,415
ARTICLE 10. EVIDENCE OF DEBT
10.01 Each Bank shall maintain, in accordance with its usual practice,
accounts evidencing the amounts from time to time lent by and owing to
it under this Agreement, including such amounts with respect to each of
the Term Portion and the Revolving Portion, which accounts shall be
prima facie evidence of such amounts. Such amounts shall be designated
in Deutsche Mark or U.S. Dollars, as appropriate, and, if designated in
U.S. Dollars, shall also be designated in the corresponding Base
Deutsche Mark Amount.
10.02 The Agent shall maintain on its books an account in which shall be
recorded:
(a) the amount of the Loan (and the currency in which each portion of
the Loan is denominated or redenominated from time to time),
including the amount of each of the Term Portion and the
Revolving Portion outstanding from time to time, and each Bank's
share therein;
(b) the amount of any principal or interest due or to become due from
the Borrower to the Banks under this Agreement (and the currency
in which such amount is denominated or redenominated from time to
time) with respect to each of the Term Portion and the Revolving
Portion and each Bank's share therein; and
(c) the amount of any sum received or recovered by the Agent (and the
currency in which such amount is denominated) under this
Agreement and each Bank's share therein.
10.03 In any legal action or proceeding arising out of or in connection with
this Agreement, the entries made in the accounts maintained pursuant to
SECTIONS 10.01 and 10.02 shall be prima facie evidence of the existence
and amounts of the obligations and the payments of the Borrower therein
recorded. In the case of any conflict between accounting under SECTION
10.01 and 10.02, the accounts of each Bank under SECTION 10.01 shall
control.
ARTICLE 11. PAYMENTS
11.01 Any and all payments by the Borrower and/or Kronos Titan under this
Agreement shall be made without setoff or counterclaim, and 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, whether under U.S. or German law or
otherwise,
63
excluding, in the case of each Bank and the Agent, taxes imposed on its
overall net income and franchise taxes imposed on it by the jurisdiction
under the laws of which such Bank or the Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each
Bank, taxes imposed on its overall net income and franchise taxes
imposed on it by the jurisdiction of such Bank's Lending Office or any
political subdivision thereof (all such excluded taxes being hereunder
referred to as "Excluded Taxes" and all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower and/or Kronos Titan
shall be required by law (whether U.S. or German or otherwise) to deduct
any Taxes from or in respect of any sum payable hereunder to any Bank or
the Agent,
(a) and if the deductions are the result of a change in circumstances
after May 30, 1990 of the type described in CLAUSE (1) of SECTION
14.01(A), the sum payable shall be increased as may be necessary
so that, after making all required deductions, such Bank or the
Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made;
(b) the Borrower and/or Kronos Titan shall make such deductions; and
(c) the Borrower and/or Kronos Titan shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law.
Any Bank claiming any additional amounts payable pursuant to this
SECTION 11.01 shall use reasonable efforts (consistent with its internal
policy and legal and regulatory restrictions) to transfer its portion of
the Loan to a Lending Office in another jurisdiction where no such
deductions are required. The Borrower and/or Kronos Titan shall forward
promptly to the Agent official receipts of the relevant taxation or
other authority or other evidence acceptable to the respective recipient
of the amount deducted or withheld as described above, when and as such
receipts or other evidence are made available to the Borrower and/or
Kronos Titan by the relevant authority.
11.02 From time to time upon the request of the Borrower, Kronos Titan or the
Agent,
(a) each Bank organized under the laws of a jurisdiction outside the
United States shall provide the Agent and the Borrower and/or
Kronos Titan with a certificate, signed by an officer of each
such Bank, stating that payments to be made to such Bank
hereunder are expected, in the reasonable judgment of such Bank,
to be exempt from United States withholding tax, if such Bank is
so exempt, and the forms (if any) prescribed by the Internal
Revenue Service of the United States certifying as to such Bank's
status; and
(b) each Bank organized under the laws of a jurisdiction outside
Germany shall provide the Agent and the Borrower and/or Kronos
Titan with a certificate, signed by an
64
officer of each such Bank, stating that payments to be made to
such Bank hereunder are expected, in the reasonable judgment of
such Bank, to be exempt from German withholding tax, if such Bank
is so exempt, and the forms (if any) prescribed by the
appropriate German governmental tax authority certifying as to
such Bank's status.
Unless the Borrower, Kronos Titan or the Agent (as applicable) has
received forms or other documents satisfactory to it indicating that
payments hereunder are not subject to United States or German
withholding tax, as applicable, the Borrower, Kronos Titan or the Agent
(as applicable) shall, unless the Borrower, Kronos Titan or the Agent
(as applicable) determines that no such withholding is required,
withhold taxes from such payments at the applicable statutory rate in
the case of payments to or for any Bank organized under the laws of a
jurisdiction outside the United States or the Federal Republic of
Germany, as the case may be. If any Bank fails to furnish to the
Borrower, Kronos Titan or the Agent (as applicable) forms or other
documents necessary for claiming exemption from United States or German
withholding tax, then payments to such Bank shall be net of any amounts
the Borrower, Kronos Titan or the Agent (as applicable) is required to
withhold under applicable law, provided, however, that, notwithstanding
anything in this Agreement to the contrary, any Bank that is subject to
withholding as a result of a change in circumstances occurring after May
30, 1990 of the type described in SECTION 14.01 shall be entitled to
payments pursuant to SECTION 11.01(A).
Each Bank hereby represents and warrants to the Borrower and Kronos
Titan that, on the date that it became or becomes a Bank in accordance
with the terms of the Original Agreement, the First Restated Agreement
or this Agreement, respectively (as may be applicable), its Lending
Office was or is entitled to receive payments of principal of, and
interest on, Loans made by such Bank from such Lending Office without
withholding or deduction for or on account of Taxes imposed by the
United States of America, Germany or any respective political
subdivisions of the United States of America or Germany.
11.03 If the Borrower and/or Kronos Titan makes an increased payment to any
Bank pursuant to SECTION 11.01 and such Bank determines in its
reasonable discretion that it has received or been granted a credit
against or relief or remission for, or payment of tax paid or payable by
it in respect of or calculated with reference to the deduction or
withholding giving rise to such payment, such Bank shall, to the extent
that it can in its sole discretion do so without prejudice to the
retention of the amount of such credit, relief, remission or repayment,
pay to the Borrower and/or Kronos Titan (as applicable) such amount as
such Bank shall have calculated to be attributable to such deduction or
withholding. If Taxes are incorrectly or illegally paid or assessed, and
if any Bank or the Agent contests the payment or assessment of such
Taxes, such Bank or the Agent shall refund, to the extent of any refund
made to such Bank or the Agent, any amounts paid by the Borrower and/or
Kronos Titan under SECTION 11.01 in respect of such Taxes. Amounts
payable pursuant
65
to this SECTION 11.03 shall be paid within 30 (thirty) days from the
date of receipt of the relevant refund by such Bank or the Agent (as the
case may be).
11.04 All payments to be made by the Borrower and/or Kronos Titan under this
Agreement shall be made in the appropriate currency (Deutsche Mark or
U.S. Dollars, as applicable) and in immediately available funds not
later than 10:00 a.m. (local time at Munich) on the date upon which the
relevant payment is due, (a) with respect to payments in Deutsche Mark,
to the Agent's account no. 6450025141 with Bayerische Hypotheken-und
Wechselbank AG, Munich, or (b) with respect to payments in U.S. Dollars,
to the Agent's account no. 001 1 329 026 with The Chase Manhattan Bank
N.A., New York, or (in either case) to such other bank and account as
the Agent may from time to time designate by written notice to the
Borrower and/or Kronos Titan (as applicable). All payments (including
prepayments) of principal or interest accrued with respect to the
Revolving Portion of the Loans shall be applied (i) first, to the
payment of interest accrued with respect to the Revolving Portion other
than the Kronos Titan Revolving Portion (until such interest is paid in
full), (ii) second, to the payment of the outstanding principal amount
of the Revolving Portion other than the Kronos Titan Revolving Portion
(until such principal is paid in full), (iii) third, to the payment of
interest accrued with respect to the Kronos Titan Revolving Portion
(until such interest is paid in full), and (iv) fourth, to the payment
of the outstanding principal of the Kronos Titan Revolving Portion
(until such principal is paid in full).
11.05 All payments to be made by the Agent to the Borrower (or, with respect
to advances under the Kronos Titan Revolving Portion, Kronos Titan)
under this Agreement shall be made not later than 10:00 a.m. (local time
at Munich) on the date upon which the relevant payment is due and, at
the risk of the Borrower (and, with respect to advances under the Kronos
Titan Revolving Portion, Kronos Titan), remitted to, in the case of the
Borrower, an account in Munich or Luxembourg maintained at Hypobank
International S.A. or an affiliate of Hypobank International S.A. which
is pledged to secure the Loans in accordance with SECTION 16.40 or, in
the case of Kronos Titan, an account of Kronos Titan.
11.06 Each Bank shall make available to the Agent in the appropriate currency
(Deutsche Mark or U.S. Dollars, as the case may be) as the Agent may
from time to time designate its portion of the Loan hereunder prior to
10:00 a.m. (local time at Munich) on the Drawdown Date or, with respect
to any redenomination of any advance pursuant to SECTION 2.06, on the
first day of the next succeeding Interest Period, as the case may be, to
such account as the Agent may from time to time designate for the
account of the Borrower and/or Kronos Titan (as applicable). Not less
than 2 (two) Business Days prior to the effective date of any initial
advance of the Loan in U.S. Dollars, each Bank shall notify the Agent of
the identity and location of the Lending Office for such Bank in
relation to all advances and payments to be denominated in U.S. Dollars
in the event that such Lending Office is different from the Lending
Office previously designated for the
66
Loan, provided, however, that (a) each Bank shall utilize the Lending
Office previously designated for the Loan unless it is prohibited from
doing so by applicable regulatory requirements, (b) if the use of such
previously designated Lending Office is so prohibited, such Bank shall
use its best efforts to use a Lending Office entitled to an exemption
from United States and German withholding taxes (but no Bank shall be
required to establish an office or branch or obtain any authorization to
engage in banking activities in any jurisdiction in order to be entitled
to any exemption from United States withholding taxes), and (c) such
Bank shall give written notice to the Borrower and/or Kronos Titan (as
applicable) if it is unable to utilize its Lending Office previously
designated for the Loan and if its Lending Office utilized for the Loan
is not entitled to an exemption from U.S. and German withholding taxes,
and further provided that the Borrower shall not be in any way relieved
of any obligation to gross up any payments to be made to the Agent or
any Bank under this Agreement. All advances to be made by each Bank in
U.S. Dollars shall be made available through the Lending Office of such
Bank so designated for advances in U.S. Dollars.
11.07 Except for payments received by the Agent for its account or for the
account of a specific Bank in accordance with this Agreement, the Agent
shall promptly distribute in like funds and currency each payment
received by it for the account of the Banks ratably in proportion to
their portion of the Loan or, as the case may be, their respective
Commitments.
11.08 Where an amount is to be made available under this Agreement by the
Agent to a Person, the Agent shall not be bound to make such amount
available to such Person until the Agent has been able to establish
whether or not such amount has been made available to the Agent. If the
Agent makes an amount available to the Borrower and/or Kronos Titan
which has not, but should have, been made available to the Agent by a
Bank, the Borrower and/or Kronos Titan (as applicable) shall (without
prejudice to any rights the Borrower and/or Kronos Titan (as applicable)
may have against that Bank) refund that amount to the Agent on request.
If the Agent makes an amount available to a Bank which has not, but
should have, been made available to the Agent by the Borrower and/or
Kronos Titan, that Bank shall (without prejudice to any rights it may
have against the Borrower and/or Kronos Titan, as applicable) refund
that amount to the Agent on a date to be determined by the Agent after
consultation with such Bank. Where, in accordance with the foregoing, an
amount is to be refunded to the Agent, the Agent in addition shall be
indemnified by the Person who has failed to make an amount available as
required under this Agreement against any reasonable interest costs
actually incurred and paid by the Agent by reason of any lapse of time
between the date on which the amount was made available to any Person by
the Agent and the date on which the amount was refunded to the Agent in
full (including, without limitation, any interest paid by the Agent in
respect of funds borrowed by the Agent in order to fund such amount
during such period).
11.09 Any currency specified in accordance with this Agreement shall be the
currency of account and of payment in all events. The payment
obligations of the Borrower and Kronos Titan hereunder shall not be
discharged by an amount paid in another currency, whether
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pursuant to a judgment or otherwise, to the extent that the amount so
paid upon conversion by the Agent or the Banks (as applicable) to the
specified currency under normal and reasonable banking procedures does
not yield at the place when payment is due the amount of the specified
currency due hereunder. In the event that any payment by or on behalf of
the Borrower and/or Kronos Titan, whether pursuant to a judgment or
otherwise, upon such conversion and after the deduction of all fees,
costs and expenses relating thereto does not result in payment of such
amount of the specified currency at the place payment is due, the Agent
and each Bank shall be entitled to receive from the Borrower and/or
Kronos Titan (as applicable), and shall have a separate cause of action
for, the deficiency in respect of the payments due to each,
respectively.
ARTICLE 12. DEFAULT INTEREST AND INDEMNITY
12.01 In the event of a failure by the Borrower to pay any sum on the date on
which such sum is due and payable pursuant to this Agreement and
irrespective of any notice by the Agent or any other Person to the
Borrower in respect of such failure, the Borrower shall pay interest on
such sum, on demand, from the date of such failure up to the date of
actual payment (both after and before any judgment) at the rate,
increased by the sum of the Margin plus 2% (two percent), determined by
the Agent to be the arithmetic mean (rounded upwards, if necessary, to
the nearest four decimal places) of the rates notified to the Agent by
the Reference Banks to be those at which deposits in Deutsche Mark or
U.S. Dollars as the Agent may select in its discretion (after
consultation with the Banks) for such period as the Agent may select in
its discretion (after consultation with the Banks) are so offered to
each Reference Bank by prime banks in the London interbank Euro-currency
market at or about 11:00 a.m. (London time) for value 2 (two) Business
Days after the Business Day immediately succeeding that on which the
Agent becomes aware of such failure and, so long as the failure
continues, such rate shall be recalculated on the same basis thereafter,
provided that:
(a) if any Reference Bank is unable or otherwise fails to furnish a
quotation for the purposes of this SECTION 12.01, the interest
rate shall be determined on the basis of the quotation(s)
furnished by the remaining Reference Bank(s); and
(b) if for any such period, none of the Reference Banks was offered
deposits in the required amount and for the required period, the
rate of interest applicable thereto shall be the weighted average
(having regard to the respective portions of such unpaid sum)
(rounded upwards, if necessary to the nearest four decimal
places) per annum of the respective rates notified to the Agent
by each Reference Bank as being that which expresses as a
percentage rate per annum the cost to such Reference Bank of
obtaining such deposits from such sources as it may select having
reasonable regard to the interests of the Borrower.
Interest accruing under this SECTION 12.01 shall be due and payable at
the end of each period by reference to which it is calculated.
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12.02 Without prejudice to the foregoing and irrespective of any notice by the
Agent or any other Person to the Borrower in respect of the Borrower's
failure to make any payment when due or in respect of any other matter
relating to this SECTION 12.02, the Borrower shall indemnify the Agent
and the Banks against any and all damages, losses or expenses
(including, without limitation, losses incurred in paying default
interest or in liquidating or employing deposits from third parties
acquired to make, fund or maintain the Loan or any part thereof,
including interest and penalties on unpaid Taxes, if any, and including
losses on foreign currency exchanges, if any, with respect to portions
of the Loan denominated in U.S. Dollars) which any of them may properly
and reasonably sustain or incur as a consequence of (a) the failure by
the Borrower to borrow pursuant to any Notice of Borrowing, (b) the
failure by the Borrower to pay any sum, including Taxes, if any, when
due and payable under this Agreement upon the occurrence of any Event of
Default, (c) the funding of the Loan or any portion thereof in U.S.
Dollars as opposed to Deutsche Mark or (d) the liquidation or employment
of amounts borrowed or contracted for relating to, or the termination or
unwinding of any contract entered into in order to fund, an advance in
U.S. Dollars requested by the Borrower that, by reason of the occurrence
of any event specified in SECTION 7.01, is not funded as requested.
12.03 If for the purposes of filing a claim or proof for obtaining or
enforcing any judgment in any court, it is necessary to convert a sum
due under this Agreement in Deutsche Mark or U.S. Dollars (as the case
may be) (the "Original Currency") into another currency (the "Other
Currency"), the parties hereto agree, to the fullest extent that they
may effectively do so, that the rate of exchange used shall be the rate
of exchange offered by any one or more of the Reference Banks to the
Agent, in respect of the relevant sums, at which, in accordance with
normal banking procedures, the Agent could purchase the greatest amount
of the Original Currency with the Other Currency at or about 11:00 a.m.
in London on the Business Day preceding that on which final judgment is
given. The obligation of the Borrower in respect of any sum due in the
Original Currency from it to any Bank or the Agent under this Agreement
shall, notwithstanding any judgment in any Other Currency, be discharged
only to the extent that on the Business Day following receipt by such
Bank or the Agent (as the case may be) of any sum adjudged to be so due
in such Other Currency, such Bank or the Agent (as the case may be) may
in accordance with normal banking procedures purchase the Original
Currency with such Other Currency. If the amount of the Original
Currency so purchased is less than the sum originally due to such Bank
or the Agent (as the case may be) in the Original Currency, the Borrower
agrees, as a separate obligation and notwithstanding any such judgment,
to indemnify immediately such Bank or the Agent (as the case may be)
against such loss, and if the amount of the Original Currency so
purchased exceeds the sum originally due to any Bank or the Agent (as
the case may be) in the Original Currency, such Bank or the Agent (as
the case may be) agrees to remit to the Borrower such excess. The above
indemnity shall constitute a separate and independent obligation of the
Borrower from its other obligations under this Agreement and shall apply
irrespective of any grace period granted by the Agent or the Banks.
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12.04 Any prepayment or repayment of principal made under this Agreement, if
made otherwise than on an Interest Payment Date relative to the amounts
prepaid or repaid, shall be made together with accrued interest thereon
and such additional amount as each Bank may certify as necessary to
compensate it for any damages or losses incurred or to be incurred by it
in connection with such prepayment or repayment (including loss of
Margin and losses on account of funds borrowed in order to make, fund or
maintain its proportion of the Loan or any part thereof prepaid or
repaid).
ARTICLE 13. SET-OFF AND REDISTRIBUTION OF PAYMENTS
13.01 Upon the occurrence and during the continuance of any Event of Default
specified in SECTION 18.01 consisting of the failure to pay principal of
the Loan or any portion thereof and subject to the prior written consent
of the Agent or the Majority Banks or upon the occurrence and during the
continuance of any Event of Default and the acceleration of the maturity
of the Loan pursuant to the provisions of ARTICLE 18, each Bank is
hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Bank (at any
office or branch) to or for the credit or the account of the Borrower
against all or any portion of the Loan outstanding under this Agreement
and other amounts payable hereunder. Each Bank agrees promptly to notify
the Borrower after any such set-off and application made by such Bank,
provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Bank under
this ARTICLE 13 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which such Bank may have.
Each Bank agrees that if it shall, by exercising any right of set-off or
counterclaim or otherwise, receive payment of a proportion of the
aggregate amount of principal and interest due with respect to any
portion of the Loan held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to any portion of the Loan held
by such other Bank, the Bank receiving such proportionately greater
payment shall purchase such participation in the portion of the Loan
held by the other Banks, and such other adjustments shall be made, as
may be required so that all such payments of principal and interest with
respect to the Loans held by the Banks shall be shared by the Banks pro
rata; provided that nothing in this ARTICLE 13 shall impair the right of
any Bank to exercise any right of set-off or counterclaim it may have
and to apply the amount subject to such exercise to the payment of
indebtedness hereunder. Subject to SECTION 13.02 hereof, the Borrower
agrees, to the fullest extent such holder may effectively do so under
applicable law, that any holder of a participation in a Loan, whether or
not acquired pursuant to the foregoing arrangements, may exercise rights
of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a
direct creditor of the Borrower in the amount of such participation.
Anything herein to the contrary notwithstanding, nothing in this ARTICLE
13 shall impair the right of the Borrower to receive notice and to have
the opportunity to cure certain Events of Default as provided in ARTICLE
18 or otherwise prior to the declaration of an acceleration of maturity.
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13.02 Except for payments to a Bank from the Agent which were received by the
Agent for the account of such Bank in accordance with the provisions of
this Agreement, if any Bank shall at any time receive payment or
satisfaction of all or a part of its share of the Loan, interest thereon
or any other amount payable hereunder, whether by setoff, counterclaim
or otherwise, in a proportion which, in relation to any amounts received
by any other Bank or Banks at the same time, represents more than its
percentage participation in the Loan, then such Bank shall notify the
Agent thereof and shall pay to the Agent not later than 10 (ten) days
after request by the Agent for account of the other Banks such amount as
determined by the Agent as will ensure that each Bank will receive a
proportion of such payment equal to its percentage participation.
13.03 In the event that at any time any Bank shall be required to refund to
the Borrower any amount which has been paid to or received by it by
set-off, counterclaim or otherwise on account of any part of the Loan,
interest thereon or any other amount payable hereunder and which has
been paid to any other Bank pursuant to this ARTICLE 13, such other Bank
shall repay a proportionate amount of the amounts so refunded without
interest.
13.04 The Borrower and the Banks expressly agree that payments by or
recoveries from the Borrower shall be distributed in accordance with the
provisions of this ARTICLE 13 without the need for further consent or
the completion of any other formalities whatsoever.
13.05 If a Bank is required to make any payment to any other Bank pursuant to
this ARTICLE 13, then, subject to SECTION 13.02, the liability of the
Borrower to the Bank making such payment under this Agreement shall be
treated as not having been reduced by the amount of such payment and the
liability of the Borrower to any Bank receiving such payment shall be
treated as having been reduced by the amount of the payment received by
such Bank.
ARTICLE 14. CHANGE OF CIRCUMSTANCES; ILLEGALITY;
RESERVE REQUIREMENTS
14.01 Change of Circumstances
(a) If, after May 30, 1990, the adoption of any applicable law, rule
or regulation, or any change therein, or any change in the
interpretation or administration by any governmental authority,
central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by any Bank (or its
Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or
comparable agency:
(1) shall subject any Bank (or its Lending Office) to any tax,
duty or other charge with respect to the Loan or its
obligation to make such Loan, or any part thereof, or
shall change the basis of taxation of payments to any Bank
(or its Lending Office) of the principal of or interest on
its Loan, or any
71
part thereof, or any other amounts due under this
Agreement in respect of its Loan or its obligation to make
the Loan, or any part thereof (except for changes in the
rate of tax on the overall net income of such Bank or its
Lending Office imposed by the jurisdiction in which such
Bank's principal executive office or Lending Office is
located); or
(2) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement, (including,
without limitation, any such requirement imposed by the
Federal Reserve) against assets of, deposits with or for
the accounts of, or credit extended by any Bank (or its
Lending Office) or shall impose on any Bank (or its
Lending Office) or on the London interbank market any
other condition affecting its Loan, or any part thereof,
or other indebtedness under the Agreement or its
obligations to make the Loan;
and the result of any of the foregoing is to increase the cost to
such Bank (or its Lending Office) of making or maintaining the
Loan, or any portion thereof, or to reduce the amount of any sum
received or receivable by such Bank (or its Lending Office) under
this Agreement with respect thereto, then, within 15 (fifteen)
days after demand by such Bank (with a copy to the Agent), the
Borrower shall pay promptly for the account of such Bank such
additional amount or amounts as will compensate such Bank for
such increased cost or reduction. Such Bank shall submit to the
Borrower and the Agent a certificate showing, in reasonable
detail, the calculation of the amount of such increased cost.
(b) If, after May 30, 1990, the adoption of any law, rule or
regulation of any general applicability regarding capital
adequacy, or any change therein, or any change in the
interpretation or administration thereof by a governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by a Bank
(or its Lending Office) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency (including,
without limitation, and whether promulgated or made before or
after the Second Restatement Date, any law, regulation,
interpretation, guideline or request contemplated by the report
dated July 1988 entitled "International Convergence of Capital
Measurement and Capital Standards" issued by the Basle Committee
on Banking Regulations and Supervisory Practices), shall, in the
determination of a Bank, have the effect of reducing the rate of
return of such Bank's capital to a level below that which such
Bank could have achieved as a consequence of its obligations
hereunder but for such adoption, change or compliance (taking
into consideration such Bank's policies with respect to capital
adequacy), by an amount deemed by such Bank to be material in its
sole and absolute discretion, then, within 15 (fifteen) days
after demand by such Bank (with a copy to the Agent), the
Borrower shall pay to such Bank such additional amount or amounts
as will compensate such Bank for such reduction.
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(c) Each Bank will notify the Borrower and the Agent promptly of any
event of which it has knowledge, occurring after the First
Restatement Date, which will entitle such Bank to compensation
pursuant to this SECTION 14.01 and will designate a different
Lending Office if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank.
A certificate of any Bank claiming compensation under this
SECTION 14.01 and setting forth the additional amount or amounts
to be paid to it under this Agreement shall be conclusive in the
absence of manifest error.
(d) Upon the occurrence of any of the events described in SECTION
14.01(A) or (B), the Borrower may prepay without premium or
penalty except as otherwise provided in SECTION 12.04 such Bank's
portion of the Loan together with all interest accrued thereon
and all fees and other amounts (including amounts payable under
SECTION 14.01(A) or (B) above) payable to such Bank hereunder, on
giving not less than 10 (ten) days prior written notice to the
Agent. Such Bank's Commitment shall be canceled on the giving of
such notice.
14.02 ILLEGALITY
(a) Notwithstanding anything to the contrary contained in this
Agreement, if any change in law, regulation or treaty or in the
interpretation or application thereof after May 30, 1990, by any
authority charged with the administration thereof shall make it
unlawful for any Bank to make, fund or maintain its portion of
the Loan (although such Bank may lawfully maintain its
Commitment) or to give effect to its obligations through its
Lending Office as contemplated hereby, such Bank may give written
notice thereof to the Agent to be forwarded by the Agent to the
Borrower and the other Banks. Before giving such notice to the
Agent, such Bank, to the reasonable extent possible, shall
designate a different Lending Office if such designation will
avoid the need for giving such notice.
(b) Until such Bank notifies the Borrower and the Agent that the
circumstances of the type described above no longer exist, the
obligation of such Bank to make its portion of the Loan shall be
suspended and the Borrower may, at its option, terminate such
Bank's Commitment, by notice to such Bank and to the Agent, to be
given within 30 (thirty) days after the date of notice by the
Agent to the Borrower, as provided above.
(c) If such Bank shall determine that it may not lawfully continue:
(1) to maintain and fund its portion of the outstanding Loan
to maturity; and
(2) to maintain its Commitment to maturity, and shall so
specify in such notice, the Borrower shall prepay, without
premium or penalty except as otherwise provided in SECTION
12.04, forthwith (or if permitted by law, on the next
73
following Interest Payment Date) such Bank's portion of
the Loan, together with all interest accrued thereon and
all fees and other amounts payable to such Bank under this
Agreement. Such Bank's obligations under this Agreement
and its Commitment shall be canceled on the giving of such
notice.
14.03 RESERVE REQUIREMENTS
The Borrower shall pay to the Agent for the account of each Bank, so
long as such Bank shall be required under regulations of the Federal
Reserve to maintain reserves with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities, interest in
addition to the applicable interest rate plus the applicable Margin on
the unpaid principal amount of the applicable portion of the Loan
advanced by such Bank, from the date of such Loan until such principal
amount is paid in full, an amount equal to an interest rate per annum
equal at all times to the remainder obtained by subtracting (i) the rate
(not including the applicable Margin) for the Interest Period for such
Loan, from (ii) the rate obtained by dividing the rate described in
CLAUSE (I) of this SECTION 14.03 by a percentage equal to 100% (one
hundred percent) minus the Eurocurrency Rate Reserve Percentage of such
Bank for such Interest Period, payable on each date on which interest is
payable. A certificate of each Bank setting forth in reasonable detail
the calculation of the amount of such increased costs and such amounts
as shall be necessary to compensate such Bank for such costs, shall be
delivered to the Borrower and the Agent. The Borrower shall pay each
Bank the amount shown as due on any such certificate within 30 (thirty)
days after its receipt of the same.
Each Bank that became a "Bank" pursuant to the Original Agreement prior
to the Primary Syndication Completion Date waives the right to claim
additional amounts based upon reserve requirements in effect on the date
it became a Bank; provided, however, that such waiver does not apply
with respect to reserve requirements to which such Bank is entitled
pursuant to Regulation D.
ARTICLE 15. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as of the Second Restatement Date
(which representations and warranties shall be deemed to be repeated on the
first day of each Interest Period) and as of the date of each advance of the
Revolving Portion existing during the term of this Agreement (except to the
extent such representations and warranties are expressly made only in reference
to another specific date) that:
15.01 CORPORATE EXISTENCE OF BORROWER AND SUBSIDIARIES
The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with a registered
office in the Federal Republic of Germany. The Borrower has corporate
power and authority to own its assets and carry on business as it is now
being conducted in the United States and the Federal Republic of
74
Germany. Each of the Subsidiaries is a corporation or limited liability
company duly organized and validly existing under the laws of its
respective jurisdiction of incorporation, with the corporate power and
authority to own its assets and carry on business as it is now being
conducted.
15.02 POWER AND AUTHORITY OF BORROWER
The Borrower had, at the time of its execution of the Original
Agreement, the First Restated Agreement and the other Loan Documents
executed in connection with the Original Agreement and the First
Restated Agreement, the necessary corporate power and authority to enter
into the Original Agreement, the First Restated Agreement and such Loan
Documents to which it is a signatory and to exercise its rights and to
perform its obligations under the Original Agreement, the First Restated
Agreement and such other Loan Documents, and has duly taken all
corporate action required to authorize the execution and delivery of,
and the performance of its obligations under, the Original Agreement,
the First Restated Agreement and such Loan Documents. The Borrower has
the necessary corporate power and authority to enter into this Agreement
and the other Loan Documents executed in connection with this Agreement
to which it is a signatory and to exercise its rights and to perform its
obligations under this Agreement and such Loan Documents, and has duly
taken all corporate action required to authorize the execution and
delivery of, and the performance of its obligations under, this
Agreement and such Loan Documents.
15.03 POWER AND AUTHORITY OF PLEDGORS AND GUARANTORS
Each of the Pledgors has the necessary corporate power and authority to
enter into its respective Pledge Agreement and to perform its
obligations under its respective Pledge Agreement, and has duly taken
all corporate action required to authorize the execution and delivery
of, and the performance of its obligations under, its respective Pledge
Agreement; and each Guarantor has the necessary corporate power and
authority to enter into its respective Guaranty and to perform its
obligations under its respective Guaranty, and has duly taken all
corporate action required to authorize the execution and delivery of,
and the performance of its obligations under, its respective Guaranty.
15.04 RANK OF INDEBTEDNESS
The claims of the Agent and the Banks against the Borrower under this
Agreement will rank senior in respect of priority of payment to any
Subordinated Debt and will rank at least pari passu in respect of
priority of payment with all other present and future Indebtedness of
the Borrower (excluding rights of secured parties with respect to
Permitted Liens). As of the Second Restatement Date, under the laws in
force in the jurisdiction of incorporation of each of the Guarantors and
in the jurisdiction of its principal place(s) of business, the claims of
the Agent and the Banks against the Guarantors under the respective
Guaranties will rank at least pari passu in respect of priority of
payment with
75
all present and future Indebtedness of the Guarantors (excluding rights
of secured parties with respect to Permitted Liens) subject to matters
described on SCHEDULE 4.
15.05 NO CONDITIONS TO PERFORMANCE AND ENFORCEABILITY
As of the Second Restatement Date, under the laws in force, all acts,
conditions and things have been done, fulfilled and performed,
including, without limitation, obtaining all authorizations, permits and
consents, and making all filings and registrations, in order:
(a) to enable the Borrower, Guarantor and Pledgors lawfully to enter
into, to exercise rights under and to perform and to comply with
their respective obligations under the Loan Documents; and
(b) to ensure that the obligations assumed under the Loan Documents
are legal, valid, binding and enforceable except as set forth on
SCHEDULE 4.
15.06 NO FILINGS; NO STAMP TAXES
As of the Second Restatement Date, under the laws in force, it is not
necessary in order to be legal, valid, binding and enforceable (subject
to matters described in SCHEDULE 4):
(a) that the Original Agreement, the First Restated Agreement, this
Agreement or any of the other Loan Documents (except the Pledge
Agreement for Societe Industrielle du Titane, S.A.) be filed,
recorded or enrolled with any court or other authority in any
jurisdiction; or
(b) that any stamp, registration or similar tax be paid on or in
relation to the Original Agreement, the First Restated Agreement,
this Agreement or any other Loan Documents, except such actions
or payments that have been taken as of the date of the Original
Agreement or the First Restated Agreement or, with respect to
this Agreement and the Loan Documents executed in connection with
this Agreement, as of the Second Restatement Date.
15.07 LEGAL, VALID AND ENFORCEABLE OBLIGATIONS
The Loan Documents have been duly executed and delivered by the Borrower
and its Subsidiaries who are signatories thereto, and each of such Loan
Documents is a legal, valid and binding obligation of such entity and
enforceable against such entity in accordance with the terms thereof,
except to the extent that enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and by principles of
equity and except as set forth in SCHEDULE 4. The execution and delivery
of the Loan Documents by the Borrower, and its Subsidiaries, as the case
may be, who are signatories thereto, do not contravene any provisions of
the Certificate of Incorporation and By-Laws, or corresponding
constitutive documents by whatever name, of the Borrower or its
Subsidiaries.
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15.08 BANKRUPTCY
Neither the Borrower nor any of its Subsidiaries has taken any corporate
action nor have any other steps been taken or legal proceedings been
started or (to the best of the Borrower's knowledge and belief) been
threatened against any of the Borrower or any of its Subsidiaries for
the winding-up, dissolution, administration or reorganization (in each
such case under bankruptcy or insolvency laws) or for the appointment of
a receiver, administrator, administrative receiver, trustee or similar
officer of it or them or of any or all of its or their assets or
revenues, except the dissolution of Subsidiaries which are not Major
Subsidiaries with respect to which notice is or has been given to the
Agent.
15.09 NO DEFAULTS; NO LITIGATION
Neither the Borrower nor any of its Subsidiaries is in breach of or in
default under any agreement to which it is a party or which is binding
on it or any of its or their assets, which breach or default could
reasonably be expected to have a Material Adverse Effect on the Borrower
and its Consolidated Subsidiaries, taken as a whole; and no action or
administrative proceeding before any court, arbitration tribunal or
governmental agency has been commenced or, to the Borrower's knowledge,
threatened against the Borrower or any Subsidiary, or any assets of any
of them, in which an adverse decision could reasonably be expected to
have a Material Adverse Effect on the Borrower and its Consolidated
Subsidiaries, taken as a whole. As of the Second Restatement Date,
SCHEDULE 5 sets forth a summary of each such action or administrative
proceeding before any court, arbitration tribunal or governmental agency
pending or, to the knowledge of the Borrower, threatened in writing, as
of the Second Restatement Date which action or proceeding may result in
liability to the Borrower and/or any Subsidiary in an amount in excess
of DM 10,000,000 (Deutsche Mark Ten Million). As of the Second
Restatement Date, except as may be set forth on SCHEDULE 5, neither NL
Industries nor Kronos nor any other Affiliate of the Borrower is in
breach of or default under any of (a) the Indentures or the senior
secured notes or senior secured discount notes issued by NL Industries
thereunder, (b) the "First-Tier Senior Mirror Note" or the "First-Tier
Discount Mirror Note" (as such terms are defined in the Indentures) or
(c) the Mirror Notes issued by the Borrower.
15.10 ENVIRONMENTAL COMPLIANCE
(a) Each of the Borrower and its Subsidiaries is in compliance in all
respects with all applicable Environmental Laws except where the
failure to do so would not have a Material Adverse Effect on the
Borrower and its Consolidated Subsidiaries, taken as a whole;
(b) Except where the failure to do so or absence thereof would not
have a Material Adverse Effect on the Borrower and its
Consolidated Subsidiaries, taken as a whole, (1) each of the
Borrower and its Subsidiaries has obtained or applied for all
environmental, health and safety permits necessary for their
respective operations;
77
(2) with respect to all such permits which have been obtained,
all such permits are in good standing other than those which have
expired as to which applications for renewal or extension are
pending; (3) with respect to all such permits which have been
obtained, each of the Borrower and its Subsidiaries is in
compliance in all material respects with all terms and conditions
of such permits; and (4) with respect to those permits for which
applications are pending or renewals or extensions have been
requested, neither the Borrower nor any of its Subsidiaries is in
violation of any applicable law for the failure to have such
permit in good standing;
(c) Neither the Borrower nor any of its Subsidiaries nor any of their
respective properties or operations nor, to the best knowledge of
the Borrower, any of their formerly owned or operated properties
are subject to any outstanding written notice or order from or
agreement with any state, federal, foreign, territorial,
provincial, local or other court or governmental authority, nor
subject to any judicial or administrative proceeding respecting
any Environmental Law, the result of which notice, order,
agreement or proceeding would have a Material Adverse Effect on
the Borrower and its Consolidated Subsidiaries, taken as a whole;
and
(d) Except as described on SCHEDULE 5, there are no conditions or
circumstances associated with any property or operations of the
Borrower or any Subsidiary or, to the best knowledge of the
Borrower, property formerly owned or operated by the Borrower or
any Subsidiary or any of their predecessors or former operations
of the Borrower or its Consolidated Subsidiaries, including
offsite disposal practices, which could give rise to
Environmental Claims that would have a Material Adverse Effect on
the Borrower and its Consolidated Subsidiaries, taken as a whole.
As of the Second Restatement Date, SCHEDULE 5 also sets forth,
for each site or location, a brief description of all
Environmental Claims involving amounts in excess of DM 10,000,000
(Deutsche Mark Ten Million) (or the equivalent amount in any
currency).
15.11 FINANCIAL STATEMENTS
The consolidated and consolidating group financial statements of the
Borrower and its Subsidiaries as of December 31, 1995 and as of
September 30, 1996, respectively, and for the year and period then
ended, present fairly, in all material respects, the consolidated group
financial position and results of operations of the Borrower and its
Subsidiaries as of such dates and for such periods, all in conformity
with German GAAP, and neither the Borrower nor any of its Subsidiaries
had any material liabilities as of December 31, 1995 or as of September
30, 1996 (as applicable), which are not reflected in such financial
statements.
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15.12 NO MATERIAL ADVERSE CHANGE
Since the preparation of the consolidated group financial statements of
the Borrower and its Subsidiaries as of September 30, 1996, there has
been no change which has had a Material Adverse Effect on the Borrower
and its Consolidated Subsidiaries, taken as a whole.
15.13 ACCURATE INFORMATION
The financial projections for the Borrower and NL Industries contained
in the projection package dated January 15, 1997, were prepared in good
faith based on assumptions believed by the management of the Borrower to
be reasonable as of such date.
15.14 NO VIOLATION, DEFAULTS OR LIENS
The execution and delivery by the Borrower and its Subsidiaries, as the
case may be, of the Loan Documents and the exercise by the Borrower of
its rights, and the performance by the Borrower and its Subsidiaries of
their respective obligations, under the Loan Documents will not result
in:
(a) the creation of or require the imposition of any Lien in favor of
any Person other than the Agent and/or the Banks; or
(b) the existence of any event of default (howsoever called) under
any agreement or contract to which the Borrower or any Subsidiary
is a party or by which any of them or their properties are bound
which event of default would have a Material Adverse Effect on
any Company; or
(c) the violation of any law or regulation, or by any judgment,
decree or order, applicable to the Borrower or its Subsidiaries
which violation would have a Material Adverse Effect on any
Company.
15.15 ERISA
(a) Except as disclosed in SCHEDULE 6 A attached hereto, with respect
to all Pension Benefit Plans which are or have been maintained by
the Borrower or any member of the Controlled Group:
(1) there have not been any prohibited transactions, the
aggregate liability for which either has not been
satisfied in full or would have a Material Adverse Effect
on the Borrower and its Consolidated Subsidiaries, taken
as a whole;
(2) none of such plans has been terminated, the aggregate
liability for which either has not been satisfied in full
or the liability for which would have a Material Adverse
Effect on the Borrower and its Consolidated Subsidiaries,
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taken as a whole, and if any of such plans has not been
terminated, the aggregate liability and potential
liability of the Borrower, if all such plans were to
terminate, would not have a Material Adverse Effect on the
Borrower and its Consolidated Subsidiaries, taken as a
whole;
(3) none of such plans has any accumulated funding deficiency,
whether or not waived, the aggregate liability for which
either has not been satisfied in full or would have a
Material Adverse Effect on the Borrower and its
Consolidated Subsidiaries, taken as a whole;
(4) neither the Borrower nor any member of the Controlled
Group has incurred aggregate liabilities (excluding
premium payments made as and when due) to the PBGC with
respect to all such plans which liabilities would have a
Material Adverse Effect on the Borrower and its
Consolidated Subsidiaries, taken as a whole;
(5) there have been no reportable events, the aggregate
liability for which either has not been satisfied in full
or would have a Material Adverse Effect on the Borrower
and its Consolidated Subsidiaries, taken as a whole.
For purposes of this SECTION 15.15, the terms "accumulated
funding deficiency" and "reportable event" shall have the
respective meanings assigned thereto by ERISA and/or the Code.
(b) Except as disclosed in SCHEDULE 6 B with respect to all Pension
Benefit Plans currently maintained or participated in by the
Borrower or another member of the Controlled Group, the amount
for which the Borrower would be liable pursuant to the provisions
of Section 4063 of ERISA would not have a Material Adverse Effect
on the Borrower and its Consolidated Subsidiaries, taken as a
whole, if all such plans had terminated.
(c) Except as disclosed in SCHEDULE 6 C, neither the Borrower nor any
other member of the Controlled Group is now, nor has the Borrower
or any other member of the Controlled Group during the preceding
10 (ten) years ever been, a contributing employer to a multiple
employer plan or a Multiemployer Plan with respect to which the
Borrower or any other member of the Controlled Group has:
(1) withdrawn as a substantial employer or otherwise so as to
become subject to the provisions of Section 4063 of ERISA
or to any liability for withdrawal from such plan under
either provisions of applicable non-U.S. laws or with
respect to the applicable plan document, unless the
aggregate liability and potential liability with respect
to all such withdrawals has been satisfied in full or
would not have a Material Adverse Effect on the Borrower
and its Consolidated Subsidiaries, taken as a whole;
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(2) incurred or caused to occur a "complete withdrawal"
(within the meaning of Section 4203 of ERISA) or a
"partial withdrawal" (within the meaning of Section 4205
of ERISA) from a Multiemployer Plan that is a Pension
Benefit Plan so as to incur withdrawal liability under
Section 4201 of ERISA, or incurred or caused to incur a
similar event which could result in liability under
non-U.S. laws with respect to Non-U.S. Employee Plans
unless the aggregate liability and potential liability for
all such withdrawals has been satisfied in full or would
not have a Material Adverse Effect on the Borrower and its
Consolidated Subsidiaries taken as a whole; or
(3) been a party to any transaction or agreement under which
the provisions of Section 4204 of ERISA were applicable,
unless Borrower can no longer be held liable for any
withdrawal liability with respect to a Multiemployer Plan
to be contributed to by the purchaser pursuant to such
transaction or agreement or the amount of the withdrawal
liability which could be imposed on Borrower if there were
a partial or complete withdrawal with respect to all such
Multiemployer Plans would not have a Material Adverse
Effect on the Borrower and its Consolidated Subsidiaries,
taken as a whole.
(d) Except as disclosed on SCHEDULE 6 D, the aggregate potential
withdrawal liability of the Borrower with respect to all
Multiemployer Plans and any similar liabilities of the Borrower
and its Subsidiaries and potential liabilities under applicable
non-U.S. laws or Non-U.S. Employee Plans would not have a
Material Adverse Effect on the Borrower and its Consolidated
Subsidiaries, taken as a whole, if the Borrower and all members
of the Controlled Group were to withdraw from all such
Multiemployer Plans and were to incur all such liabilities and
potential liabilities under applicable non-U.S. laws or with
regard to the Non-U.S. Employee Plans.
(e) Except as disclosed on SCHEDULE 6 E, there are no actions, suits
or claims pending (other than routine claims for benefits) or, to
the knowledge of the Borrower, threatened in writing which could
reasonably be expected to be asserted against any Employee Plan
maintained by the Borrower or against the Borrower or the assets
of any such plan, the liability for which in the aggregate could
have a Material Adverse Effect on the Borrower and its
Consolidated Subsidiaries, taken as a whole.
(f) All of the Employee Plans maintained by the Borrower or by any
member of the Controlled Group comply or, upon amendment to
conform to legislation within any applicable remedial amendment
period, will comply in all material respects with their terms and
with all applicable provisions of ERISA and the Code, and all
other applicable laws, rules and regulations, except where the
failure to do so would not have a Material Adverse Effect on the
Borrower and its Consolidated Subsidiaries, taken as a whole.
81
15.16 NON-U.S. EMPLOYEE PLANS
Except as provided in SCHEDULE 6 F, with regard to Non-U.S. Employee
Plans for which assets are not required to be or have not been set aside
in a separate fund or trust, the reserves on the balance sheet of each
Subsidiary, respectively, equal or exceed the present value of all
accrued benefits under such Non-U.S. Employee Plans or the amount by
which such reserves are less than the present value of all such accrued
benefits would not have a Material Adverse Effect on the Borrower and
its Consolidated Subsidiaries, taken as a whole. The aggregate fair
market value of the assets of Non-U.S. Employee Plans which are required
to be funded by applicable law, or are funded to any extent (although
not required to be funded), is at least equal to the sum of the accrued
benefits and all other accrued liabilities provided for under such
Non-U.S. Employee Plans, or if such value is not at least equal to such
sum, the fact that, and the amount by which, the value is less than such
sum would not have a Material Adverse Effect on the Borrower and its
Consolidated Subsidiaries, taken as a whole. The Borrower, its
Subsidiaries and their Non-U.S. Employee Plans are in compliance in all
material respects with all applicable laws, regulations and reserve
and/or funding requirements concerning Non-U.S. Employee Plans, except
where the failure to so comply would not have a Material Adverse Effect
on the Borrower and its Consolidated Subsidiaries, taken as a whole.
15.17 INVESTMENT COMPANY
Neither the Borrower nor any Subsidiary is (a) an "investment company"
within the meaning of the Investment Company Act of 1940, as amended; or
(b) a "holding company" or a "subsidiary company" of 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.
15.18 SUBSIDIARIES
As of the Second Restatement Date:
(a) the Subsidiaries listed in SCHEDULE 7 are the only Subsidiaries
of the Borrower, and the Subsidiaries designated as Major
Subsidiaries in SCHEDULE 7 are the only Major Subsidiaries of the
Borrower;
(b) SCHEDULE 7 sets forth the jurisdiction of incorporation,
principal place of business and percentage of ownership of the
Borrower or any of its Subsidiaries in such Subsidiaries;
(c) The Borrower or its Subsidiaries have good and marketable title
to the shares of the Major Subsidiaries comprising the respective
percentages of ownership indicated on SCHEDULE 7, free and clear
of any Liens, except Liens in favor of the Agent and the Banks
under the Loan Documents;
82
(d) Neither the Borrower nor any of its Subsidiaries have sold or
agreed to sell or otherwise dispose of any right, title or
interest in any of its or their shares of any of the Subsidiaries
described on SCHEDULE 7;
(e) All of the shares of capital stock of the Pledged Subsidiaries
have been duly authorized and are fully paid and non-assessable
and, in the case of Pledged Subsidiaries issuing registered
shares, are in registerable form; SCHEDULE 7 sets forth, with
respect to the Pledged Subsidiaries, the number of shares of each
class of capital stock authorized, the number of shares of each
class of capital stock issued and outstanding and, if applicable,
the stock certificate numbers which evidence such issued and
outstanding shares; and, as of the Second Restatement Date, no
options, warrants, conversion or other rights, agreements or
commitments of any kind to a Person other than the Borrower or
its Subsidiaries or officers or directors thereof obligating any
of the Pledged Subsidiaries to issue or sell any shares of its
capital stock of any class, or any securities convertible into or
exchangeable for any of such shares, are outstanding, nor has any
authorization therefor been given;
(f) There are no contractual restrictions on the right to vote any
shares of the Major Subsidiaries owned by the Borrower or its
Subsidiaries, or the right to sell, transfer or otherwise dispose
of such shares; and
(g) The Pledge Agreements, which have been accompanied by any
required delivery of share certificates, create a valid first
priority perfected security interest in the shares of the
respective Subsidiaries pledged thereunder.
15.19 MARGIN STOCK
Neither the Borrower nor any Subsidiary is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock
or margin securities (within the meaning of Regulations U or X of the
Federal Reserve) or owns any such margin stock or margin security, and
no part of the proceeds of any extension of credit under this Agreement
will be used by the Borrower or any Subsidiary to purchase or carry any
such margin stock or margin security or to extend credit to others for
the purpose of purchasing or carrying any margin stock or margin
security.
15.20 TAXES
The Borrower and its Subsidiaries have filed all income tax returns and
all other material tax returns that are required to be filed by them and
have paid all taxes due for the period covered by such returns or
pursuant to any material assessment received by the Borrower or any of
its Subsidiaries, except for those being contested in good faith by
appropriate proceedings against which adequate reserves are being
maintained if required in accordance with German GAAP. As of the Second
Restatement Date, except as may be specified on SCHEDULE 11, (i) none of
the tax returns of the Borrower or any of its
83
Subsidiaries is under audit, (ii) there is no dispute, action or
administrative proceeding by or before any court, arbitration, tribunal
or governmental authority pending or, to the Borrower's knowledge,
threatened in writing against the Borrower or any Subsidiary relating to
any income taxes or similar types of taxes involving amounts in excess
of DM 5,000,000 (Deutsche Mark Five Million) (or the equivalent amount
in any currency), and (iii) no Lien referred to in CLAUSE (E) of the
definition of the term "Permitted Lien" arising from income tax
assessments or similar types of tax assessments has been granted or
exists involving amounts in excess of DM 5,000,000 (Deutsche Mark Five
Million) (or the equivalent amount in any currency).
15.21 INTELLECTUAL PROPERTY RIGHTS
(a) Except as set forth on SCHEDULE 8 A, the Borrower and its
Subsidiaries either own or are licensed to use pursuant to the
license agreements with Affiliates of the Borrower set forth on
SCHEDULE 8 B (the "Affiliate License Agreements") or pursuant to
the license agreements with parties other than Affiliates of the
Borrower set forth on SCHEDULE 8 C (the "Third Party License
Agreements") the Intellectual Property Rights. Each of the
Affiliate License Agreements and the Third Party License
Agreements is presently in full force and effect, neither the
Borrower, any of its Affiliates nor any of its Subsidiaries is in
default under any Affiliate License Agreement or Third Party
License Agreement and, pursuant to the Affiliate License
Agreements and the Third Party License Agreements, the Borrower,
its Affiliates and its Subsidiaries hold (and following the
completion of the transactions contemplated by this Agreement
will continue to hold) licenses to all Intellectual Property
Rights material to the conduct of their businesses.
(b) Except for the Affiliate License Agreements and the Third Party
License Agreements and except as set forth on SCHEDULE 8 D, there
are no agreements pursuant to which the Borrower or its
Subsidiaries are licensed to use Intellectual Property Rights.
(c) SCHEDULE 8 E sets forth the owners among the Borrower's
Affiliates or Subsidiaries of Intellectual Property Rights which
are patented or for which patent applications have been filed.
(d) SCHEDULE 8 F sets forth the owners among the Borrower's
Affiliates or Subsidiaries of trademarks included in the
Intellectual Property Rights which are registered or for which
applications for registration have been filed.
(e) To the best knowledge of the Borrower, (i) the current
manufacturing operations of the Borrower's Subsidiaries as of the
Second Restatement Date do not infringe on any valid patent,
trade secret or copyright of any other Person and (ii) the
current marketing and sales operations of the Borrower and its
Subsidiaries as of the Second Restatement Date do not infringe on
any valid trademark or trade name of any other Person which, in
each case, if enforced would have a Material
84
Adverse Effect on the Borrower and its Consolidated Subsidiaries,
taken as a whole.
(f) Except as set forth on SCHEDULE 8 G, no claims by any other
Person alleging infringement of any patent, trade secret,
trademark, trade name or copyright of such Person and relating to
the current manufacturing, marketing or sales operations of the
Borrower and its Subsidiaries as of the Second Restatement Date
have been communicated to an employee of Borrower or its
Subsidiaries charged with responsibility for Intellectual
Property Rights and are pending against Borrower or its
Subsidiaries, nor have any such claims been made and so
communicated within the twelve months preceding the Second
Restatement Date.
(g) The execution, delivery and performance of the Loan Documents to
which the Borrower is a party will not in any material manner or
to any material extent impair the ownership of or any rights
under or the license of, as the case may be, any of the
Intellectual Property Rights utilized by the Borrower and/or its
Subsidiaries.
15.22 KEY CONTRACTS
The Borrower has delivered to the Agent, true, correct and complete
photocopies of the Leverkusen Lease, the Service Contract and all
existing loan agreements, including all Project Financing agreements,
which, if terminated or materially modified, would have a Material
Adverse Effect on the Borrower and its Consolidated Subsidiaries, taken
as a whole. As of the Second Restatement Date, SCHEDULE 12 hereto
specifically identifies each of such loan agreements.
15.23 AFFILIATE TRANSACTIONS
SCHEDULE 9 sets forth all agreements or arrangements, whether or not in
the ordinary course of business, existing on the Second Restatement
Date, which involve payments or transfers of assets (other than
inventory in the ordinary course of business) in excess of DM 5,000,000
(Deutsche Mark Five Million) per calendar year by the Borrower and/or
its Subsidiaries to Affiliates (other than the Borrower and its
Subsidiaries).
15.24 NL DEBT OFFERING; MIRROR NOTES; SUBORDINATED LOANS; CONSIDERATION FOR
PREPAYMENTS
(a) The gross proceeds of the NL Debt Offering were not less than
$350,000,000 (Three Hundred Fifty Million U.S. Dollars), all of
which gross proceeds, less the NL Debt Offering Expenses, were
paid by NL Industries or Kronos to the Agent on behalf of the
Borrower as the First Prepayment pursuant to SECTION 2.01 of the
First Restated Agreement. The aggregate principal amount of the
Mirror Notes issued by the Borrower did not exceed the gross
proceeds of the NL Debt Offering. The only consideration received
or to be received by NL Industries, Kronos or any other Affiliate
of the Borrower from the Borrower in consideration for or
otherwise
85
in connection with or relating to the First Prepayment is the
Indebtedness evidenced by the Mirror Notes, and there is no other
Indebtedness, liability or obligation due or owing, or that may
become due or owing, by the Borrower as consideration for, or in
any way in connection with or relating to, the First Prepayment.
(b) The amount of the Kronos Subordinated Loan made by Kronos to the
Borrower on December 31, 1996, was DM 25,000,000 (Deutsche Mark
Twenty-Five Million). The amount of the NL Subordinated Loan made
by NL Industries to the Borrower on or before the Second
Restatement Date was DM 260,000,000 (Deutsche Mark Two Hundred
Sixty Million), DM 150,000,000 (Deutsche Mark One Hundred Fifty
Million) of which proceeds of the NL Subordinated Loan are,
concurrently with the Second Restatement Date, being paid by NL
Industries to the Agent on behalf of the Borrower as the Second
Prepayment. The Subordinated Loan Documents evidence and
represent the entire agreement between NL Industries and the
Borrower relating to the Kronos Subordinated Loan and the NL
Subordinated Loan.
15.25 TAXES RELATING TO MIRROR NOTES
Under the laws in force at the First Restatement Date and the Second
Restatement Date, no Taxes were or will be required to be deducted or
withheld from or with respect to any sum payable or to be paid under the
Mirror Notes.
15.26 OWNERSHIP OF MATERIAL ASSETS
As of the Second Restatement Date, SCHEDULE 13 sets forth each tangible
property or asset (or group of related properties or assets), whether
real or personal property but exclusive of cash balances, inventory and
accounts receivable, of the Borrower or any of its Subsidiaries which
individual property or asset (or group of related properties or assets),
individually or in the aggregate, has a book value or estimated fair
market value of DM 20,000,000 (Deutsche Mark Twenty Million) (or
equivalent amount in any currency) or more, and also sets forth the
owner(s) of each such property or asset (or group of related properties
or assets).
15.27 OPTIONAL PREPAYMENTS
As of the Second Restatement Date, no optional prepayments of the Loan
have been made with funds provided by Kronos and/or NL Industries which
would allow for the making of Restricted Payments in accordance with
SECTION 16.20(B).
15.28 CERTAIN ADJUSTED RESTRICTED PAYMENTS
86
The aggregate of all Adjusted Restricted Payments made by the Borrower
or any of its Subsidiaries to any Affiliate of the Borrower (other than
Subsidiaries of the Borrower) during 1996 did not exceed DM 47,000,000
(Deutsche Mark Forty-Seven Million).
15.29 SOLVENCY OF RHEOX, INC.
A condition to the closing of the January 1997 $150,000,000 loan to
Rheox, Inc. is the issuance by an independent valuation firm of a
solvency opinion with respect to the financial condition of Rheox, Inc.
after giving effect to such loan and a dividend in the maximum amount of
$130,000,000 from Rheox, Inc. to NL Industries.
ARTICLE 16. UNDERTAKINGS AND COVENANTS
The Borrower agrees that so long as the Loan or any portion thereof or
any Commitment therefor is outstanding, the Borrower shall do the following:
16.01 DELIVERY OF FINANCIAL STATEMENTS, ETC.
(a) As soon as the same become available, but in any event within 90
(ninety) days after the end of each of its fiscal years, deliver
to the Agent, in sufficient copies for distribution to all the
Banks, the audited consolidated group financial statements
(including a balance sheet and statements of operations,
stockholders' equity and cash flow) of the Borrower and its
Subsidiaries for such fiscal year, and, as unaudited supplemental
information:
(1) the related consolidating financial statements by country;
and
(2) separate balance sheets, as included in the consolidated
group balance sheet of the Borrower, for each of Kronos
Titan, Kronos Europe S.A./N.V., Titania A/S, Kronos Titan
A/S and Kronos Canada, Inc.;
all as prepared in accordance with German GAAP, consistent with
the preparation of the financial statements for the prior
financial period except to the extent that any inconsistent
practice is specified in the certificate described below,
together with a certificate executed by the chief financial
officer of the Borrower in the form of EXHIBIT Q including
calculations of the provisions of SECTIONS 16.18 through 16.25,
showing in reasonable detail the basis for such calculations.
(b) Within 60 (sixty) days after the end of each fiscal quarter
(excluding the fourth quarter), unaudited consolidating group
financial statements of the Borrower and its Subsidiaries, by
country, prepared in accordance with German GAAP, consistent with
the preparation of the financial statements for the prior
financial period except to the extent that any inconsistent
practice is specified in the certificate described below, and, as
supplemental information, separate balance sheets, as included in
the consolidating balance sheets of the Borrower and its
87
Subsidiaries, for each of Kronos Titan, Kronos Europe S.A./N.V.,
Titania A/S, Kronos Titan A/S and Kronos Canada, Inc., for each
fiscal quarter (excluding the fourth quarter, except as provided
below) and, commencing with the third fiscal quarter of 1993, a
certificate executed by the chief financial officer of the
Borrower in the form of EXHIBIT R including calculations of the
provisions of SECTIONS 16.18 through 16.25, showing in reasonable
detail the basis for such calculations and including (for each
fiscal quarter, including the fourth quarter) calculations of
Adjusted Restricted Payments made through the end of such fiscal
quarter, showing in reasonable detail the basis for such
calculations.
(c) Promptly deliver notice thereof to the Agent, upon the
commencement of any action or other proceedings by or against the
Borrower or any of its Subsidiaries under any bankruptcy,
insolvency or other similar law.
(d) Upon request of the Agent, furnish the Agent with such
information about the business, assets and financial condition of
each of the Borrower and/or any of its Subsidiaries as the Agent,
or any Bank through the Agent, may reasonably request; provided,
however, nothing in this Agreement shall entitle the Agent or the
Banks to request, nor require the Borrower or its Subsidiaries to
provide, (i) nonpublic confidential technical information and
knowhow or information relating to processes of or used by the
Borrower or its Subsidiaries or (ii) information relating to the
costs of manufacture (including, without limitation, raw
materials supply contracts) any of which, if made public, would,
in the reasonable opinion of the Borrower, impair its competitive
position, provided, however, that the restriction on information
set forth in CLAUSES (I) and (II) (A) shall not apply if an Event
of Default exists and is continuing and (B) does not include
information which:
(1) is or becomes generally available to the public other than
as a result of a disclosure by the Agent or the Banks
which are signatories to this Agreement or their
respective directors, officers, employees, Affiliates,
attorneys, accountants or other professional advisors in
violation of this provision;
(2) was available to the Agent or any Bank on a
non-confidential basis prior to its disclosure to any
other Bank; or
(3) becomes available to the Agent or any Bank on a
non-confidential basis from a Person (other than the
Borrower or its Affiliates) who, to the reasonable belief
of the Agent or such Bank, is not bound by a
confidentiality agreement and is not prohibited from
transmitting such information under applicable law.
(e) Upon the request of the Agent, and at the Bank's expense, permit
an auditor of the Agent to audit the financial statements and
review all the financial records of the
88
Borrower and/or any of its Subsidiaries and permit the Banks to
receive additional information from the auditors of the Borrower
and its Subsidiaries.
(f) Within 5 (five) days after the end of each month, (i) a report in
form and substance reasonably satisfactory to the Agent which
sets forth the maximum committed amount, the outstanding
principal amount and identities of the debtor and payee of all
Indebtedness of the Borrower or any of its Subsidiaries as of the
end of such immediately preceding month, and (ii) the Liquidity
Report (as such term is defined in the Liquidity Undertaking).
16.02 OPERATING PERMITS
Inform the Agent promptly about the refusal of (or written notice of
intent to refuse) any application for any operating permits and/or
licenses or the suspension or withdrawal of any operating permits or
licenses by governmental authorities having jurisdiction over the
Borrower or any of its Subsidiaries, as the case may be, if the refusal
of such application or the occurrence of such refusal, suspension or
withdrawal would have a Material Adverse Effect on any of the Companies.
16.03 ENVIRONMENTAL COMPLIANCE
Cause each of the Companies to comply in all material respects with all
applicable Environmental Laws and all other laws, rules, regulations and
orders relating to the disposal of Contaminants except to the extent
failure to comply would not have a Material Adverse Effect on such
Company.
16.04 COMPLIANCE WITH APPLICABLE LAW
Comply, and cause each of its Subsidiaries to comply, in all material
respects with all applicable laws, ordinances, rules, regulations and
requirements of governmental authorities (including, without limitation,
applicable Environmental Laws) except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings and for
which adequate reserves are being maintained if required by German GAAP
or where noncompliance with such laws, ordinances, rules, regulations or
requirements would not have a Material Adverse Effect on any of the
Companies.
16.05 BOOKS AND RECORDS
Keep, and cause each of its Subsidiaries to keep, proper books and
records and accounts in which full, true and correct entries in
conformity with local standards shall be made of all material dealings
and transactions in relation to its business and activities; and subject
to SECTION 16.01(D) permit, and cause each of its Subsidiaries to
permit, representatives of any Bank, at such Bank's expense, to visit
and inspect any of their respective properties, to examine and make
abstracts from any of their respective books and records (including,
without limitation, all documents relating to environmental control of
the production of
89
titanium dioxide pigments) and to discuss their respective affairs,
finances and accounts with their respective officers, employees and
independent accountants, and authorize and instruct and cause each of
its Subsidiaries to authorize and instruct said officers, employees and
accountants to so discuss the respective affairs, finances and accounts,
all of the foregoing at such reasonable times and as often as may
reasonably be requested with prior notice.
16.06 ENVIRONMENTAL REPORTS
(a) Notify the Agent and the Banks in writing, promptly upon the
Borrower or any of its Subsidiaries learning of any of the
following which could have a Material Adverse Effect on any of
the Companies:
(1) any Environmental Claim against the Borrower or any of its
Subsidiaries, including one to take a remedial, removal or
other action with respect to any Contaminants contained on
any property whether or not owned by the Borrower or
Subsidiary so notified;
(2) any notice of violation of any Environmental Law; and
(3) the commencement of any judicial or administrative
proceedings or investigation alleging a violation of any
Environmental Law.
(b) Upon written request by the Agent or any Bank submit, and cause
each of its Subsidiaries to submit, to the Agent or such Bank, at
reasonable intervals, a report providing an update of the status
of any environmental, health or safety compliance, hazard or
liability issue identified in any notice required pursuant to
this SECTION 16.06.
16.07 INTELLECTUAL PROPERTY RIGHTS
(a) Not permit any of its Subsidiaries to assign the Affiliate
License Agreements to which they are a party or to amend or
modify in any respect adverse to any Company or any Subsidiary,
or allow to expire, or terminate any of the Affiliate License
Agreements to which they are a party, provided that this
provision shall be without prejudice to the right of a party to
seek damages or specific performance for breach of any of the
Affiliate License Agreements; and
(b) maintain, protect and enforce, and require each Subsidiary to
take reasonable steps to maintain, protect and enforce, the
Intellectual Property Rights owned by it (if any), consistent
with prior practice by and among Kronos, Kronos U.S. and their
Affiliates and, in any event, consistent with prudent business
practices of the Borrower and the Subsidiaries.
16.08 LIENS
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Not create or permit to exist, or permit its Subsidiaries to create or
permit to exist, any Lien, except Permitted Liens.
16.09 DISPOSITIONS
Not make, nor permit any of its Subsidiaries to make, a Disposition of
any asset:
(a) other than in the ordinary course of business;
(b) for less than fair market value (other than a Disposition
described in SECTIONS 16.09(A), (C), (D), (F) or (G));
(c) other than transactions made in accordance with SECTION 16.15(C),
Restricted Payments made in accordance with SECTION 16.20 and
payments made under the Mirror Notes in accordance with the terms
of the Mirror Notes;
(d) other than interest payments on Subordinated Debt, if and to the
extent permitted by the Subordination Agreement, provided that
there exists no Default with respect to payment of any amounts
due and owing under this Agreement and no Default exists or would
result from such payment;
(e) except for cash, if the aggregate Net Proceeds of such
Dispositions (other than a Disposition described in CLAUSES (A),
(C), (D), (F) or (G) of this SECTION 16.09), either alone or in
the aggregate, during any calendar year during the term of this
Agreement exceeds DM 100,000,000 (Deutsche Mark One Hundred
Million);
(f) other than Dispositions between and among the Borrower and its
Subsidiaries or between and among the Subsidiaries; provided,
however, that with respect to Kronos Canada, Inc., Kronos Europe
S.A./N.V., Kronos Titan, Kronos Titan A/S and Titania A/S (the
"Operating Subsidiaries"), without approval of the Majority
Banks, the Borrower shall not make, nor permit its Operating
Subsidiaries to make, a Disposition to the Borrower or another
Subsidiary of assets in such Operating Subsidiaries consisting of
production capacity, inventory (other than in the ordinary course
of business), accounts receivable (other than to Kronos World
Services S.A./N.V. (and as long as it remains a Subsidiary) for
cash) or Intellectual Property Rights (other than licenses and
sub-licenses of such Intellectual Property Rights), and further
the Borrower shall not transfer, nor permit any of its
Subsidiaries to transfer, to any other Subsidiary the Stock of
any Pledged Subsidiary without the approval of the Majority
Banks;
(g) notwithstanding anything in this Agreement to the contrary, other
than Dispositions, termination or shortening of the term, or
modifications, of the Leverkusen Lease for full, fair and
reasonable consideration; or
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(h) other than Dispositions prior to the Second Restatement Date of
the distributorship/marketing arrangements existing as of the
First Restatement Date between Rheox, Inc. and/or its
subsidiaries and certain Subsidiaries of the Borrower.
Not use, or allow to be used, directly or indirectly, the proceeds of
any Disposition permitted by this Section 16.09 to make any payment or
other transfer of funds to or for the benefit of any Affiliate of the
Borrower other than the Subsidiaries of the Borrower (if and to the
extent that such payment or transfer to Subsidiaries is not otherwise
prohibited by this Agreement); provided, however, that, subject to
compliance with the other terms of this Agreement, the proceeds of any
such permitted Disposition may be used to make Restricted Payments if
and to the extent that such Restricted Payments are permitted pursuant
to Section 16.20 and to make payments under the Mirror Notes in
accordance with the terms of the Mirror Notes.
16.10 MERGER; CONSOLIDATION
(a) (i) Not merge or consolidate with any other Person whereby
the Borrower shall be the surviving corporation without
the prior written consent of the Majority Banks.
(ii) Not merge or consolidate with or into any other Person
whereby any other Person would be the surviving entity
without the prior written consent of the Majority Banks
(662/3%).
(b) Not permit Kronos Canada, Inc., 2927527 Canada Inc., 2969157
Canada Inc. or Kronos Europe S.A./N.V. to merge or consolidate
with or into any other Person (other than, as to 2927527 Canada
Inc. only, the Borrower), unless the survivor shall (i) be a
corporation organized under the laws of Canada (with respect to
Kronos Canada, Inc., 2927527 Canada Inc. or 2969157 Canada Inc.)
or Belgium (with respect to Kronos Europe S.A./N.V.); (ii) have a
net worth approximately equal to or greater than that of Kronos
Canada, Inc., 2927527 Canada Inc., 2969157 Canada Inc. or Kronos
Europe S.A./N.V., as the case may be; (iii) have assumed all of
the liabilities of Kronos Canada, Inc., 2927527 Canada Inc.,
2969157 Canada Inc. or Kronos Europe S.A./N.V., as the case may
be; and (iv) be a Subsidiary directly Controlled by the Borrower.
(c) Not permit Kronos Titan, Kronos Titan A/S or Titania A/S to merge
or consolidate with or into any Person unless the survivor shall
(i) be a corporation organized under the laws of Germany (with
respect to Kronos Titan) or Norway (with respect to Kronos Titan
A/S or Titania A/S); (ii) have a net worth approximately equal to
or greater than that of Kronos Titan, Kronos Titan A/S or Titania
A/S, as the case may be; (iii) have assumed all of the
liabilities of such entity; and (iv) be a Subsidiary either
directly Controlled by the Borrower or directly Controlled by a
Subsidiary of the Borrower;
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provided, however, that any other Subsidiary may merge with or
into any other Subsidiary.
16.11 EMPLOYEE MATTERS
(a) DISCHARGE OF ERISA LIABILITY
Pay and discharge promptly or cause any Subsidiary to pay and
discharge promptly any liability imposed upon it pursuant to the
provisions of Title IV of ERISA or the provisions of any similar
applicable Non-U.S. law or similar provisions provided for in any
applicable plan or document relating to such plan; provided,
however, that neither the Borrower nor any Subsidiary shall be
required to pay any such liability if:
(i) the amount, applicability or validity thereof shall be
diligently contested in good faith by appropriate
proceedings; and
(ii) the Borrower or the Subsidiary, as the case may be, shall
establish and maintain reserves, if required in accordance
with German GAAP which, in the opinion of the Borrower's
independent accountants, are adequate with respect
thereto.
(b) ERISA NOTICES
Deliver to the Banks promptly, and in any event within 10 (ten)
working days:
(i) when the Borrower or any member of the Controlled Group
gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA)
with respect to any Pension Benefit Plan that might
constitute grounds for a termination of such Pension
Benefit Plan under Title IV of ERISA, or knows that the
plan administrator of any Pension Benefit Plan has given
or is required to give notice of any such reportable
event, a copy of the notice of such reportable event given
or required to be given to the PBGC;
(ii) when the Borrower or a member of the Controlled Group, or
an administrator of any Pension Benefit Plan files with
participants, beneficiaries or the PBGC a notice of intent
to terminate any such plan in a distress termination
pursuant to Section 4041(c) of ERISA, a copy of any such
notice;
(iii) upon the receipt of notice by the Borrower or member of
the Controlled Group or an administrator of any Pension
Benefit Plan from the PBGC of
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the PBGC's intention to terminate any Pension Benefit Plan
or to appoint a trustee to administer any such plan, a
copy of such notice;
(iv) when the Borrower knows or has reason to know of any event
or condition which might constitute grounds under the
provisions of Section 4042 of ERISA for the termination of
(or the appointment of a trustee to administer) any
Pension Benefit Plan or when Borrower or any member of the
Controlled Group files an application under Section 412(d)
of the Code for a waiver of the minimum funding standards
with respect to a Pension Benefit Plan, an explanation of
such event or condition or a copy of such application, as
the case may be; or
(v) upon the receipt by the Borrower or by a member of the
Controlled Group of aggregate assessments in excess of
$1,000,000 (U.S. Dollars One Million) of withdrawal
liability under Section 4201 of ERISA from Multiemployer
Plans, a copy of each such assessment.
(c) ERISA TRANSACTIONS
Not engage in any transaction or permit any Subsidiary to engage
in any transaction which could subject the Borrower or any
Subsidiary to a civil penalty assessed pursuant to the provisions
of Section 502 of ERISA or tax imposed under the provisions of
Section 4975 of the Code, which civil penalty or tax would have a
Material Adverse Effect on the Borrower and its Consolidated
Subsidiaries, taken as a whole.
(d) NO TERMINATION OF EMPLOYEE PLANS
Not terminate any Pension Benefit Plan of the Borrower or any
member of the Controlled Group in a "distress termination" under
Section 4041 of ERISA, or take any other action or have any event
occur with respect to an Employee Plan, including, without
limitation, any action or event for which the Borrower must
provide the Banks with a copy of a notice, an explanation of an
event or condition, or a copy of an assessment under this SECTION
16.11, which would have a Material Adverse Effect on the Borrower
and its Consolidated Subsidiaries, taken as a whole.
(e) NON-U.S. EMPLOYEE PLANS
Not permit any condition to exist with respect to a Non-U.S.
Employee Plan which would have a Material Adverse Effect on any
Company.
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16.12 INTEREST RATE PROTECTION AGREEMENTS
Shall, with financial institutions and at rates reasonably acceptable to
the Agent, maintain Interest Rate Protection Agreements with respect to
a minimum of 45% (forty-five percent) of the amount of the Loans
outstanding at any time through May 31, 1995.
16.13 INDEBTEDNESS TO SUBSIDIARIES
Shall not make any payments with respect to any Indebtedness owed by the
Borrower to any Subsidiary if a Default exists and is continuing, or
would result from the making of such payment.
16.14 MAINTENANCE OF SEPARATE CORPORATE IDENTITIES
Shall, for so long as the Loan or any portion thereof or any Commitment
therefor is outstanding,
(a) provide, that at all times, at least one (1) member of its board
of directors or at least one (1) of its officers will be a Person
who is not an officer, director or employee of any corporation
which Controls the Borrower;
(b) maintain corporate records and books of account separate from
those of any corporation which Controls the Borrower and separate
from those of any Major Subsidiary;
(c) not commingle its funds or assets with those of any corporation
which Controls the Borrower or with those of any Major
Subsidiary; and
(d) provide that its board of directors will hold all appropriate
meetings, which will not be jointly held with any corporation
which Controls the Borrower, to authorize and approve the
Borrower's corporate actions.
16.15 AFFILIATE TRANSACTIONS
Not, nor permit any of its Subsidiaries, directly or indirectly, to pay
any funds (including, without limitation, payments of principal or
interest on Indebtedness or Subordinated Debt to any Affiliate) to or
for the account of, make any investment in, lease, sell, transfer or
otherwise dispose of, any assets, tangible or intangible, grant loans,
guarantees, suretyships to, enter into management, consulting,
brokerage, advisory or similar agreements or arrangements with, or
participate in or effect any transaction in connection with any joint
enterprise or other joint arrangement with, any Affiliate (other than
the Borrower and its Subsidiaries), provided, however, that the
foregoing shall not restrict:
(a) transactions which are on terms and conditions no less favorable
to the Borrower and its Subsidiaries than would apply in
comparable arm's-length transactions
95
(involving comparable circumstances) with a Person not an
Affiliate; provided that (i) in no event shall payments provided
for in any management, consulting, advisory or similar agreements
or arrangements (other than the existing agreements and
arrangements described in SCHEDULE 9) exceed, in the aggregate,
DM 10,000,000 (Deutsche Mark Ten Million) in any calendar year;
(ii) in no event shall amounts paid to Affiliates as brokerage
fees in connection with Dispositions to non-Affiliates exceed the
lesser of (A) 3% (three percent) of the Gross Proceeds or (B)
customary fees and expenses which would be incurred pursuant to
an arm's length agreement or arrangement); and (iii) with respect
to sales or transfers of product or similar assets by the
Borrower or any of its Subsidiaries to Affiliates of the Borrower
(other than the Borrower and its Subsidiaries) (A) all such sales
or transfers shall be on payment terms that provide for full
payment in cash on or before 45 (forty-five) days after the date
of such sale or transfer and (B) the aggregate amount owing to
the Borrower and its Subsidiaries for all such sales or transfers
(net of any amounts owing by the Borrower and its Subsidiaries
with respect to sales or transfers of product or similar assets
to such Affiliates of the Borrower) shall not at any time exceed
$15,000,000 (Fifteen Million Dollars) (or the equivalent amount
in any currency);
(b) Restricted Payments made in accordance with SECTION 16.20;
(c) transactions by the Borrower or any Subsidiary with any Affiliate
(including, without limitation, loans and advances), to the
extent that the aggregate amount of such transactions when
aggregated with Restricted Payments shall not exceed the limit on
payments in the periods specified under SECTION 16.20 and shall
otherwise be made in accordance with SECTION 16.20;
(d) the Affiliate License Agreements and transactions by the Borrower
or any Subsidiary pursuant to the Affiliate License Agreements;
or
(e) the issuance and payment of the Mirror Notes in accordance with
the terms of the Mirror Notes.
16.16 TRANSACTIONS WITH SUBSIDIARIES
If the Borrower or any Subsidiary, or a Subsidiary and another
Subsidiary, creates or enters into any agreement with a Subsidiary which
is on terms and conditions more favorable to such Subsidiary than would
apply in a similar agreement with a Person which is not an Affiliate,
then, in the event that any such benefitted Subsidiary merges or
consolidates with another entity such that the surviving entity is no
longer a Subsidiary, or such agreement is, or the benefits of such
agreement are, sold (in one transaction or a series of transactions to a
Person that is not a Subsidiary), any such agreement involving such
benefitted Person must, prior to such merger, consolidation or sale of
assets, be modified so that the terms and conditions thereof would be no
more favorable than would apply with a Person which is not an Affiliate.
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16.17 NOTICE OF DEFAULT; CHANGE OF LAW
Advise the Agent promptly upon the Borrower becoming aware of (i) any
Default under this Agreement or any of the other Loan Documents or (ii)
any change in law which would cause any representation or warranty in
SECTION 15.04, 15.05, 15.06, 15.07, or 15.14 of this Agreement to be
incorrect if such change in law were in effect on the Second Restatement
Date.
16.18 LIMITATION OF INDEBTEDNESS
Not incur any Indebtedness other than Permitted Indebtedness.
16.19 SUBSIDIARY INDEBTEDNESS
Not allow any Subsidiary to incur any Indebtedness other than (a)
Permitted Indebtedness or (b) subject to the limitations of SECTION
16.18, Indebtedness in respect of unfunded vested benefits under any
laws governing non-U.S. Employee Plans.
16.20 RESTRICTED PAYMENTS
Not make or declare any Restricted Payments except for the following
Restricted Payments if no Default exists or would result after giving
effect thereto:
(a) As a result of the First Prepayment, the Borrower may make
Restricted Payments to Kronos in an aggregate amount not to
exceed DM 75,000,000 (Deutsche Mark Seventy-Five Million),
provided that (i) none of such Restricted Payments may be made
prior to January 1, 1995 and (ii) the aggregate of all such
Restricted Payments made during calendar year 1995 shall not
exceed DM 50,000,000 (Deutsche Mark Fifty Million); and
(b) The Borrower may make Restricted Payments to Kronos and/or NL
Industries if and to the extent that such payments do not exceed,
at any time when paid, the positive remainder, if any, of (i) the
sum of (A) the optional prepayments of the Loan made with funds
provided by Kronos and/or NL Industries as described in SECTION
8.02, exclusive of any optional prepayments directly or
indirectly made with funds constituting capital contributions
made or Subordinated Debt advanced to the Borrower and satisfying
all or any portion of the "Maximum Required Investment Amount" as
such term is defined in the Liquidity Undertaking and exclusive
of the First Prepayment, the Second Prepayment and any other
prepayments made with the proceeds of the NL Subordinated Loan or
the Kronos Subordinated Loan, plus (B) interest accrued, at a
rate not to exceed the average rate of interest applicable to the
Loans plus 0.50% (one-half of one percent) as of the Business Day
upon which such Restricted Payment is made, on any Subordinated
Debt borrowed by the Borrower from Kronos and/or NL Industries
and incurred to finance such optional prepayments of the Loan
referred to in
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CLAUSE (A) preceding minus (ii) the amount of Restricted Payments
then previously paid by the Borrower to Kronos and/or NL
Industries pursuant to this CLAUSE (B); for purposes of this
CLAUSE (B), no such optional prepayment (or portion thereof)
shall be deemed to have been made with funds provided by Kronos
and/or NL Industries unless, in connection with the prior written
notice of such optional prepayment given pursuant to SECTION
8.02, the Borrower notifies the Agent that such optional
prepayment (or portion thereof) shall be made with funds provided
by Kronos and/or NL Industries and, at the time of such
prepayment, the Agent receives evidence reasonably satisfactory
to it that such optional prepayment (or portion thereof) was in
fact paid with funds provided by Kronos and/or NL Industries and
placed into the Special Purpose Account (or, if so agreed by the
Agent, into another special, restricted account of the Borrower
maintained at, and acceptable to, the Agent from which the
Borrower may not make withdrawals or otherwise direct
distributions except with respect to any interest to accrue
thereon) and then applied against the Loan pursuant to SECTION
8.02.
Notwithstanding the foregoing, the Borrower may make Restricted
Payments, even if the foregoing conditions are not met, but only if and
to the extent that, prior to or concurrently with the making of any such
Restricted Payment, a cash equity capital contribution is made to the
Borrower by the Person to whom such Restricted Payment is to be made
such that the sum of Consolidated Equity plus Subordinated Debt of the
Borrower is at least equal to the sum of Consolidated Equity plus
Subordinated Debt of the Borrower if such Restricted Payment had not
been made.
16.21 MAXIMUM FUNDED DEBT RATIO; MAXIMUM INDEBTEDNESS
Maintain for each fiscal quarter during the fiscal years set forth below
a Funded Debt Ratio not exceeding the maximum Funded Debt Ratio
specified opposite each such fiscal year:
YEAR MAXIMUM FUNDED DEBT RATIO
1996 0.95 to 1.00
Effective as of the Second Restatement Date, allow to exist or remain
outstanding Indebtedness of the Borrower and its Subsidiaries on a
consolidated basis, exclusive of the Indebtedness evidenced by the
Mirror Notes, that does not, at any time during any particular fiscal
year, exceed the aggregate amount set forth in the table below
applicable to such year:
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Maximum Aggregate
YEAR AMOUNT OF INDEBTEDNESS
1997 DM 430,000,000
1998 DM 430,000,000
1999 DM 400,000,000
2000 DM 300,000,000
16.22 MINIMUM CONSOLIDATED EQUITY
Maintain for each fiscal quarter during the fiscal years set forth below
Consolidated Equity of not less than the minimum Consolidated Equity
specified opposite each such fiscal year:
YEAR MINIMUM CONSOLIDATED EQUITY
1997 DM 1,600,000,000
1998 DM 1,325,000,000
1999 DM 1,175,000,000
2000 DM 1,100,000,000
16.23 CURRENT ASSETS TO CURRENT LIABILITIES RATIO
Maintain a ratio of Current Assets to Current Liabilities of not less
than 1.50 to 1.00.
16.24 INTEREST COVERAGE RATIO
Maintain for the four fiscal quarters then ended an Interest Coverage
Ratio of not less than the minimum Interest Coverage Ratio specified
opposite each date as set forth below:
Four Fiscal Minimum Interest
QUARTERS ENDED COVERAGE RATIO
March 31, 1997 0.65 to 1.00
June 30, 1997 0.35 to 1.00
September 30, 1997 0.30 to 1.00
December 31, 1997 0.30 to 1.00
March 31, 1998 0.30 to 1.00
June 30, 1998 0.50 to 1.00
September 30, 1998 0.80 to 1.00
December 31, 1998 1.00 to 1.00
March 31, 1999 1.05 to 1.00
June 30, 1999 1.15 to 1.00
September 30, 1999 1.25 to 1.00
December 31, 1999 1.60 to 1.00
March 31, 2000 1.75 to 1.00
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June 30, 2000 2.00 to 1.00
16.25 MINIMUM EBITDA
Have or achieve, for each fiscal year set forth below, EBITDA that is
not less than the minimum EBITDA specified opposite each such fiscal
year below:
FISCAL YEAR ENDED MINIMUM EBITDA
1997 DM 20,000,000
1998 DM 90,000,000
1999 DM 195,000,000
For purposes of determining compliance with the minimum EBITDA
requirements set forth in the immediately preceding sentence, there
shall be added to EBITDA during any fiscal year the positive remainder,
if any, of (a) the sum of (i) the amount, if any, of contributions to
the equity of the Borrower in the form of cash (as distinguished from
the conversion of debt to equity) made by NL Industries or Kronos during
such fiscal year plus (ii) the amount, if any, of loans made by NL
Industries or Kronos as Subordinated Debt during such fiscal year minus
(b) the sum of (i) the increase in the Restricted Capital Amount during
such fiscal year, plus (ii) the aggregate amount of Restricted Payments
made during such fiscal year pursuant to SECTION 16.20(B); provided,
however, that such addition to EBITDA may occur during no more than two
separate fiscal years of the Borrower during the term of this Agreement
and any such addition occurring during any fiscal year shall be wholly
excluded for purposes of determining EBITDA during any other fiscal
year.
16.26 REGISTERED OFFICE IN GERMANY
Maintain a registered office in Germany.
16.27 SERVICE CONTRACT OF KRONOS TITAN
Cause Kronos Titan to maintain the Service Contract or obtain a renewal
or renewals, or a replacement or replacements, thereof providing for
comparable services during the term of the Leverkusen Lease.
16.28 RESTRICTION ON DIVIDENDS FROM SUBSIDIARIES
(a) Without the consent of the Majority Banks, the Borrower shall not
permit any of its Subsidiaries to incur any Indebtedness not
existing as of the First Restatement Date, which Indebtedness
includes a consensual encumbrance or restriction on the ability
of a Subsidiary to pay dividends or distributions or make similar
payments on its Stock to the Borrower or to any other Subsidiary.
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(b) Without the consent of the Majority Banks, the Borrower shall
not, nor permit any of its Subsidiaries to, amend or refinance
any Indebtedness if such amendment or refinancing includes a
consensual encumbrance or restriction on the ability of any
Subsidiary to pay dividends or distributions or make similar
payments on its Stock to the Borrower or to any other Subsidiary
to a greater extent than exists with respect to such Indebtedness
at the time of such amendment or refinancing.
16.29 INVESTMENTS
Except as otherwise expressly permitted under SECTIONS 16.09 or 16.10 of
this Agreement, neither the Borrower nor any of its Subsidiaries will
make or acquire any Investment in any Person other than:
(a) Temporary Cash Investments;
(b) Investments by a Subsidiary in the Borrower, or by the Borrower
or any of the Subsidiaries in any of the Major Subsidiaries;
(c) Investments by the Borrower or by any of its Subsidiaries in any
Subsidiary which is not a Major Subsidiary if, immediately after
such Investment is made or acquired, the aggregate net book value
of all Investments permitted by this CLAUSE (C) does not exceed
DM 105,000,000 (Deutsche Mark One Hundred Five Million); and
(d) any Investment not otherwise permitted by the foregoing clauses
of this SECTION 16.29 if, immediately after such Investment is
made or acquired, the aggregate net book value of all Investments
permitted by this CLAUSE (D) does not exceed DM 25,000,000
(Deutsche Mark Twenty-Five Million);
and provided, however, that neither the Borrower nor any of its
Subsidiaries shall, if a Default exists and is continuing, make or
acquire any Investment in any Person other than pursuant to CLAUSES (A)
and (B) of this SECTION 16.29.
16.30 LIMITATION ON RESTRICTED PAYMENTS
Not make any Restricted Payment to any Person if any one or more of the
following Persons shall fail to make payments when due and payable of
any of their Indebtedness in an aggregate amount exceeding DM 20,000,000
(Deutsche Mark Twenty Million) with respect to each such Person: NL
Industries, the Principal Shareholder, or any corporation Controlled by
NL Industries and Controlling the Principal Shareholder.
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16.31 MAINTENANCE OF PROPERTY; INSURANCE
Except as otherwise permitted under this Agreement, keep, and cause each
of its Subsidiaries to keep, all property useful and necessary in its
business in good working order and condition, ordinary wear and tear
excepted and maintain, and cause each of its Subsidiaries to maintain
(either in the name of the Borrower or in such Subsidiary's own name),
with financially sound and reputable insurance companies, insurance on
all their property in at least such amounts and against at least such
risks as are usually insured against in the same general area by
companies of established repute engaged in the same or a similar
business; and furnish to the Agent, upon written request from the Agent,
full information as to the insurance carried. SCHEDULE 10 attached
hereto is a description of the types and amounts of insurance carried by
the Borrower and its Subsidiaries as of the Second Restatement Date.
16.32 CONTINUATION OF BUSINESS
Except as otherwise permitted under this Agreement, continue, and cause
each of its Major Subsidiaries to continue, to engage in business of the
same general type as conducted by each of them as of the First
Restatement Date, and preserve, renew and keep in full force and effect,
and cause each of its Major Subsidiaries to preserve, renew and keep in
full force and effect its respective corporate existence and its
respective rights, privileges and franchises necessary or desirable in
the normal conduct of business.
16.33 TAXES
File, and cause each of its Subsidiaries to file, all income tax returns
and all other material tax returns that are required to be filed by
them; and timely pay and cause each of its Subsidiaries to pay timely
all taxes due and payable for the period covered by such returns or
pursuant to any assessment received by the Borrower or any of its
Subsidiaries, except for those being contested in good faith by
appropriate proceedings and against which adequate reserves are
established and maintained if required in accordance with German GAAP.
16.34 ADDITIONAL GUARANTIES, PLEDGED SUBSIDIARIES, ETC.
(a) Cause any Subsidiary which is not a Guarantor as of the Second
Restatement Date (including, without limitation, a Subsidiary
which becomes a Subsidiary after the Second Restatement Date) to
become a Guarantor hereunder and thereupon promptly execute a
Guaranty in form and substance reasonably satisfactory to the
Agent, to the extent permitted by applicable law; provided,
however, that no such Subsidiary shall be required to execute
such a Guaranty if, in the opinion of its independent counsel or
counsel for the Agent, the execution of such Guaranty could
subject the directors or officers of such Subsidiary to civil or
criminal liability; provided, further, however, that each such
Subsidiary which is not required to execute such a Guaranty in
accordance with the preceding proviso shall
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be required to execute such Guaranty if and when (and within a
reasonably prompt time after the occurrence of) any change in or
clarification of applicable law would permit the execution of
such Guaranty without the imposition of such civil or criminal
liability.
(b) Cause any Subsidiary which is not a Pledged Subsidiary as of the
Second Restatement Date (including, without limitation, any
Subsidiary which becomes a Subsidiary after the Second
Restatement Date) to become a Pledged Subsidiary and if it or any
Subsidiary owns shares of a Subsidiary which becomes a Pledged
Subsidiary, it shall, or shall cause such Subsidiary to, become a
Pledgor with respect thereto and promptly execute a Pledge
Agreement in form and substance reasonably satisfactory to the
Agent, to the extent permitted by applicable law; provided,
however, that neither the Borrower nor any Subsidiary shall be
required to execute a Pledge Agreement if, in the opinion of its
independent counsel or counsel for the Agent, the execution of
such Pledge Agreement could subject the directors or officers of
the Borrower or such Subsidiary to civil or criminal liability;
provided, further, however, that if and to the extent that the
Borrower or any Subsidiary is not required to execute such a
Pledge Agreement in accordance with the preceding proviso, the
Borrower or such Subsidiary (as applicable) shall be required to
execute such Pledge Agreement if and when (and within a
reasonably prompt time after the occurrence of) any change in or
clarification of applicable law would permit the execution of
such Pledge Agreement without the imposition of such civil or
criminal liability.
16.35 PLEDGED STOCK
(a) Except as otherwise permitted by this Agreement, not effect nor
permit any reduction in, or limitation on, by charter, by-law or
otherwise, voting rights, rights to dividends or other
distributions, or rights of sale by pledgees in foreclosure, with
respect to the Stock of any Pledged Subsidiaries.
(b) Except as otherwise permitted by this Agreement, not effect any
sale, pledge, hypothecation, mortgage of, nor grant an option
with respect to, or otherwise transfer, assign or encumber, any
of the Stock of any Pledged Subsidiary.
(c) Not permit a Pledged Subsidiary to issue Stock to the Borrower or
other Pledgor that is not subject to a Pledge Agreement or as
otherwise permitted under this Agreement.
(d) Not effect or permit, by charter, by-laws, contract or other
arrangement, any restriction on the rights of the pledgees under
the Pledge Agreements to exercise their rights of sale or other
rights or remedies in accordance with the terms of such
agreements.
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16.36 PRINCIPAL SHAREHOLDER WAIVER
If Kronos is no longer the Principal Shareholder of the Borrower, then
any such Person which becomes a Principal Shareholder shall promptly
execute, to the extent not prohibited by applicable law, an
Acknowledgement of Limitation of Special Damages substantially in the
form of EXHIBIT J to the First Restated Agreement.
16.37 MAXIMUM CAPITAL EXPENDITURES
Not make or allow any Consolidated Subsidiary to make any Capital
Expenditures, provided, however that Capital Expenditures may be made
if, after giving effect thereto, the aggregate Capital Expenditures made
during any fiscal year do not exceed the maximum aggregate Capital
Expenditures specified opposite each such fiscal year below:
Maximum Aggregate
YEAR CAPITAL EXPENDITURES
1996 DM 90,000,000
1997 DM 70,000,000
1998 DM 60,000,000
1999 DM 60,000,000
2000 DM 60,000,000
2001 DM 60,000,000
2002 DM 60,000,000
and provided further, however, that Capital Expenditures exceeding the
amount thereof set forth in the preceding table may be made during any
fiscal year if and to the extent that (a) such Capital Expenditures are
reasonably required to comply with applicable Environmental Laws and the
Borrower provides reasonable evidence of such requirement to the Agent
and (b) such Capital Expenditures have not been previously budgeted or
otherwise planned to occur during such fiscal year, and provided
further, however, that the Borrower may, in addition to the maximum
aggregate Capital Expenditures allowed in the table above for any
particular fiscal year, make Capital Expenditures during such fiscal
year of an amount equal to the positive remainder (if any) of (i) the
maximum aggregate Capital Expenditures allowed in the table above for
the immediately preceding fiscal year minus (ii) the aggregate Capital
Expenditures actually made during such immediately preceding fiscal
year. In addition, and notwithstanding anything to the contrary
contained in the immediately preceding sentence, the Borrower and its
Consolidated Subsidiaries shall, during each fiscal year subsequent to
1996, make Capital Expenditures of not less than DM 40,000,000 (Deutsche
Mark Forty Million) (or the equivalent amount in any currency) in
aggregate amount.
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16.38 MIRROR NOTES; SUBORDINATED LOANS
(a) Not make any payment (whether principal, interest or other
payment in any form) of, on or with respect to the Mirror Notes,
the NL Subordinated Loan or the Kronos Subordinated Loan, except
for payments of principal and interest on or with respect to the
Mirror Notes in amounts not to exceed the amounts then due made
on or after the due dates for such payments, which payments of
principal are (in the absence of any acceleration of maturity
upon the occurrence of a default) due, respectively, on October
20, 2003 and October 20, 2005; and
(b) Not amend or modify any of the Mirror Notes or the Subordinated
Loan Documents without the prior written consent of the Majority
Banks (662/3%) (i) to increase the principal amount of any of the
Mirror Notes or the NL Subordinated Loan or the Kronos
Subordinated Loan, (ii) to shorten the maturity of, or any date
for the payment of any principal of or interest on, any of the
Mirror Notes or the NL Subordinated Loan or the Kronos
Subordinated Loan, (iii) to increase the rate of interest on or
with respect to any of the Mirror Notes or the NL Subordinated
Loan or the Kronos Subordinated Loan, (iv) to otherwise amend or
modify any of the payment terms of the Mirror Notes or the NL
Subordinated Loan or the Kronos Subordinated Loan other than to
waive or cancel any payment obligations of the Borrower with
respect thereto or to contribute such Indebtedness to the equity
capital of the Borrower or a Subsidiary, (v) to increase any
cost, fee or expense payable by the Borrower, (vi) to add any
collateral as security for payment or collection of any of the
Mirror Notes or the NL Subordinated Loan or the Kronos
Subordinated Loan or (vii) in any other respect that would
reasonably be expected to be adverse to the Borrower or any
Subsidiary.
16.39 NOTIFICATION OF INDENTURE DEFAULTS
Promptly notify the Agent of the occurrence of any "Default" or "Event
of Default", as such terms are defined in either of the Indentures.
16.40 BANK ACCOUNTS
The Borrower shall cause all cash balances of the Borrower and its
Subsidiaries, other than Kronos World Services S.A./N.V., to be
maintained at Hypobank International S.A. (or any affiliate of Hypobank
International S.A. acceptable to the Agent) or another Bank (party to
this Agreement) or branch of such Bank acceptable to the Agent;
provided, however, that an aggregate amount of cash balances not to
exceed DM 30,000,000 (Deutsche Mark Thirty Million) (or the equivalent
amount in any currency) may be maintained by the Borrower or
Subsidiaries of the Borrower at other financial institutions if and to
the extent that it is not feasible for the Borrower or such Subsidiaries
to maintain cash balances with Hypobank International S.A. or its
affiliates or another Bank or branch of such Bank. The Borrower shall,
and shall cause each of its Canadian Subsidiaries to, from time to time
as may be necessary, pledge to the Agent as security for the Loans,
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pursuant to agreements, documents and instruments in form and substance
reasonably satisfactory to the Agent which shall create first priority
Liens (except as provided in SECTION 17.05), all cash balances of the
Borrower and its Canadian Subsidiaries, and the Borrower will, and will
cause each of its Canadian Subsidiaries to, at all times cause its cash
balances to be so pledged.
ARTICLE 17. COLLATERAL
17.01 As security for the repayment of the Loans and the performance of all
other obligations of the Borrower to the Banks (and in addition to
certain undertakings, covenants and other agreements), the following
documents were executed and delivered in connection with the Original
Agreement or the First Approval Agreement:
(a) Pledge dated as of May 30, 1990, executed by the Borrower to and
in favor of the Agent relating to the Stock of NL Industries
(Deutschland) GmbH, Kronos Chemie GmbH and Schraubenfabrik
Neustadt Goetz & Cie. GmbH, as amended and reaffirmed;
(b) Pledge dated as of May 30, 1990, executed by NL Industries to and
in favor of the Agent relating to the Stock of NL Industries
(Deutschland) GmbH, as amended and reaffirmed;
(c) Deed of Security dated as of May 30, 1990 and as of June 19,
1992, executed by the Borrower, the Agent and Societe
Industrielle du Titane S.A., Assignment of Dividends dated as of
May 30, 1990 and as of June 19, 1992, executed by the Borrower,
the Agent and Societe Industrielle du Titane S.A. and Declaration
of Pledge dated as of June 19, 1992, executed by the Borrower and
Societe Industrielle du Titane S.A. to and in favor of the Banks,
all relating to the Stock of Societe Industrielle du Titane S.A.;
(d) Pledge Agreement of Registered Shares dated as of May 30, 1990,
executed by the Borrower to and in favor of the Agent relating to
the Stock of Kronos S.A./N.V. (including power of attorney and
notice of assignment relating thereto), as amended and
reaffirmed, and Pledge Agreement of Registered Shares dated as of
May 28, 1993, executed by the Borrower to and in favor of the
Agent relating to the Stock of Kronos Europe S.A./N.V. (including
power of attorney and notice of assignment relating thereto);
(e) Pledge Agreement dated as of May 30, 1990, executed by the
Borrower to and in favor of the Agent relating to the Stock of
Kronos Norge A/S, as amended and reaffirmed;
(f) Legal Mortgage of Shares dated as of May 30, 1990, executed by
the Borrower to and in favor of the Agent relating to the Stock
of Kronos Limited (including power of attorney relating thereto),
as amended and reaffirmed;
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(g) Pledge of Shares dated as of May 30, 1990, executed by the
Borrower to and in favor of the Agent relating to the Stock of
Kronos Canada, Inc., as amended and reaffirmed;
(h) Stock Pledge Agreement dated as of May 30, 1990, executed by the
Borrower to and in favor of the Agent relating to the Stock of
Kronos Europe, Inc., as amended and reaffirmed;
(i) Guaranty dated as of May 30, 1990, executed by Kronos Europe,
Inc. to and in favor of the Agent, as amended and reaffirmed;
(j) Guaranty dated as of March 22, 1991, executed by NL Industries
and Kronos (US) to and in favor of Agent, as amended and
reaffirmed (which Guaranty has been fully performed);
(k) Guarantee Agreement dated as of May 10, 1991, executed by Kronos
Canada, Inc. to and in favor of the Agent, as amended and
reaffirmed;
(l) Special Purpose Account Agreement dated as of May 15, 1992,
executed by NL Industries, Kronos (US) (then known as Kronos,
Inc.) and the Borrower to and in favor of the Agent relating to
the Special Purpose Account;
(m) Declaration dated as of June 15, 1992, executed by the Borrower,
NL Industries and Kronos (US) relating to the pledge of the
Special Purpose Account (and additional documents relating
thereto);
(n) Pledge of Shares dated as of September 30, 1993, executed by the
Borrower to and in favor of the Agent relating to the Stock of
2927527 Canada Inc.; and
(o) Guarantee Agreement dated as of September 30, 1993, executed by
2927527 Canada Inc. to and in favor of the Agent.
17.02 As additional security for the repayment of the Loans and the
performance of all other obligations of the Borrower to the Banks, the
documents referred to in CLAUSES (I)(A) through (C) of SECTION 4.01(A)
of the First Restated Agreement were executed and delivered concurrently
with the First Restatement Date.
17.03 As additional security for the repayment of the Loans and the
performance of all other obligations of the Borrower to the Banks, the
documents referred to in Paragraphs 3(h), 3(i) and 3(k) of the First
Approval Agreement, if required to be executed under such agreement,
were executed and delivered in accordance with, and at the times
specified in, the First Approval Agreement.
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17.04 As additional security for the repayment of the Loans and the
performance of all other obligations of the Borrower to the Banks, the
following documents have been, or will be concurrently with the Second
Restatement Date, executed and delivered:
(a) (i) Pledge of Shares dated as of November 5, 1993,
executed by the Borrower to and in favor of the Agent
relating to the Stock of 2969157 Canada Inc., as amended
and reaffirmed;
(ii) Guarantee Agreement dated as of November 5, 1993, executed
by 2969157 Canada Inc. to and in favor of the Agent, as
amended and reaffirmed;
(iii) Amendment and Reaffirmation of Pledge Agreement dated as
of January 28, 1994, executed by the Borrower and the
Agent confirming the pledge of 48,313 new shares of Stock
of Kronos Norge A/S issued by Kronos Norge A/S to the
Borrower;
(iv) Pledge Agreement of ZCON and ZCON Agreement dated as of
February 2, 1994, executed by the Borrower to and in favor
of the Agent relating to the pledge of the Subordinated
Zero Coupon Option Note dated March 15, 1993, in the
principal amount of NOK 110 million issued by Kronos
Europe S.A./N.V. (then known as Kronos S.A./N.V.) to
Kronos Norge A/S and the Agreement dated January 29, 1993,
between Kronos Europe S.A./N.V. and Kronos Norge A/S and
the ZCON Amendment Agreement dated March 15, 1993;
(v) Amendment and Reaffirmation of Pledge of Shares dated as
of January 1, 1994, executed by the Borrower and the Agent
relating to the Stock of 2927527 Canada Inc.; and
(vi) Amendment and Reaffirmation of Pledge of Shares dated as
of January 1, 1994, executed by the Borrower and the Agent
relating to the Stock of 2969157 Canada Inc.;
(b) Amended and Restated Pledge Agreement dated as of June 26, 1996,
executed by the Borrower to and in favor of the Agent relating to
the pledge of 53,427 newly issued shares and 532,196 newly issued
shares of Stock of Kronos Norge A/S and that certain Promissory
Note and Agreement dated June 26, 1996, in the original principal
amount of NOK 200,000,000 made by Kronos Norge A/S payable to the
order of the Borrower; and
(c) (i) the Nordenham Mortgage executed by Kronos Titan to and
in favor of the Agent, which Lien document shall secure
only the principal amount of the Kronos Titan Revolving
Portion which has at any time been advanced directly to
Kronos Titan and which is outstanding at any time
(including the principal thereof, interest accrued thereon
and fees incurred with respect
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thereto) and the priority of which Lien shall be
subordinate only to (A) the existing Lien in favor of
Westdeutsche Landesbank securing an actual (as opposed to
nominal) aggregate amount not to exceed DM 4,000,000
(Deutsche Mark Four Million) of principal Indebtedness at
any time outstanding, (B) the existing Lien in favor of
the German tax authorities securing claims for taxes
(including interest) of the Borrower and its Subsidiaries
owed to the German tax authorities for fiscal year 1990
not to exceed DM 100,000,000 (Deutsche Mark One Hundred
Million) and (C) any (if any) Permitted Liens referred to
in CLAUSES (D) and (E) of the definition of the term
"Permitted Liens";
(ii) the Canadian Security Documents executed by Kronos Canada,
Inc., 2927527 Canada Inc. and 2969157 Canada Inc. (as
applicable) to and in favor of the Agent;
(iii) the Cash Pledge Agreements executed by the Borrower,
Kronos Canada, Inc., 2927527 Canada Inc. and 2969157
Canada Inc. (as applicable) to and in favor of the Agent;
and
(iv) the NL Guaranty executed by NL Industries to and in favor
of the Agent.
17.05 The Borrower covenants and agrees that, pursuant to the Pledge
Agreements, the Nordenham Mortgage, the Canadian Security Documents and
the Cash Pledge Agreements, the Agent, as Agent for the Banks, shall
have a Lien in and to (a) the Stock of the Pledged Subsidiaries, (b) the
Nordenham plant of Kronos Titan, (c) all material assets and properties
of Kronos Canada, Inc., 2927527 Canada Inc. and 2969157 Canada Inc.
(including, without limitation, the Varennes, Quebec, Canada plant of
Kronos Canada, Inc. and the Kronos Canada Note held by 2969157 Canada
Inc. but excluding the stock of Kronos World Services S.A./N.V. owned by
Kronos Canada, Inc.), and (d) certain bank accounts of the Borrower,
Kronos Canada, Inc., 2927527 Canada Inc. and 2969157 Canada Inc., all as
security for the Loans (including, without limitation, the Revolving
Portion and any reborrowings of the Revolving Portion to be advanced on
the date of any drawdown thereof). The Borrower further covenants and
agrees that all of such Liens referred to in the immediately preceding
sentence shall constitute perfected first priority Liens in favor of the
Agent for the benefit of the Agent and the Banks and the properties and
assets affected thereby shall not be subject to any other Liens other
than Permitted Liens referred to in CLAUSE (D), (E), (F) or (I) of the
definition of the term "Permitted Liens" in this Agreement; provided,
however, that (A) the Lien created by the Nordenham Mortgage may have
the priority specified in CLAUSE (I) of SECTION 17.04(C), (B) the Lien
referred to in CLAUSE (B) preceding may be subordinate to any (if any)
Permitted Liens referred to in CLAUSES (D) and (E) of the definition of
the term "Permitted Liens", and (C) the Liens referred to in CLAUSE (C)
preceding may be subordinate to any (if any) Permitted Liens referred to
in CLAUSES (D), (E), (F) and, as to Liens affecting assets or properties
of Kronos Canada, Inc. only, (H) of the term "Permitted Liens", and the
Banks hereby expressly authorize the Agent to take all actions and
execute all instruments
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on their behalf necessary to subordinate its Liens referred to in CLAUSE
(C) preceding affecting assets or properties of Kronos Canada, Inc. to
the Liens referred to in CLAUSE (H) of the term "Permitted Liens".
ARTICLE 18. EVENTS OF DEFAULT
If, for whatever reason, any of the following shall occur and be
continuing:
18.01 The Borrower shall fail to pay principal of the Loan or any portion
thereof on the due date therefor; shall fail to pay any interest with
respect to the Loan or any portion thereof within five (5) days of the
due date therefor; or shall fail to pay any fee or any other sum which
shall have become due under this Agreement or any other Loan Document
within five (5) days after notice from the Agent; provided, however,
that no failure of the Borrower to pay principal on the due date
therefor shall be an Event of Default (as hereinafter defined) if, and
only if, NL Industries or Kronos pays such principal on such due date;
18.02 The Borrower ceases to be, directly or indirectly, a majority-owned
subsidiary of NL Industries.
18.03 The Leverkusen Lease is voluntarily modified, or is terminated or
shortened or there is a Disposition of the Leverkusen Lease, or an
agreement providing for the Disposition, modification, termination or
shortening of the Leverkusen Lease shall be entered into during the term
of the Loan or while any payments due and payable by the Borrower remain
outstanding, unless such Disposition, modification, termination of or
agreement with respect to the Leverkusen Lease will result in the
payment of full, fair and reasonable consideration to Kronos Titan.
18.04 The lessor under the Leverkusen Lease exercises or has the right to
exercise immediately any remedies or rights of reversion or termination
thereunder or, with respect to rental payments required in accordance
with the Leverkusen Lease, the lessee fails to make rental payments for
a period of 2 (two) quarters or, if there is a bona fide dispute, the
lessee fails to make rental payments for a period of 4 (four) quarters.
18.05 The Service Contract is terminated, modified or Disposition is made
thereof during the term of the Leverkusen Lease unless replaced or
renewed with a contract or provisions providing for comparable services
which replacement continues during the term of the Leverkusen Lease or
unless the Disposition of the Service Contract or any such replacement
occurs concurrently with the Disposition, termination, shortening or
modification of the Leverkusen Lease in accordance with the terms of
this Agreement.
18.06 Any representation, warranty, certification or statement made by the
Borrower or any Affiliate (including, without limitation, NL Industries,
Kronos (US), Kronos and the Subsidiaries) in any Loan Document shall
prove to have been incorrect in any material respect when made or deemed
to have been made or repeated, as the case may be.
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18.07 Except as set forth on SCHEDULE 4, any Loan Document or any of the
obligations of the Borrower or any Affiliate (including, without
limitation, NL Industries, Kronos (US), Kronos and the Subsidiaries)
thereunder shall cease in any material respect to be legally valid,
binding and enforceable in accordance with the respective terms of such
Loan Document, or any Guarantor shall state its intention, in writing,
to revoke its Guaranty.
18.08 The Borrower and/or any Subsidiary shall fail to observe or perform in
any material respect any covenant or agreement contained in SECTION
16.08 (to the extent that Borrower or any of its Subsidiaries
voluntarily creates or permits to exist any Lien, except a Permitted
Lien) or SECTIONS 16.09, 16.10, 16.17 through 16.25, 16.30 or 16.38 of
this Agreement.
18.09 The Borrower and/or any Affiliate (including, without limitation, NL
Industries, Kronos (US), Kronos and the Subsidiaries) shall fail to
observe or perform in any material respect any other covenant or
agreement contained in any Loan Document (and not constituting an Event
of Default under any other clause of this ARTICLE 18) and such failure
shall continue for 30 (thirty) days after written notice thereof has
been given to the Borrower by the Agent.
18.10 Any Company, NL Industries, Kronos, the Principal Shareholder or any
corporation which is Controlled by NL Industries and Controls the
Principal Shareholder becomes insolvent for the purposes of any relevant
law, or shall commence a voluntary action or other proceedings seeking
liquidation, reorganization or other relief with respect to itself, its
properties or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect, or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it
or any substantial part of its property, or shall consent to any relief
or to the appointment of or taking or possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assign ment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing.
18.11 An involuntary action or other proceedings shall be commenced against
any Company, NL Industries, Kronos, the Principal Shareholder or any
corporation which is Controlled by NL Industries and Controls the
Principal Shareholder seeking liquidation, reorganization or other
relief with respect to it or its debt under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 75 (seventy-five) days; or an order of relief
shall be entered against any such corporation under any bankruptcy laws
as now or hereafter in effect;
18.12 Indebtedness of (i) the Borrower and/or any Subsidiary or (ii) the
Principal Shareholder, in either such case in an aggregate amount
exceeding DM 20,000,000 (Deutsche Mark Twenty Million) (or the
equivalent amount in any currency) is not paid when due after any
111
applicable grace period or is not paid if it becomes due and payable
prior to its specified maturity, or any creditor or creditors of the
Borrower or any of its Subsidiaries or the Principal Shareholder becomes
entitled immediately to declare any such Indebtedness due and payable
prior to its specified maturity;
18.13 One or more final judgments or non-appealable orders for the payment of
money in excess of DM 10,000,000 (Deutsche Mark Ten Million) (or the
equivalent amount in any currency) for all such judgments or orders
shall be rendered against the Borrower and/or any of its Major
Subsidiaries, and such judgments or orders shall continue unsatisfied
and in effect for a period of 10 (ten) consecutive days;
18.14 Any other event occurs or circumstances arise with respect to the
Borrower and/or its Subsidiaries which in the reasonable opinion of the
Majority Banks is likely to materially adversely affect the ability of
the Borrower to perform its obligations with respect to payments,
Collateral or Liens under the Loan Documents;
18.15 The occurrence of an "Event of Default" (whether or not such an "Event
of Default" is declared or any remedy is exercised with respect
thereto), as such term is defined in either of the Indentures; or
18.16 (a) Either of the Indentures or any of the NL Notes shall be amended or
modified without the prior written consent of the Majority Banks
(662/3%) (i) to increase the principal amount of any of the NL Notes,
(ii) to shorten the maturity of, or any date for the payment of any
principal of or interest on, any of the NL Notes, (iii) to increase the
effective rate of interest or discount on or with respect to any of the
NL Notes, (iv) to increase any cost, fee or expense payable by NL
Industries or any of its subsidiaries, (v) to add any collateral as
security for payment or collection of any of the NL Notes, or (vi) in
any other respect that would be materially adverse to NL Industries or
any of its subsidiaries, (b) NL Industries shall elect to make any
optional redemption or optional prepayment of principal of, interest on
or other amount with respect to the NL Notes (or any of such notes)
without the prior written consent of the Majority Banks (662/3%), or (c)
the Borrower shall voluntarily or involuntarily make a payment of
principal of, interest on or other amount with respect to the NL
Subordinated Loan or the Kronos Subordinated Loan without the prior
written consent of the Majority Banks (662/3%); or
18.17 The First Prepayment or any portion thereof or the Second Prepayment or
any portion thereof, for any reason, is determined by a court of
competent jurisdiction to be void or invalid as a fraudulent transfer, a
preference or the like or is otherwise required to be disgorged;
then unless such an event (an "Event of Default") shall have been cured
or waived in accordance with the applicable terms of this Agreement,
except for an event under SECTIONS 18.10 or 18.11, the Agent may, and
upon instruction of the Majority Banks shall, at any time after the
occurrence of such Event of Default by notice in writing to the
Borrower, declare that the Loan and all outstanding balances hereunder,
together with
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accrued interest thereon, and all other sums whatsoever payable pursuant
to this Agreement and/or any other Loan Document have become immediately
due and payable and that the Commitment of any Bank under this Agreement
shall have terminated, without presentment, demand, protest or any other
notice of any kind, all of which are expressly waived by the Borrower,
and exercise any and all other rights or remedies of the Agent and/or
the Banks under the Loan Documents or otherwise available under
applicable law (none or which rights or remedies are waived). Upon the
occurrence of any event in SECTION 18.10 or 18.11 above, the Commitments
of the Banks shall automatically terminate and the Loan and all
outstanding balances hereunder, accrued interest thereon and all other
sums whatsoever payable pursuant to this Agreement and/or any other Loan
Document shall automatically become due and payable, without
presentment, demand, protest or notice of any kind, all of which are
expressly waived by the Borrower. The occurrence of an Event of Default
shall entitle the Agent and the Banks to enforce their rights and
remedies under the Loan Documents and against any Collateral, and
otherwise as permitted by applicable law, and the same shall be
cumulative, non-exclusive and concurrent against the Borrower, its
Affiliates or any other obligated party for payment of and/or
performance under the Loan or any of the Loan Documents, or any part
thereof, or against any one or more of them, or against the Collateral,
at the sole discretion of the Agent and the Banks, and may be exercised
as often as occasion therefor shall arise, it being agreed by the
Borrower that the exercise of or failure to exercise any of same shall
in no event be construed as a waiver or release thereof or of any right,
remedy or recourse.
ARTICLE 19. FEES
19.01 On or before the Second Restatement Date, the Borrower shall pay to the
Agent, for distribution amongst the Banks, a closing fee in an amount
equal to 1/2 of 1% (one-half of one percent) of the sum of, for each
such Bank and as of the Second Restatement Date, the outstanding
principal amount of the Term Portion of the Loans of such Bank plus the
maximum amount of such Bank's Revolving Commitment (in each case after
giving effect to the prepayments and the reduction in the maximum amount
of the Revolving Portion to occur on the Second Restatement Date). On or
before January 29, 1997, the Borrower shall pay to the Agent, for
distribution amongst each of the Banks who consents to this Agreement on
or before January 24, 1997, whether or not this Agreement is executed by
the Majority Banks, an additional closing fee in an amount equal to
1/10th of 1% (one-tenth of one percent) the sum of, for each such Bank
and as of the Second Restatement Date, the outstanding principal amount
of the Term Portion of the Loans of such Bank plus the maximum amount of
such Bank's Revolving Commitment (in each case after giving effect to
the prepayments and the reduction in the maximum amount of the Revolving
Portion to occur on the Second Restatement Date). On or before January
29, 1997, the Borrower agrees to pay 40% (forty percent) of the closing
fee referred to in the first sentence of this SECTION 19.01 preceding to
each of the Banks who consents to this Agreement on or before January
24, 1997, whether or not this Agreement is executed by the Majority
Banks.
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19.02 The Borrower shall pay to the Agent for its own account an annual agency
fee in Deutsche Mark in the amounts and on the dates stated in the
letter dated as of May 30, 1990 to the Agent from the Borrower, as such
letter may be amended from time to time. In addition, and in connection
with this Agreement, the Borrower shall pay to the Agent for its own
account the fees in the amounts and on the dates stated in the letter
dated December 30, 1996 to the Agent from the Borrower.
19.03 The Borrower shall pay to the Agent for distribution amongst the Banks
pro rata according to each Bank's Revolving Commitment a commitment fee,
with respect to the Revolving Portion, equal to one-half of one percent
(0.50%) per annum of the average Revolving Portion Availability during
the applicable period. Such commitment fee shall be payable, for the
period from the First Restatement Date through June 30, 2000, on the
last day of each calendar quarter during the term of the First Restated
Agreement or this Agreement (commencing December 31, 1993) and on August
15, 2000, and shall be calculated for the actual number of days elapsed
on the basis of a 365 (three hundred sixty-five) day year.
19.04 All of the fees paid or payable by the Borrower pursuant to the Original
Agreement, the First Restated Agreement, this Agreement and the other
Loan Documents shall be nonrefundable.
ARTICLE 20. EXPENSES AND DUTIES
20.01 The Borrower shall reimburse the Agent on demand for all reasonable
out-of-pocket charges and expenses incurred by the Agent in connection
with the preparation, negotiation and execution of the Original
Agreement, the First Restated Agreement, this Agreement and the other
Loan Documents (including, without limitation, fees and expenses of
legal advisors) and reimburse the Agent on demand for reasonable
out-of-pocket charges and expenses in connection with the publication of
this transaction. The Borrower shall reimburse the Agent on demand for
fees and expenses of legal advisors, financial consultants and other
consultants in connection with the preparation, negotiation and
execution of the Original Agreement, the First Restated Agreement, this
Agreement and the other Loan Documents.
20.02 The Borrower shall reimburse the Agent and the Banks on demand for all
reasonable, out-of-pocket charges and expenses (including legal fees)
reasonably incurred by them or any of them in, or in connection with,
any modification of, the enforcement of, or preservation of rights under
the Original Agreement, the First Restated Agreement, this Agreement and
the other Loan Documents, provided that prior to an Event of Default the
Borrower shall not be obligated to pay the fees and expenses of more
than one law firm (unless questions arise under laws of jurisdictions in
which the principal firms engaged are not authorized to practice law),
and, after an Event of Default, the Borrower shall reimburse the Banks
for the fees and expenses of counsel for each such Bank in connection
with the modification, enforcement or restructuring of this Agreement
and the other Loan Documents, and provided further that the Borrower
shall not be obligated to pay under the
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Original Agreement, the First Restated Agreement, this Agreement or any
of the other Loan Documents losses, costs or expenses arising from or
relating to disputes solely among the Agent and the Banks, or losses,
costs or expenses of the Agent or any Bank resulting from its gross
negligence or wilful misconduct.
20.03 The Borrower shall pay any and all stamp, registration and similar
taxes, duties and charges of whatsoever nature (but excluding all
Excluded Taxes) which may be payable or determined to be payable on, or
in connection with, the execution, registration, notarization,
performance or enforcement of the Original Agreement, the First Restated
Agreement, this Agreement and the other Loan Documents. The Borrower
shall indemnify the Agent and the Banks against any and all liabilities
with respect to or resulting from delay or omission on the part of the
Borrower to pay any such taxes, duties or charges.
20.04 The Borrower shall reimburse the Agent on demand for all reasonable,
out-of-pocket charges and expenses (including, without limitation, legal
fees and fees of financial consultants and other consultants) reasonably
incurred by it in, or in connection with, periodic monitoring and
determination of on-going compliance (or non-compliance, as the case may
be) with the terms and provisions of this Agreement and the other Loan
Documents. The Borrower acknowledges and agrees that, in addition to
legal advisors, such consultants may include, without limitation,
industry, tax, accounting and environmental consultants.
ARTICLE 21. THE AGENT AND THE BANKS
21.01 Each Bank hereby irrevocably appoints the Agent to act as its agent in
connection with this Agreement and the Loan Documents and authorizes the
Agent to exercise such rights, remedies, powers and discretion as are
specifically delegated to the Agent by the terms of this Agreement and
the Loan Documents together with all such rights, powers and discretion
as are reasonably incidental thereto.
21.02 When acting in connection with the Loan Documents, the Agent may:
(a) assume that no Default has occurred and that the parties thereto
are not in breach or default of their respective obligations
thereunder unless the officers of the Agent immediately
responsible for matters concerning this Agreement shall have
actual knowledge or shall have been notified in writing by a Bank
that such Bank considers that a Default exists and is continuing
and specifying the nature thereof;
(b) assume that each Bank's Lending Office is that identified with
its signature below and on SCHEDULE 1 until it has received from
such Bank written notice designating some other office of such
Bank as its Lending Office and continue to act upon such notice
until the same is superseded by a further such notice;
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(c) subject to the provisions of SECTION 20.02, engage and pay for
the advice or services of any lawyers, accountants or other
experts whose advice or services may to it seem necessary,
expedient or desirable and fully rely upon any advice so
obtained;
(d) rely as to any matters of fact which might reasonably be expected
to be within the knowledge of the Borrower or any of its
Affiliates upon a certificate signed by an officer on behalf of
such entity;
(e) rely upon any communication or document believed by it to be
genuine;
(f) refrain from exercising any right, power or discretion vested in
it hereunder unless and until instructed by the Majority Banks as
to the manner in which such right, power or discretion should be
exercised; and
(g) refrain from acting in accordance with any instructions of the
Majority Banks to begin any legal action or proceeding arising
out of or in connection with the Loan Documents until it shall
have been indemnified by the Banks to its reasonable satisfaction
against any and all costs, claims, expenses (including legal
fees) and liabilities which it will or may expend or incur in
complying with such instructions.
21.03 The Agent shall:
(a) subject to the provisions of this Agreement, promptly inform each
Bank of the contents of any written notice or document received
by it from the Borrower hereunder;
(b) promptly notify each Bank of the occurrence of any Default under
this Agreement of which the Agent has received written notice
from a Bank pursuant to SECTION 21.02;
(c) subject to the provisions of this Agreement, act in accordance
with any written instructions given to it by the Majority Banks;
(d) if so instructed by the Majority Banks in writing, refrain from
exercising any right, power or discretion vested in it hereunder;
and
(e) administer and service the Loan in accordance with its customary
procedures and practices in the administration and servicing of
loans of a similar nature made by the Agent, and the Agent shall
have the authority to make decisions hereunder in connection with
the day-to-day administration and servicing of the Loan, and each
Bank shall be bound thereby.
21.04 Neither the Agent nor any of its directors, officers, employees, agents
or Affiliates, shall:
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(a) be bound to inquire as to the occurrence or otherwise of any
Default or Event of Default or as to any failure of the Borrower
or any Affiliate duly to perform its obligations hereunder or
under the Loan Documents;
(b) be bound to account to any Bank for any sum or the profit element
of any sum received by it for its own account;
(c) be bound to disclose to any other Person any information relating
to the Borrower or any of the Borrower's Affiliates received by
it if such disclosure would or might in the opinion of any of the
above Persons constitute a breach of any law or regulation or be
otherwise actionable by suit of any Person;
(d) be under any fiduciary duty towards any Bank or under any
obligations other than those for which express provision is made
herein;
(e) be liable for any action taken or omitted to be taken except for
their own gross negligence or wilful misconduct; or
(f) be liable for any error in computing any amount payable to any
Bank, provided, that the Agent, the Borrower and any affected
Bank, upon discovery of such error, shall make such adjustments
as may be required to correct such error.
21.05 Each Bank agrees to indemnify the Agent and its directors, officers,
employees, agents and Affiliates to the extent not reimbursed by the
Borrower in the proportion of its share in the Loan (or, if no amount is
outstanding, its Commitment) for any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent and its directors,
officers, employees, agents or Affiliates in any way relating to or
arising out of the First Restated Agreement, this Agreement or any other
Loan Documents, or any other documents contemplated by or referred to
herein or the transactions contemplated hereby (including, without
limitation, the costs and expenses which the Borrower is obligated to
pay under ARTICLE 20 but excluding, unless an Event of Default has
occurred and is continuing, normal administrative costs and expenses
incident to the performance of its Agent's agency duties hereunder) or
the enforcement of any of the terms of the First Restated Agreement,
this Agreement, the Loan Documents or of any such other documents,
provided that no Bank shall be liable for any of the foregoing to the
extent they arise from the Agent's gross negligence or wilful
misconduct.
21.06 Each Bank agrees that the Agent shall not be responsible for the
accuracy or completeness of any representation made (whether orally or
otherwise) herein or in connection herewith, for the proper form,
validity, effectiveness, adequacy or enforceability of the Original
Agreement, the First Restated Agreement, this Agreement, any Guaranty,
the Pledge Agreements, the Nordenham Mortgage, the Canadian Security
Documents, the Cash Pledge Agreements or any of the other Loan Documents
or for the creditworthiness of the Borrower, any Guarantor, Pledgor,
Pledged Subsidiary or any Affiliate of the foregoing
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entities. Neither the Agent nor any of its directors, officers,
employees, agents or Affiliates shall be under any liability for or in
respect of any action taken or omitted by any of them in relation to the
Original Agreement, the First Restated Agreement, this Agreement, any
Guaranty, the Pledge Agreements, the Nordenham Mortgage, the Canadian
Security Documents, the Cash Pledge Agreements or any of the other Loan
Documents except for their gross negligence or wilful misconduct.
21.07 The Agent may accept deposits from, lend money to and generally engage
in any kind of banking or other business with the Borrower or any
Affiliate, independently of the transactions contemplated herein.
21.08 It is understood and agreed by each Bank that it has been, and will
continue to be, solely responsible, without reliance upon the Agent, for
making its own independent appraisal of and investigations into the
financial condition, creditworthiness and affairs of the Borrower, any
Guarantor, the Pledgors, Pledged Subsidiaries and Affiliates of the
foregoing entities and the value of the Collateral or the validity,
enforceability or genuineness of the Original Agreement, the First
Restated Agreement, this Agreement or any of the Loan Documents and
accordingly each Bank confirms to the Agent that it has not relied, and
will not hereafter rely, on the Agent:
(a) to check or inquire on its behalf into the adequacy, accuracy or
completeness of any information provided by the Borrower or any
Affiliates, director, officer, employee or agent thereof in
connection with the Loan Documents or the transactions therein
contemplated whether or not such information has been or is
hereafter circulated to such Bank by the Agent; or
(b) to assess or keep under review on its behalf the financial
condition, creditworthiness or affairs of the Borrower or its
Affiliates and the value and/or enforceability of the Collateral.
21.09 The Agent may at any time be removed by the Majority Banks upon at least
30 (thirty) days prior written notice to such Agent of such removal but
only for cause consisting of gross negligence or wilful misconduct or
following a declaration of insolvency by the appropriate regulators. The
Agent may at any time resign from the agency upon not less than 45
(forty-five) days' notice to the Banks of its intention to do so and, if
any such notice is given by the Agent, the Agent shall, upon the
appointment of a successor agent as hereinafter provided for, cease to
be under any further obligation as Agent hereunder. Within such period,
the Majority Banks may appoint a successor agent with the consent of the
Borrower, which consent will not be unreasonably withheld or delayed and
if, before the expiry of such notice, such successor agent notifies the
parties hereto that it accepts such appointment:
(a) each reference herein to the "Agent" shall thereafter be
construed as a reference to the successor agent; and
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(b) the successor agent and the parties hereto other than the
retiring Agent shall thereafter have such rights and obligations
inter se as they would have if the successor agent had been named
herein as the Agent. If no successor agent, appointed by the
Majority Banks, notifies the parties hereto, prior to the expiry
of the Agent's notice of its intention to retire from the agency
giving rise to the need to appoint the same, of its acceptance of
such appointment, the Agent may appoint any experienced and
reputable bank having offices in London, Munich, New York City or
Luxembourg to be the successor agent and, if it does and such
successor agent notifies the parties hereto that it accepts such
appointment:
(i) each reference herein to the "Agent" shall thereafter be
construed as a reference to the successor agent so
appointed; and
(ii) the successor agent so appointed upon execution of a
counterpart of this Agreement and the parties hereto other
than the retiring Agent shall thereafter have such rights
and obligations inter se as they would have if the
successor agent so appointed had been named herein as the
Agent.
Until the Borrower receives written notice of the appointment of
a new Agent, the Borrower shall be entitled to continue to send
notices and payments to the previously appointed Agent and
otherwise to treat such Agent as the Agent for purposes of this
Agreement.
21.10 If any Reference Bank shall be prepaid under this Agreement or shall
cease to have any Commitment or after the Second Restatement Date cease
to have any principal or interest owing to it hereunder, the Agent may
in consultation with the Banks and the Borrower appoint a substitute
Reference Bank.
21.11 The provisions of this ARTICLE 21 are solely for the benefit of the
Agent and the Banks and neither the Borrower nor any Subsidiary or
Affiliate of the Borrower shall have any rights (whether as third party
beneficiary or otherwise) except as specifically provided herein.
ARTICLE 22. NO WAIVER
No failure to exercise and no delay in exercising on the part of the
Agent or any Bank of any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or future exercise thereof, or the exercise of any
other right, power or privilege. The rights and privileges herein provided are
cumulative and not exclusive of any rights or remedies provided by law in equity
or otherwise. This Agreement may be amended and any provision of this Agreement
may be waived only with the consent of the Majority Banks, provided, however,
that no amendment or waiver shall, unless in writing and signed by each Bank
affected thereby, do any of the following:
(1) reduce the principal or the rate of interest payable by
the Borrower on any Loan or reduce any fees payable to the
Banks under this Agreement;
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(2) postpone the date fixed for the payment of principal of or
interest on the Loan or any fees to the Banks under this
Agreement;
(3) increase the Commitment of any Bank or subject any Bank to
any additional obligation to make Loans; or
(4) amend this ARTICLE 22;
provided, further, that no amendment or waiver shall be effected which releases
or impairs or otherwise compromises any Collateral or substitutes Collateral
without the prior written consent of the Majority Banks (662/3%) other than in
the case of the NL Undertaking for which the consent of the Majority Banks shall
be required; and provided further that no such amendment or waiver or consent,
as the case may be, which has the effect of (i) increasing the duties or
obligations of the Agent under this Agreement or of the Agent under any other
Loan Document, or (ii) increasing the standard of care or performance required
on the part of the Agent under this Agreement or of the Agent under any other
Loan Document, or (iii) reducing or eliminating the indemnities or immunities to
which the Agent is entitled hereunder (including any amendment or modification
of this ARTICLE 22), shall be effective unless the same shall be signed by or on
behalf of the Agent.
ARTICLE 23. PARTIAL INVALIDITY; CHANGE IN ACCOUNTING PRINCIPLES
23.01 If at any time any provision of this Agreement or other Loan Documents
to which the Borrower or any of its Affiliates is a signatory is or
becomes illegal, invalid or unenforceable in any respect under the law
of any jurisdiction, the legality, validity or enforceability of the
remaining provisions under this Agreement or such Loan Document shall
not in any way be affected or impaired thereby. Such illegal, invalid or
unenforceable provisions shall be replaced by legal, valid and
enforceable provisions, the economic and legal effects of which are as
close as possible to that of the invalid illegal or unenforceable
provisions.
23.02 If any changes in German GAAP or other applicable accounting principles
after the First Restatement Date result in a change of the
interpretation, calculation or method of calculation of financial
covenants, ratios, standards or terms contained in this Agreement (the
"Financial Covenants") which is materially different from the
interpretation, calculation or method of calculation of the Financial
Covenants on the First Restatement Date, the parties hereto agree to
enter into negotiations with a view to amending the Financial Covenants
so that the criteria for evaluating the financial condition of the
Borrower and its Subsidiaries shall be the same as if such change had
not been made.
ARTICLE 24. ASSIGNMENTS, PARTICIPATION
24.01 The Borrower may not assign or transfer all or any of its rights,
benefits and obligations under this Agreement without the prior written
consent of the Majority Banks (662/3%); provided, however, that nothing
in this SECTION 24.01 shall affect the ability of the
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Borrower to merge or consolidate in accordance with the terms of SECTION
16.10.
24.02 (a) Notwithstanding any other provision contained in this
Agreement or any other documents, no Bank may assign or transfer
any of its interests under this Agreement except in accordance
with the provisions of this SECTION 24.02 and no Bank may
transfer, assign or grant participations in its rights and/or
delegations under this Agreement except in accordance with this
SECTION 24.02; provided, however, that nothing in this SECTION
24.02 or in this Agreement shall prevent, subject to SECTION
24.03, any Bank assigning or granting participations in such
Bank's interests under this Agreement to such Bank's parent bank
holding company or to any affiliate in which such Bank or parent
bank holding company has the power to vote at least 33 1/3% of
the voting securities issued by such affiliate for the election
of the board of directors (or members of an equivalent governing
body), provided, however, that such affiliate assignee may only
further assign or subparticipate its interests in Loans pursuant
to the terms of this ARTICLE 24 and provided, however, that such
affiliate assignee cannot further assign or subparticipate its
interests in Loans to any Person which is an affiliate pursuant
to the provisions of SECTION 24.02(A).
(b) Each Bank shall have the right to transfer, assign or grant
participations in all or any part of its remaining rights and
obligations under this Agreement on the basis and subject to the
conditions set forth below in this SUBSECTION 24.02(B).
(i) Each Bank may assign all or a portion of its rights and
obligations under this Agreement to any Person in
accordance with the terms of this SECTION 24.02. The
parties to each such assignment shall execute and deliver
to the Agent, for its acceptance and recording, an
Assignment and Acceptance substantially in the form of
EXHIBIT A together with a processing and recordation fee
of DM 1,000 (Deutsche Mark One Thousand). Upon such
execution, delivery, acceptance and recording, from and
after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least 5
(five) Business Days after the execution thereof (or such
earlier date as shall have been agreed to by the assignor
Bank, the assignee and the Agent), (A) the assignee
thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the
rights and obligations of a Bank hereunder and (B) the
Bank assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its
rights and be released from its obligations under this
Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an
assigning Bank's rights and obligations under this
Agreement, such Bank shall cease to be a party hereto).
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(ii) Each Bank may sell participations to one or more banks or
other financial institutions in all or a portion of its
rights and obligations under this Agreement (including,
without limitation, all or a portion of its Commitment and
the Loans owing to it); provided, however, that (A) such
Bank shall remain a "Bank" for all purposes of this
Agreement and the transferee of such participation shall
not constitute a Bank hereunder, (B) such Bank's rights
and obligations under this Agreement (including, without
limitation, its Commitment to the Borrower hereunder)
shall remain unchanged, (C) no notice to or filing
(including the filing of any registration or similar
statement) with any governmental authority or regulatory
body is required in connection with any participation, (D)
such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations,
(E) the Borrower, the Guarantors, the Agent and the other
Banks shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations
under this Agreement and (F) any agreement pursuant to
which any Bank grants a participation in its rights with
respect to the Loan shall provide that, with respect to
such Loan, such Bank shall retain the sole right and
responsibility to exercise the rights of such Bank, and
enforce the obligations of the Bor rower relating to such
Loan, including without limitation the right to approve
any amendment, modification or waiver of any provision of
this Agreement or any other Loan Documents and the right
to take action to have the Loan declared due and payable
pursuant to ARTICLE 18, provided that such participation
agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement or any
of the other Loan Documents without the consent of the
participant that would:
(1) reduce the principal or the rate of interest
payable by the Borrower on any Loan or reduce any
fees payable under this Agreement;
(2) postpone any date fixed for the payment of
principal of or interest on the Loan or any fees
under this Agreement;
(3) increase the Commitment of any Bank or subject any
Bank to any additional obligation to make Loans; or
(4) amend ARTICLE 22 or any other provision of this
Agreement requiring the consent or other action of
all the Banks.
No participant shall have any rights under this Agreement
to receive payments pursuant to SECTION 11.01 AND 14.01.
24.03 Assignments under this Agreement, including assignments made to an
Affiliate of a Bank in accordance with SECTION 24.02(A), are subject to
the condition that if, at the time of such assignment, the assignee
would be subject to any greater Taxes than those to which
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the assignor Bank is then subject, or thereafter, if the assignee would
at any time be subject to any greater Taxes than those to which the
assignor Bank would at such time have been subject, the assignee Bank
shall and does hereby waive any right to claim and receive Taxes and
additional amounts payable pursuant to SECTIONS 11.01 AND 14.01 in
respect of the excess of the Taxes and additional amounts applicable to
it over the Taxes and additional amounts applicable to the assignor
Bank.
24.04 By executing and delivering an Assignment and Acceptance, the assignor
Bank thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assignor Bank makes no
representation or warranty and assumes no responsibility with respect to
any statements, warranties or representations made in or in connection
with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, the
Loan Documents, the Collateral or any other instrument or document
furnished pursuant hereto; (ii) such assignor Bank makes no
representation or warranty and assumes no responsibility with respect to
the financial condition of the Borrower, any Pledgor, any Guarantor or
their Affiliates or the performance or observance by the Borrower or any
such Pledgor, Guarantor or Affiliate of any of its obligations under
this Agreement, other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; (iii) such assignee confirms that
it has received a copy of this Agreement, together with copies of the
financial statements referred to in SECTION 15.11 and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance
upon the Agent, such assignor Bank or any other Bank and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement or any of the other Loan Documents; (v) such
assignee appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers as
are reasonably incidental thereto; and (vi) such assignee agrees that it
will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a
Bank.
24.05 The Agent shall maintain at its address referred to below a copy of each
Assignment and Acceptance delivered to and accepted by it and records of
the names and addresses of the Banks and the Commitment (including the
Revolving Commitment) of, and principal amount of the Loan (including
each portion thereof) owing to, each Bank from time to time. The entries
in such records shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agent and the Banks may treat each
Person whose name is recorded in such records as a Bank hereunder for
all purposes of this Agreement. The records shall be available for
inspection by the Borrower or any Bank at any reasonable time and from
time to time upon reasonable prior notice.
24.06 Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee, the Agent shall, if such Assignment and
Acceptance has been completed and is
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in substantially the form of EXHIBIT A hereto, as the case may be, (i)
accept such Assignment and Acceptance, (ii) record the information
contained therein, and (iii) give prompt notice thereof to the Borrower.
24.07 Each of the Agent and each Bank which is a signatory to this Agreement
shall execute a Confidentiality Agreement in the form of EXHIBIT S
attached hereto on or prior to the date of its execution of this
Agreement. Any Bank may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
ARTICLE 24 disclose to the assignee or participant or proposed assignee
or participant, any information relating to the Borrower or its
Affiliates furnished to such Bank by or on behalf of the Borrower or its
Affiliates; provided that, prior to the disclosure of confidential
information concerning the Borrower or its Affiliates, the assignee or
participant or proposed assignee or participant shall execute and
deliver to the Borrower a Confidentiality Agreement in the form of
EXHIBIT S.
ARTICLE 25. LANGUAGE
Each document, instrument, certificate and statement referred to herein
or to be delivered hereunder shall, if not in the English language, be
accompanied by an English translation thereof. In the case of conflict between
any original document not in the English language and the English translation
thereof, the language of the original document shall prevail.
ARTICLE 26. NOTICES
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telecopied, telexed or sent by courier service or
first class prepaid mail (airmail if to an address in a foreign country from the
party writing) and shall be deemed to have been given when delivered in person
or by courier service, upon transmission of a telecopy or telex or four (4) days
after deposit in the mail (registered, with postage prepaid and properly
addressed). Notices to Agent shall not be effective until received by the Agent.
For the purposes hereof, the addresses of the parties hereto (until 15 (fifteen)
days' prior written notice of a change thereof is delivered as provided in this
ARTICLE 26) shall be as set forth below each party's name on the signature pages
hereof.
ARTICLE 27. LIMITATION ON SPECIAL DAMAGES
EACH OF THE BORROWER AND KRONOS TITAN HEREBY WAIVES, RELEASES AND AGREES
NOT TO SUE FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, SUFFERED BY THE
BORROWER OR ANY AFFILIATE, IN CONNECTION WITH ANY CLAIM (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED
WITH THIS AGREEMENT AND/OR ANY OTHER LOAN DOCUMENTS, WHETHER SUCH CLAIM IS
ASSERTED BEFORE OR AFTER REPAYMENT IN FULL OF ALL OF THE BORROWER'S AND/OR
KRONOS TITAN'S OBLIGATIONS.
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ARTICLE 28. APPLICABLE LAW; JURISDICTION; SERVICE OF PROCESS
THIS AGREEMENT, AND THE RELATIONSHIP OF THE PARTIES ESTABLISHED BY THIS
AGREEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF
GERMANY. EACH OF THE BORROWER AND KRONOS TITAN HEREBY AGREES THAT ALL CLAIMS OR
SUITS OF ANY NATURE, WHETHER IN CONTRACT, TORT OR OTHERWISE, ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE RELATIONSHIP OF THE PARTIES ESTABLISHED BY
THIS AGREEMENT SHALL BE RESOLVED EXCLUSIVELY BEFORE THE LANDGERICHT MUENCHEN I
(COURT OF MUNICH), IN GERMANY, AND EACH OF THE BORROWER AND KRONOS TITAN HEREBY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF SAID COURT. NOTHING IN THIS ARTICLE 28
SHALL AFFECT (I) THE RIGHT OF THE AGENT AND THE BANKS TO BRING AN ACTION OR
PROCEEDING AGAINST THE BORROWER OR KRONOS TITAN OR ANY OF ITS PROPERTIES OR
AGAINST ANY OF ITS SUBSIDIARIES IN THE COURT OF ANY OTHER JURISDICTION OR (II)
THE RIGHT OF THE BORROWER OR KRONOS TITAN TO BRING AN ACTION OR PROCEEDING
AGAINST THE AGENT OR THE BANKS ARISING UNDER ANY CONFIDENTIALITY AGREEMENT
EXECUTED PURSUANT TO SECTION 24.07. The Borrower, in connection
with the Original Agreement, and pursuant to a Form of Designation of Process
Agent dated May 30, 1990, designated, appointed and empowered Dr. Wienand
Meilicke, with offices at Poppelsdorfer Allee 106, 5300 Bonn 1, Germany, as its
designee, appointee and agent to secure, accept and acknowledge for and on its
behalf, and in respect of its property, service of any and all legal process,
summons, notices and documents which may be served in any such action or
proceeding. The Borrower hereby ratifies and confirms such designation,
appointment and empowerment, and hereby agrees to appoint a substitute person
upon the death or removal of Dr. Meilicke pursuant to a designation
substantially identical to that previously delivered to the Agent or otherwise
in form and substance reasonably satisfactory to the Agent.
ARTICLE 29. COUNTERPARTS
This Agreement may be executed and delivered in one or more
counterparts, each of which shall constitute an original, and all of which when
taken together shall constitute one and the same instrument and shall become
effective when copies thereof, bearing the signatures of each of the parties
hereto, shall have been received by the Agent and the Borrower.
ARTICLE 30. FURTHER ASSURANCES
In addition to the acts recited herein and contemplated to be performed,
executed and/or delivered by the Borrower, the Borrower hereby agrees, at any
time, and from time to time, to perform, execute and/or deliver to the Agent
upon request, any and all such further acts, additional agreements, documents
and instruments (including, without limitation, estoppel certificates stating
that the Loan is in full force and effect and that there are no defenses,
counterclaims or offsets thereto), or further assurances as may be necessary or
proper to assure the rights and remedies intended to be granted or conveyed to
the Agent and the Banks under this
125
Agreement or any of the other Loan Documents; and create, perfect, preserve,
maintain and protect the liens and security interests created or intended to be
created by the Loan Documents.
ARTICLE 31. CONSTRUCTION
The terms and provisions of this Agreement and the wording used herein
shall in all cases be interpreted and construed simply in accordance with their
fair meanings and not strictly for or against any party hereto.
ARTICLE 32. ENTIRE AGREEMENT
This Agreement and the other Loan Documents constitute the entire
agreement with respect to the matters set forth herein and therein, and all
prior negotiations, drafts and other writings that do not constitute a part of
the Loan Documents but which relate to the subject matter of this Agreement or
the other Loan Documents are merged herein and therein and are superseded,
nullified and canceled by this Agreement and the other Loan Documents; provided,
however, that the Original Agreement shall remain in effect as to the period
from May 30, 1990 to the First Restatement Date and the First Restated Agreement
shall remain in effect as to the period from the First Restatement Date to the
Second Restatement Date. This Agreement shall become effective as of the Second
Restatement Date when executed by the Borrower, Kronos Titan, the Agent and the
Majority Banks and, if and when so executed, shall constitute an amendment and
restatement of the First Restated Agreement.
ARTICLE 33. SURVIVAL OF WARRANTIES AND AGREEMENTS
All statements contained in this Agreement or any of the other Loan
Documents, or any certificate, financial statement or other written material
delivered by the Borrower to the Agent or the Banks pursuant to or in connection
with this Agreement or any other Loan Document shall constitute representations
and warranties made under this Agreement. All agreements, representations and
warranties made herein shall survive, and shall not be waived by, the execution
and delivery of this Agreement and the other Loan Documents, and any
investigation by the Agent or any Bank. The obligations of the Borrower under
ARTICLES 11, 12, 14, 19 and 20 shall survive, and not be waived by, the
repayment of Borrower's obligations under this Agreement.
ARTICLE 34. NO THIRD PARTY BENEFICIARIES
The covenants contained herein and in all other Loan Documents to be
kept by Borrower and/or Kronos Titan or the Agent and the Banks are intended
solely for the benefit of the Borrower, the Agent and the Banks, respectively,
and are not intended for the benefit of any other Person. No Person other than
Borrower may compel the disbursement of Loans hereunder. No provisions in this
Agreement or actions taken by the Agent or the Banks under this Agreement shall
be construed as an assumption of any undertaking to protect third parties and
all such provisions and actions are solely for the protection of the Agent and
the Banks.
126
ARTICLE 35. NO NOVATION
This Agreement shall not result in or be deemed to be a novation of the
Loan or any portion thereof. Without limiting the generality of the foregoing,
the division of the Loan into the Term Portion and the Revolving Portion, and
the division of the Revolving Portion into the Kronos Titan Revolving Portion
and the portion that is not the Kronos Titan Revolving Portion, shall not result
in or be deemed to be a repayment or an extinguishment of any portion of the
Loan.
ARTICLE 36. MISCELLANEOUS
36.01 The parties hereto agree that a matter that is not a breach of the
representation set forth in SECTION 15.21(E) shall not be, or be claimed
to be, a breach of the representation set forth in SECTION 15.21(A).
36.02 The Banks hereby agree that the consummation of the Kronos (US)/Kronos
Flip shall not, in and of itself, be deemed to result in a "Kronos MAC"
as such term is defined in the Original Agreement.
36.03 Subject to the Borrower's compliance with Section 8.01(a) and the other
terms of this Agreement, the Agent shall have the authority and
obligation to release any Collateral (a) consisting of the Stock of any
Pledged Subsidiary, which Stock is transferred to another Subsidiary
with the approval of the Majority Banks pursuant to Section 16.09(f)
(except to the extent that such approval is conditioned upon there not
being a release of such Collateral), (b) consisting of the Stock of any
Pledged Subsidiary that is a party to a merger permitted by (and
approved in accordance with, if applicable) Section 16.10 if (i) such
Pledged Subsidiary is not the surviving entity in such merger, (ii) such
release occurs concurrently with or after such merger and (iii)
concurrently with such release, the Agent (on behalf of the Banks)
receives a valid and enforceable first priority perfected security
interest in the Stock of the entity surviving such merger, and (c)
consisting of all of the issued and outstanding Stock of any Pledged
Subsidiary owned by the Borrower if (i) such Stock is sold, in
compliance with this Agreement, to a Person who is not an Affiliate of
the Borrower for an amount equal to or greater than its fair market
value and (ii) all Net Proceeds from such sale shall be, promptly upon
the occurrence of such sale and concurrently with such release, applied,
first, as a prepayment of the principal of the Loan in the manner stated
in Section 8.01(b), second (if any such Net Proceeds remain after all
principal of the Loan is paid in full) to interest accrued and unpaid on
the Loan and, third (if any such Net Proceeds remain after all interest
accrued on the Loan is paid in full), to pay any additional amounts due
and owing to the Agent and/or any Bank under the Loan Documents.
127
36.04 If and to the extent that such approval is necessary, the Banks hereby
approve consummation of the following transactions:
(a) the cross-licensing and transfer of technology between the
"Kronos Group" and the "Tioxide Group", and the licensing of
technology to the joint venture that will acquire the plant of
Kronos Louisiana, Inc., pursuant to that certain Master
Technology Exchange Agreement dated October 15, 1993 among
Kronos, the Borrower, Kronos Louisiana, Inc., Tioxide Group
Limited and Tioxide Group
Services Limited;
(b) the execution of an amendment to that certain Trademark Use
Agreement among Kronos (US), Kronos, Kronos Titan and Kronos
Titan A/S dated as of May 30, 1990 to take account of the
assignment of trademarks from Kronos (US) to Kronos;
(c) the execution of an amendment to that certain License Agreement
between Kronos and Kronos Titan A/S dated as of October 1, 1966,
pursuant to which the royalty rate payable by Kronos Titan A/S to
Kronos is reduced from 7% to 5% of annual net sales; and
(d) the execution of supplementary agreements dated as of December
27, 1990 and July 16, 1991 implementing the mechanism for
paragraphs II.G and II.H of the Amended and Restated Technology
Transfer and License Agreement between Kronos and Kronos Titan
dated as of May 30, 1990.
IN WITNESS WHEREOF the hands of the duly authorized representatives of
the parties hereto the day and year first before written.
128
THE BORROWER KRONOS INTERNATIONAL, INC.
By: /s/ E. Gaertner
Name: E. Gaertner
Title: President
By: /s/ V. Roth
Name: V. Roth
Title: Vice President/Controller
Address for Notices:
Peschstrasse 5
51373 Leverkusen 1
Germany
Attention: Volker Roth
Telefax: 0214-42150
Copy to:
NL Industries, Inc.
70 East 55th Street
New York, New York 10022
Attention: Susan E. Alderton
Telefax: 212-421-7209
129
The undersigned, Kronos Titan - GmbH, executes this Agreement for the
limited purposes of agreeing to all of the terms and provisions contained in
this Agreement in any way relating to or in connection with (a) the Kronos Titan
Revolving Portion, including, without limitation, the borrowing of the Kronos
Titan Revolving Portion and the repayment of the principal of the Kronos Titan
Revolving Portion, the payment of interest accrued on such principal and the
payment of all fees accrued with respect to the Kronos Titan Revolving Portion
in accordance with SECTION 2.04, ARTICLE 8 and SECTION 19.03 and (b) ARTICLES 27
and 28.
KRONOS TITAN KRONOS TITAN - GMBH
By: /s/ E. Gaertner
Name: E. Gaertner
Title: Company Manager
By:
Name:
Title:
Address for Notices:
51373 Leverkusen 1
Germany
Attention: Volker Roth
Telefax: 0214-42150
Copy to:
NL Industries, Inc.
70 East 55th Street
New York, New York 10022
Attention: Susan E. Alderton
Telefax: 212-421-7209
130
THE AGENT AND A BANK HYPOBANK INTERNATIONAL S.A.
By: /s/ Michael Bisch
Name: Michael Bisch
Title: Charge de Service
By: /s/ Erwin Moos
Name: Erwin Moos
Title: Vice President
Address for Notices:
4, rue Alphonse Weicker
L-2099 Luxembourg
Attention: Michael Bisch
Phone: 011-352-4272-2151
Fax: 011-352-4272-4510
Lending Office:
4, rue Alphonse Weicker
L-2099 Luxembourg
Attention: Michael Bisch
Phone: 011-352-4272-2151
Fax: 011-352-4272-4510
131
ABN-AMRO BANK (DEUTSCHLAND) AG
NIEDERLASSUNG DUESSELDORF
By:
Volker Haubrich
Title:
By:
Roland Lukas
Title:
ADDRESS FOR NOTICES:
Berliner Allee 41
D-40212 Duesseldorf
Attention: Volker Haubrich
Roland Lukas
Phone: 49-211-8770-117
Fax: 49-211-8770-125
LENDING OFFICE:
Berliner Allee 41
D-40212 Duesseldorf
Attention: Volker Haubrich
Roland Lukas
Phone: 49-211-8770-117
Fax: 49-211-8770-125
132
ARAB BANKING CORPORATION B.S.C.
By: /s/ Wahid O. Bugaighis
Name: Wahid O. Bugaighis
Title: Fist Vice President
By: /s/ Stephen A. Plauche
Name: Stephen A. Plauche
Title: Vice President
ADDRESS FOR NOTICES:
277 Park Avenue, 32nd Floor
New York, New York 10172
Attention: R. Hassan/Susan Williams
Phone: 212-583-4770/71
Fax: 212-583-0921/32
LENDING OFFICE:
Arab Banking Corporation (B.S.C.)
Grand Cayman Branch
c/o 277 Park Avenue, 32nd Floor
New York, New York 10172
Attention: R. Hassan/Susan Williams
Phone: 212-583-4770/71
Fax: 212-583-0921/32
133
BAHRAIN MIDDLE EAST BANK E.C.
By: /s/ Albert I. Kittaneh
Name: Albert I. Kittaneh
Title: Chief Executive
ADDRESS FOR NOTICES:
BMB Centre, Diplomatic Area
P. O. Box 797
Manama, Bahrain
Attention: K.S. Ganesh
Vice President
Phone: 973-528138
Fax: 973-536312
LENDING OFFICE:
BMB Center, Diplomatic Area
P. O.Box 797
Manama, Bahrain
Attention: K.S. Ganesh
Vice President
Phone: 973-528138
Fax: 973-536312
134
BANK HAPOALIM BM
By: /s/ Conrad Wager
Name: Conrad Wagner
Title: First Vice President
By: /s/ Shaun Breidbart
Name: Shaun Breidbart
Title: Assistant Vice President
ADDRESS FOR NOTICES:
1177 Avenue of the Americas
New York, New York 10036
Attention: Conrad Wagner
Phone: 212-782-2176
Fax: 212-782-2187
LENDING OFFICE:
1177 Avenue of the Americas
New York, New York 10036
Attention: Conrad Wagner
Phone: 212-782-2176
Fax: 212-782-2187
135
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ A. G. Tucker
Name: A. G. Tucker
Title: Vice President
ADDRESS FOR NOTICES:
1, Alie Street
London EC1 8DE
England
Attention: A. G. Tucker
Phone: 44-171-634-4728
Fax: 44-171-634-4968
LENDING OFFICE:
1, Alie Street
London EC1 8DE
Attention: A. G. Tucker
Phone: 44-171-634-4728
Fax: 44-171-634-4968
136
BANK OF MONTREAL
By: /s/ Michael J. Solski
Name: Michael J. Solski
Title: Director
ADDRESS FOR NOTICES:
115 South LaSalle Street, 11th Floor
Chicago, Illinois 60603
Attention: Farid Ali
Phone: 312-750-3727
Fax: 312-750-3798
LENDING OFFICE:
Corporate and Institutional Financial Services
24th Floor, First Bank Tower
First Canadian Place, P. O. Box 1
Toronto, Ontario M5X 1A1
Attention: Michael J. Solski
Phone: 416-867-6968
Fax: 417-867-6366
137
BANK OF SCOTLAND
By: /s/ Catherine M. Oniffrey
Name: Catherine M. Oniffrey
Title: Vice President
ADDRESS FOR NOTICES:
565 Fifth Avenue, 5th Floor
New York, New York 10017
Attention: Catherine M. Oniffrey
Fax: 212-557-9460
WITH A COPY TO:
Bank of Scotland
Houston Representative Office
1750 Two Allen Center
1200 Smith Street
Houston, Texas 77002
Attention: Justin M. Alexander
Phone: 713-651-1870
Fax: 713-651-9714
LENDING OFFICE:
Bank of Scotland
Grand Cayman Branch
565 Fifth Avenue, 5th Floor
New York, New York 10017
Attention: Catherine M. Oniffrey
Fax: 212-557-9460
138
BANKERS TRUST COMPANY
By: /s/ Michael Dent
Name: M. Dent
Title: Managing Director
ADDRESS FOR NOTICES:
1 Appold Street, Broadgate
London EC2A 2HE
Attention: Simon Alloway/Robert Foulston
Phone: 44-171-982-3302
Fax: 44-171-982-1902
LENDING OFFICE:
1 Appold Street, Broadgate
London EC2A 2HE
Attention: Simon Alloway/Robert Foulston
Phone: 44-171-982-3302
Fax: 44-171-982-5833
139
BANQUE ET CAISSE D'EPARGNE DE L'ETAT,
LUXEMBOURG
By: /s/ John Dhur
Name: John Dhur
Title: Sous Director
ADDRESS FOR NOTICES:
1, place de Metz
L-2954 Luxembourg
Attention: Jean Pierre Thein
Phone: 352-4015-4337
Fax: 352-4015-4284
LENDING OFFICE:
1, place de Metz
L-2954 Luxembourg
Attention: Jean Pierre Thein
Phone: 352-4015-4337
Fax: 352-4015-4284
140
BANQUE INDOSUEZ
By: /s/ Jerome Sanzo
Name: Jerome Sanzo
Title: First Vice President
By: /s/ Jaime Silver
Name: Jaime Silver
Title: Vice President
ADDRESS FOR NOTICES:
1211 Avenue of the Americas
New York, New York 10036
Attention: Jaime Silver/Raymond Wright
Phone: 212-278-2544
Fax: 212-278-2759
LENDING OFFICE:
1211 Avenue of the Americas
New York, New York 10036
Attention: Raymond Wright
Loan Department
Phone: 212-278-2000
Fax: 212-278-2502
141
BANQUE INTERNATIONALE A LUXEMBOURG
S.A.
By: /s/ Yves Lahaye
Name: Yves Lahaye
Title: Vice President
By: /s/ Claude Lehnertz
Name: Claude Lehnertz
Title: Vice President
ADDRESS FOR NOTICES:
69, route d'Esch
L-2953 Luxembourg
Attention: Guy Denys/Simon Hauxwell
Phone: 352-4590-2564
Fax: 352-4590-3855
LENDING OFFICE:
69, route d'Esch
L-2953 Luxembourg
Attention: Guy Denys/Simon Hauxwell
Phone: 352-4590-2564
Fax: 352-4590-3855
142
CHRISTIANIA BANK OG KREDITKASSE ASA
By: /s/ Stein H. Offenberg
Name: Stein H. Offenberg
Title: Senior Vice President
ADDRESS FOR NOTICES:
P. O. Box 1166 Sentrum
N-0107 Oslo
Norway
Attention: Stein H. Offenberg
Phone: 47-22-48-69-59
Fax: 47-22-56-40-83
WITH A COPY TO:
International Loan Administration
P. O. Box 1166 Sentrum
N-0107 Oslo
Norway
Attention: Aud Sandnes
Phone: 47-22-48-47-26
Fax: 47-22-48-54-97
LENDING OFFICE:
P. O. Box 1166 Sentrum
N-0107 Oslo
Norway
Attention: Stein H. Offenberg
Phone: 47-22-48-69-59
Fax: 47-22-56-40-83
143
DLJ CAPITAL FUNDING, INC.
By: /s/ Stephen P. Hickey
Name: Stephen P. Hickey
Title: Managing Director
ADDRESS FOR NOTICES:
525 Washington Boulevard
Newport Tower
Jersey City, NJ 07310
Attention: Ed Vowinkel
Phone: 201-610-1971
Fax: 201-610-1965
WITH A COPY TO:
c/o DLJ International
Moorgate Hall, 155 Moorgate
London, EC 2M 6XB
Attention: Pam Carter
Phone: 44-171-628-0869
Fax: 44-171-814-7224
and
DLJ Capital Funding, Inc.
277 Park Avenue, 9th Floor
New York, New York 10172
Attention: Mr. Donald Pollard
Phone: 212-892-5475
Fax: 212-892-5286
LENDING OFFICE:
525 Washington Boulevard
Newport Tower
Jersey City, NJ 07310
Attention: Ed Vowinkel
Phone: 201-610-1971
Fax: 201-610-1965
144
FUJI BANK (LUXEMBOURG) S.A.
By: /s/ Tadashi Omiya
Name: Tadashi Omiya
Title: Managing Director
ADDRESS FOR NOTICES:
29, Avenue de la Porte Neuve
2227 Luxembourg
Attention: Loan Department
Phone: 352-474-681
Fax: 352-474-688
WITH A COPY TO:
The Fuji Bank, Limited
One Houston Center, Suite 4100
1221 McKinney Street
Houston, Texas 77010
Attention: Philip C. Lauinger, III
Phone: 713-650-7852
Fax: 713-759-0048
LENDING OFFICE:
29, Avenue de la Porte Neuve
2227 Luxembourg
Attention: Loan Department
Phone: 352-474-681
Fax: 352-474-688
145
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Frederik W. Aase
Name: Frederik W. Aase
Title: Vice President
By:
Name:
Title:
ADDRESS FOR NOTICES:
Grand Cayman Branch
One State Street
New York, New York 10004
Attention: Frank DeLillo/Frederik W. Aase
Phone: 212-858-2786
Fax: 212-858-2115
LENDING OFFICE:
Grand Cayman Branch
One State Street
New York, New York 10004
Attention: Frank DeLillo/Frederik W. Aase
Phone: 212-858-2786
Fax: 212-858-2222
146
MERITA BANK LTD.
By: /s/ Esa Tuomi
Name: Esa Tuomi
Title: Vice President
By: /s/ Aimo Vitie
Name: Aimo Vitie
Title: Vice President
ADDRESS FOR NOTICES:
2627 International Credits
FIN-00020 Merita
Attention: Pirkko Relander/Borje Lindblom
Phone: 358-9-165-55590
Fax: 358-9-165-52820
LENDING OFFICE:
2627 International Credits
FIN-00020 Merita
Attention: Pirkko Relander/Borje Lindblom
Phone: 358-9-165-55590
Fax: 358-9-165-52820
147
SCHRODER MUENCHMEYER HENGST & CO.
By: /s/ Thomas W. Benger
Name: Thomsa W. Benger
Title:
By: /s/ David E. Watson
Name: David E. Watson
Title:
ADDRESS FOR NOTICES:
Friedensstrasse 6-10
D-60311 Frankfurt am Main
Attention: Thomas W. Benger
Phone: 49-69-2179-562
Fax: 49-69-2179-591
LENDING OFFICE:
Friedensstrasse 6-10
D-60311 Frankfurt am Main
Attention: Thomas W. Benger
Phone: 49-69-2179-562
Fax: 49-69-2179-591
148
SWISS BANK CORPORATION
New York and Cayman Islands Branches
By: /s/ Nicolas T Erni
Name: Nicolas T. Erni
Title: Director
By: /s/ William A. Roche
Name: William A. Roche
Title: Restructuring
ADDRESS FOR NOTICES:
New York and Cayman Islands Branches
222 Broadway
New York, New York 10038
Attention: Elizabeth Burnett
Phone: 212-574-3000
Fax: 212-574-3162
LENDING OFFICE:
New York and Cayman Islands Branches
222 Broadway
New York, New York 10038
Attention: Nicolas T. Erni
Phone: 212-574-3443
Fax: 212-574-3162
149
THE BANK OF NOVA SCOTIA
By: /s/ R. A. Millard
Name: R. A. Millard
Title: Relationship Manager
ADDRESS FOR NOTICES:
1100 Louisiana Street
Houston, Texas 77002
Attention: Bryan Bulawa
Phone: 713-752-0900
Fax: 713-752-2425
LENDING OFFICE:
Scotia House
33 Finsbury Square
London EC2A 1BB
Attention: R. A. Millard/J.W. Stevens
Phone: 44-171-454-5758
Fax: 44-171-454-9019
150
THE CHUO TRUST AND BANKING CO., LTD.
By: /s/ Mr. Y. Ueda
Name: Mr. Y. Ueda
Title: Deputy General Manager
ADDRESS FOR NOTICES:
Woolgate House
Coleman Street
London EC2R 5AT
Attention: Paul Glynn/R. Weir
Phone: 44-171-726-6050
Fax: 44-171-606-8061
LENDING OFFICE:
Woolgate House
Coleman Street
London EC2R 5AT
Attention: Paul Glynn/R. Weir
Phone: 44-171-726-6050
Fax: 44-171-606-8061
151
SCHEDULE 1
152
SCHEDULE 2
INDEBTEDNESS
153
SCHEDULE 3
LIENS
154
SCHEDULE 4
CERTAIN LEGAL MATTERS
155
SCHEDULE 5
LITIGATION
156
SCHEDULE 6
ERISA AND NON-U.S. EMPLOYEE PLANS
157
SCHEDULE 7
SUBSIDIARIES
158
SCHEDULE 8
LICENSE AGREEMENTS AND INTELLECTUAL PROPERTY RIGHTS
159
SCHEDULE 9
AFFILIATE TRANSACTIONS
160
SCHEDULE 10
INSURANCE
161
SCHEDULE 11
TAX INFORMATION
162
SCHEDULE 12
CERTAIN LOAN AGREEMENTS
163
SCHEDULE 13
CERTAIN MATERIAL ASSETS
164
EXHIBIT A
FORM OF ASSIGNMENT AND ACCEPTANCE
165
EXHIBIT B
FORM OF MIRROR NOTES
166
EXHIBIT C
SUBORDINATED LOAN DOCUMENTS
167
EXHIBIT D
FORMS OF AMENDMENTS AND/OR REAFFIRMATIONS
OF PLEDGE AGREEMENTS
168
EXHIBIT E
FORMS OF AMENDMENTS AND/OR
REAFFIRMATIONS OF GUARANTIES
169
EXHIBIT F
FORM OF SECOND AMENDED AND RESTATED TECHNOLOGY
AND TRADEMARK UNDERTAKING
170
EXHIBIT G
FORM OF AMENDMENT AND/OR REAFFIRMATION OF
SUBORDINATION AND CONTRIBUTION AGREEMENT
171
EXHIBIT H
FORM OF SECOND AMENDED AND
RESTATED LIQUIDITY UNDERTAKING
172
EXHIBIT I
FORM OF ACKNOWLEDGMENT OF LIMITATION
OF SPECIAL DAMAGES
173
EXHIBIT J
FORM OF NL GUARANTY
174
EXHIBIT K
FORM OF CANADIAN SECURITY DOCUMENTS
175
EXHIBIT L
FORM OF NORDENHAM MORTGAGE
176
EXHIBIT M
FORMS OF CASH PLEDGE
AGREEMENTS OF THE BORROWER
177
EXHIBIT N
FORMS OF CASH PLEDGE AGREEMENTS
OF THE CANADIAN SUBSIDIARIES
178
EXHIBIT O
FORM OF SOLVENCY CERTIFICATE
179
EXHIBIT P
FORM OF NOTICE OF BORROWING
180
EXHIBIT Q
FORM OF CERTIFICATE OF CHIEF FINANCIAL OFFICER
OF BORROWER AS TO ANNUAL FINANCIAL STATEMENTS
181
EXHIBIT R
FORM OF CERTIFICATE OF CHIEF FINANCIAL OFFICER OF
BORROWER AS TO QUARTERLY FINANCIAL STATEMENTS
182
EXHIBIT S
FORM OF CONFIDENTIALITY AGREEMENT
183
EXHIBIT 10.4
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING
This Second Amended and Restated Liquidity Undertaking (this "Agreement"),
dated effective as of January 31, 1997, is executed and delivered by NL
INDUSTRIES, INC., a New Jersey corporation ("NL Industries"), KRONOS, INC., a
Delaware corporation f/k/a Kronos (USA), Inc. ("Kronos") (NL Industries and
Kronos are sometimes hereinafter individually called a "Shareholder" and
collectively called "Shareholders") and KRONOS INTERNATIONAL, INC., a Delaware
corporation ("Borrower") to and in favor of HYPOBANK INTERNATIONAL S.A.
("Agent"), as Agent for the Banks (hereinafter defined), and the Banks.
WITNESSETH:
Borrower, Kronos Titan-GmbH, Agent and the Banks are, concurrently
herewith, entering into that certain Second Amended and Restated Loan Agreement
dated as of January 31, 1997 (as the same may be amended or supplemented from
time to time now or hereafter, the "Loan Agreement"), which Loan Agreement
amends and restates that certain Amended and Restated Loan Agreement dated as of
October 15, 1993, among Borrower, Agent, Banque Paribas, as Co-Agent
("Co-Agent"), and the Banks (or their precedessors in interest) (the "First
Restated Agreement"), which First Restated Agreement amends and restates that
certain Loan Agreement dated as of May 30, 1990, among Borrower, Agent, Co-Agent
and the Banks (or their predecessors in interest), as amended by that certain
(i) First Amendment Agreement dated as of December 31, 1990, (ii) Second
Amendment Agreement dated as of March 22, 1991, and (iii) Third Amendment
Agreement (herein so-called) dated as of June 15, 1992 (the "Original
Agreement").
Pursuant to the Third Amendment Agreement, the parties hereto executed
that certain Liquidity Undertaking dated as of June 15, 1992 (the "Original
Liquidity Undertaking"). Pursuant to the First Restated Agreement, the parties
hereto executed that certain Amended and Restated Liquidity Undertaking dated as
of October 15, 1993 (the "First Restated Liquidity Undertaking") which amended
and restated the Original Liquidity Undertaking. In order to induce Agent and
the Banks to enter into the Loan Agreement, Shareholders and Borrower desire to
amend and restate the First Restated Liquidity Undertaking as herein set forth.
NOW, THEREFORE, for and in consideration of the Loan Agreement and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree that the First Restated Liquidity
Undertaking is amended and restated in its entirety as follows:
i. Definitions. Unless otherwise defined in this Agreement, initially
capitalized terms used in this Agreement shall have the meanings
ascribed to them in the Loan Agreement. As used in this Agreement,
the phrase "any Shareholder" means any Shareholder and/or both
Shareholders.
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 1
ii. Maintenance of Liquidity.
(i) Liquidity Report. By 5:00 p.m. (New York, New York
time) on each Business Day (i) which occurs prior
to January 1, 2001 and (ii) which is the first
Business Day immediately preceding any date upon
which Borrower is required to make any payment of
principal or interest on the Loans (any such
Business Day herein a "Report Date" and any such
date upon which Borrower is required to make any
such payment hereinafter called a "Payment Date")
but excluding any day upon which the payment of
principal on the Loan is due as a result of the
acceleration thereof, Borrower agrees to provide
Shareholders and Agent with a report (the
"Liquidity Report") identifying Borrower's
Liquidity Level as of the prior Business Day (each
such prior Business Day herein a "Date of
Determination") and showing, in reasonable detail,
Borrower's Liquidity Level and the manner in which
such Liquidity Level was calculated. As used
herein, the term "Liquidity Level" means, as of
each Date of Determination the sum of (i)
Borrower's Cash Position, plus (ii) without
duplication, each Consolidated Subsidiaries' Cash
Position, plus (iii) if no Default has occurred,
the amount available to be borrowed by Borrower
under the terms of Section 2.04 of the Loan
Agreement but excluding any amounts available to
be borrowed by Borrower under any other credit
facilities, minus (iv) the amount of all the
payments scheduled to be made under the Loans on
the Payment Date immediately following the Report
Date. As used herein, the term "Cash Position"
means, with respect to any Person, the amount,
expressed in Deutsche Mark, equal to the remainder
of (A) the sum of such Person's cash and cash
equivalents (determined in accordance with German
GAAP with respect to Borrower and its Consolidated
Subsidiaries or determined on an unconsolidated
basis but otherwise in accordance with accounting
principles generally accepted in the United States
["U.S. GAAP"] with respect to the Shareholders,
both consistently applied) plus the market value
of such Person's Marketable Securities minus (B)
without duplication, the aggregate amount of any
Indebtedness secured by any Lien, other than a
Lien in favor of Agent as security for the Loans,
affecting such cash, cash equivalents and/or
Marketable Securities (in each case not to exceed
the amount
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 2
or value of the particular cash, cash equivalents
or Marketable Securities affected by such Lien).
As used herein, the term "Marketable Securities"
means all stocks, bonds, notes or other securities
which are regularly traded on any recognized
national or international market or exchange and
are otherwise freely transferable. The market
value of Marketable Securities shall be determined
as of each Date of Determination by reference to a
market price quoted as of such date in a
recognized national or international market or
exchange for the Marketable Securities in question
and otherwise on a basis reasonably satisfactory
to the Majority Banks. If any cash, cash
equivalent or the value of Marketable Securities
is denominated in any currency other than Deutsche
Mark, then, for purposes of calculating the Cash
Position under this Agreement, the equivalent
amount of Deutsche Mark shall be determined by
using the Spot Rate existing as of the applicable
Date of Determination. As used in this Agreement,
the term "Spot Rate", with respect to any currency
and any day, means the rate determined based on
the "Frankfurt Foreign Exchange Fixing" for the
offered rates to purchase Deutsche Mark with such
currency as reflected on the display designated as
page "1011" on the Telerate Systems, Incorporated
service (or such other page as may replace page
"1011" on that service for the purposes of
displaying such offered rates) at or about 11:00
a.m. London time on such date. If at least two
such offered rates appear on such display, the
rate for such date will be the arithmetic mean of
such offered rates.
(ii) Borrower Liquidity Deficit; Required Investment.
If Borrower's Liquidity Level is less than DM
25,000,000 (Deutsche Mark Twenty Five Million) as
of any Date of Determination, Shareholders shall
on a joint, several, irrevocable and unconditional
basis (but subject to subparagraph (d) of this
Paragraph 2), within ten (10) days after being
given the applicable Liquidity Report (or if such
Liquidity Report is not delivered, within ten (10)
days after being given written notice from Agent)
either make Capital Contributions to Borrower
and/or make Subordinated Loans to Borrower, in
either case in an aggregate amount sufficient so
that, after giving effect to such contributions
and/or such loans and the receipt of such funds by
Borrower, Borrower's Liquidity Level (calculated
as if such contributions and/or
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 3
loans were made as of the applicable Date of
Determination) shall equal or exceed DM 25,000,000
(Deutsche Mark Twenty Five Million); provided that
the aggregate amount of Capital Contributions and
Subordinated Loans made by Shareholders to
Borrower after January 31, 1997 and prior to
January 1, 2001 pursuant to this Agreement shall
not exceed an aggregate amount equal to DM
125,000,000 (Deutsche Mark One Hundred Twenty-Five
Million) (the "Maximum Required Investment
Amount"); and provided further that Shareholders'
obligations to make Capital Contributions and/or
Subordinated Loans up to the Maximum Required
Investment Amount shall be satisfied by any of the
following: (A) to the extent and in an amount
equal to, as of the date of determination, the
positive remainder (if any) of (1) the aggregate
amount of Shareholders' optional Capital
Contributions and/or Subordinated Loans made to
Borrower after January 31, 1997 for general
corporate purposes (including, without limitation,
optional prepayments) minus (2) the sum of the
aggregate amount of Restricted Payments made by
Borrower prior to the date of determination but
after January 31, 1997 pursuant to Section
16.20(b) of the Loan Agreement plus the aggregate
amount of Restricted Payments permitted (as of the
date of determination) to be made by Borrower on
or after the date of determination pursuant to
Section 16.20(b) of the Loan Agreement, and (B) an
amount equal to the Liquidity Undertaking Credit
in effect as of the date of determination. The
term "Capital Contributions" means contributions
by a Shareholder to the equity of Borrower. The
term "Subordinated Loans" means loans by a
Shareholder to Borrower on terms and provisions
acceptable to such Shareholder and Borrower;
provided that such loans are "Subordinated Debt",
as such term is defined in the Loan Agreement.
(iii) Event of Default; Required Investment.
Notwithstanding anything to the contrary contained
elsewhere in this Agreement, if an Event of
Default has occurred and is continuing and Agent
shall have given Borrower and Shareholders written
notice requesting or requiring performance under
this subparagraph (c), then Borrower and
Shareholders' jointly and severally agree as
follows:
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 4
(i) a Liquidity Report shall be provided by Borrower to
Shareholders and Agent within two Business Days after Borrower's
receipt of such notice referred to in this subparagraph (c), which
Liquidity Report shall identify Borrower's Liquidity Level as of the
Business Day immediately succeeding the date of such notice (the
"Default Date of Determination"); provided, however that, for
purposes of this subparagraph (c), the term "Liquidity Level" shall
mean (without duplication) (A) the Liquidity Level as defined in
subparagraph (a) of this Paragraph 2 minus, (B) the aggregate unpaid
principal amount of the Loans, minus (C) the aggregate of the
accrued and unpaid interest and fees under the Loan Agreement and
the other Loan Documents; and
(ii) based upon the Liquidity Level as so determined in
accordance with clause (i) immediately preceding, the Shareholders
shall, on a joint, several, irrevocable and unconditional basis (but
subject to subparagraph (d) of this Paragraph 2), within ten (10)
days after being given such notice from Agent, either make Capital
Contributions to Borrower and/or make Subordinated Loans to
Borrower, in either case in an aggregate amount sufficient so that,
after giving effect to such contributions and/or such loans and the
receipt of such funds by Borrower, Borrower's Liquidity Level (as
defined in this subparagraph (c) and calculated as if such
contributions and/or loans were made as of the applicable Default
Date of Determination) shall equal or exceed DM 25,000,000 (Deutsche
Mark Twenty Five Million); provided that the aggregate amount of
Capital Contributions and Subordinated Loans made by Shareholders to
Borrower after January 31, 1997 and prior to January 1, 2001
pursuant to this Agreement shall not exceed the Maximum Required
Investment Amount. Notwithstanding anything to the contrary that may
be contained in this Agreement, payments by NL Industries under the
NL Guaranty will not reduce or otherwise affect the Maximum Required
Investment Amount.
(iv) Priority of Contributions by Shareholders. Each
time the Shareholders are required to make Capital
Contributions or Subordinated Loans (the "Required
Contributions") under subparagraphs (b) or (c) of
this Paragraph 2, Kronos shall be obligated to
make so much of the Required Contributions as it
is able to make from funds received from or
otherwise attributable to its operations before NL
Industries (i) makes any portion of the Required
Contributions or (ii) contributes funds to Kronos
to enable Kronos to make the Required
Contributions. Kronos agrees that it will not
utilize any funds received from NL Industries to
make any Required Contributions until it has
utilized all the then available funds which are
received from or otherwise attributable to its
operations. After Kronos has satisfied its
obligations under the preceding two sentences or
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 5
if Kronos is unable to make Required
Contributions, then NL Industries will, if
necessary, promptly (within the ten (10) day
period specified in subparagraph (c) of this
Paragraph 2) make the Required Contributions or
the remainder thereof left unpaid.
(v) Payments. All payments by either Shareholder under
this Agreement shall be in immediately available
funds and made directly to Borrower's account
number 5803610284 maintained at Bayerische
Hypotheken-und Wechselbank AG in Munich, Germany.
All payments by the Shareholders hereunder shall
be made without setoff, deduction or counterclaim
for amounts owed to any Shareholder by Borrower.
Each Shareholder irrevocably waives, to the
fullest extent permitted by law, all defenses,
rights of setoff and counterclaims, which may now
exist or hereafter arise with respect to such
payments or other obligations under this
Agreement. All payments by each Shareholder under
this Agreement shall also be made free and clear
of, and without withholding or deduction for or on
account of, any present or future taxes now or
hereafter imposed on Borrower or its property,
except to the extent that such withholding or
deduction is required by applicable law.
(vi) Borrower Obligations. Borrower hereby irrevocably
and unconditionally agrees to either (i) authorize
(to the extent necessary), issue and sell capital
stock to Shareholders, in connection with any
Capital Contributions, or (ii) authorize and issue
promissory notes and any other necessary documents
to evidence the Subordinated Loans or (iii) take
such other action at such time as is necessary for
Shareholders to comply with the provisions of this
Paragraph 2. Neither the obligations of Borrower
under this subparagraph (f), any other provision
of this Agreement or any other Loan Document nor
the performance thereof shall be a condition to
the obligations of Shareholders to pay to Borrower
the amounts required under this Agreement;
provided that either Shareholder's performance
shall not constitute a waiver of any rights
against Borrower.
(vii) Termination. The obligations of Shareholders under
this Paragraph 2 shall terminate on January 1,
2001 (the "Termination Date") except with respect
to any obligation under this Paragraph 2 which
remains unsatisfied on the
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 6
Termination Date and except as provided in
subparagraph (j) and (k) below.
(viii)Failure to Perform; No Proof of Damages; Specific
Performance. Borrower and each Shareholder
recognize and agree that in the event Borrower or
any Shareholder fails to perform or observe any or
all of its obligations under this Agreement, and
if for any reason Agent or any Bank shall have
failed to receive when due and payable (whether at
stated maturity, by acceleration, or otherwise)
the payment of all or any part of principal or
interest or any other amount payable by Borrower
under the Loan Agreement or the other Loan
Documents, then in each such case it shall be
assumed conclusively without necessity of proof
that such failure by Borrower or Shareholders was
the sole and direct cause of Agent or any Bank
failing to receive such payment when due
irrespective of any other contributing or
intervening cause whatsoever. As a result of the
forgoing, Shareholders and Borrower irrevocably
waive to the full extent permitted by applicable
law any right or defense that Borrower or
Shareholders may have to cause Agent or any Bank
to prove the cause or amount of any damages or to
mitigate the same. In addition, and without
limiting the forgoing, the parties hereto agree
that in the event of such a failure, (i) it is
impossible to measure in money the damages that
would be suffered by Agent and the Banks, (ii)
Agent and the Banks will be irreparably damaged
and (iii) any remedy at law will be inadequate
relief and, as a result, this Agreement shall be
enforceable by Agent and the Banks in a court of
equity by a decree of specific performance without
the need of proving that a remedy at law is
inadequate, Borrower and each Shareholder hereby
waiving and agreeing not to raise the defense that
an adequate remedy at law exists.
(ix) Non-impairment of Obligations upon Bankruptcy of
Borrower. The obligations of Shareholders under
this Agreement shall not be released, impaired,
limited, reduced, discharged or otherwise affected
on account of the insolvency, bankruptcy,
arrangement, adjustment, composi tion,
liquidation, disability, dissolution or lack of
authority of Borrower or any Shareholder, whether
now existing or hereafter arising and, in
furtherance of the foregoing, each Shareholder
waives, to the fullest extent permitted by
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 7
applicable law and for the benefit of, and as a
separate undertaking with, Agent and the Banks,
any defense to the performance of this Agreement
which may be available to either Shareholder as a
consequence of Borrower not being in existence or
this Agreement being rejected or otherwise not
assumed by Borrower or any trustee or other
similar official for Borrower or for any
substantial part of the property of Borrower, or
as a consequence of this Agreement being otherwise
terminated or modified, in any bankruptcy or
insolvency proceeding whether such rejection,
non-assumption, termination or modification be by
reason of this Agreement being held to be an
executory contract or by reason of any other
circumstance; provided that, if Borrower is no
longer in existence or this Agreement shall be
rejected or otherwise not assumed, or terminated
or modified, each Shareholder agrees for the
benefit of, and as a separate undertaking with,
Agent and the Banks, that it will unconditionally,
jointly and severally pay to Agent an amount equal
to each payment which would otherwise be payable
by Shareholders under or in connection with this
Agreement to Borrower if this Agreement were not
so rejected or otherwise not assumed or were
otherwise not so terminated or modified (such
amount to be payable to Agent to be applied to the
indebtedness, liabilities and obligations owing
under or pursuant to the Loan Documents (the "Loan
Obligations")) and in such event, Borrower shall
comply with its obligations under subparagraphs
(f) of this Paragraph 2. Shareholders further
agree that their obligations under this
subparagraph (i) shall continue to be effective or
be reinstated (if a release, discharge or
termination has occurred but only to the extent of
the amount discharged), as the case may be, if at
any time any payment (or any part of such payment)
to Agent or any Bank previously paid by either
Shareholder under the terms of this subparagraph
(i) is rescinded or must otherwise be restored or
disgorged by Agent or any Bank pursuant to any
bankruptcy, insolvency, reorganization,
receivership, liquidation or other debtor relief
granted to any Shareholder or its successors or
assigns. If, pursuant to the foregoing sentence,
the obligations of Shareholders under this
subparagraph (i) shall continue to be effective or
be reinstated (if a release, discharge or
termination has occurred), any prior release,
discharge or termination from
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 8
the terms of this Agreement given to any
Shareholder by Agent or any Bank shall be without
effect.
(x) No Effect or Impairment. Each Shareholder consents
to and agrees that its obligations under this
Agreement will also not be discharged or affected
by: (i) any acceptance, forbearance or release in
respect of the rights of Agent or any of the Banks
under the Loan Agreement or the other Loan
Documents; (ii) any waiver or release of any right
or option of Agent or any of the Banks under the
terms of the Loan Agreement or other Loan
Documents; (iii) any modification, extension,
renewal or amendment of the terms of the Loan
Agreement or other Loan Documents; (iv) the fact
that the Loan Agreement or any other Loan Document
shall be invalid, illegal or unenforceable, in
whole or in part, for any reason; or (v) except as
otherwise provided herein, any other act or
omission of any kind by Agent, any Bank or
Borrower or any other circumstance whatsoever
which might constitute a legal or equitable
discharge of the Shareholders.
(xi) Liquidity Report; Liquidity Level. Borrower agrees
to provide to Agent and Shareholders, promptly
upon any request therefor by Agent or any
Shareholders, such information in such detail as
Agent or any Shareholder may reasonably request
from time to time relating to the determination of
the Liquidity Level from time to time.
Furthermore, and notwithstanding anything to the
contrary contained elsewhere in this Agreement, in
the event that Borrower fails to timely provide a
Liquidity Report or an accurate Liquidity Report
in accordance with this Agreement within five (5)
days after being given written notice from Agent
to do so, then for all purposes of this Agreement,
the Liquidity Level as of the applicable date
shall be deemed to be the Liquidity Level, as
reasonably determined by Agent in good faith,
specified in a written notice to Borrower and
Shareholders.
iii. Representations and Warranties of Shareholders. In connection with
this Agreement, Shareholders hereby jointly and severally represent
and warrant to Agent and the Banks as follows, provided, however,
that any representation or warranty contained in this Paragraph 3
made as to a particular Shareholder shall be deemed made in this
Agreement only by such Shareholder:
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 9
(i) NL Industries is the sole shareholder of Kronos
and Kronos is the sole shareholder of Borrower,
and Shareholders have received and will continue
to receive a direct and indirect material benefit
from the making of this Agreement, the Loans and
the transactions evidenced by and contemplated in
the Loan Agreement and the other Loan Documents;
this Agreement is given by Shareholders in
furtherance of the direct and indirect business
interests and corporate purposes of Shareholders,
and is necessary to the conduct, promotion and
attainment of the business of Shareholders; and
the value of the consideration received and to be
received by Shareholders pursuant to the Loan
Agreement is reasonably worth at least as much as
the liability and obligation of Shareholders under
this Agreement;
(ii) Each Shareholder is a corporation duly organized,
validly existing and in good standing under the
laws of the jurisdiction of its incorporation and
has the corporate power and authority to execute,
deliver and perform its obligations under this
Agreement. The execution, delivery and performance
by each Shareholder of this Agreement have been
duly authorized by all requisite action on the
part of each Shareholder and do not and will not
violate or conflict with the articles of
incorporation or bylaws of either Shareholder or
any law, rule or regulation or any order, writ,
injunction or decree of any court, governmental
authority or arbitrator to which such Shareholder
is subject and do not and will not result in the
creation or imposition of any Lien upon any of the
revenues or assets of either Shareholder. The
execution and delivery of this Agreement and the
performance of and compliance with the terms of
this Agreement will not conflict with, constitute
a default (or an event which with notice or lapse
of time or both would constitute a default) under,
or result in the breach of, any material contract,
agreement or other instrument to which any
Shareholder is a party or which may be applicable
to any Shareholder or any of its assets;
(iii) This Agreement, when executed and delivered by
each Shareholder and Borrower, will constitute the
joint and several and valid, legal and binding
obligation of each Shareholder enforceable in
accordance with its terms, except to the extent
that enforcement may be limited by
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 10
bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of
creditors' rights generally and by principles of
equity;
(iv) As of the date of this Agreement, and after giving
effect to this Agreement and the contingent
obligations evidenced by this Agreement, each
Shareholder is not, and will not be, insolvent (as
such term is used or defined in all applicable
bankruptcy, fraudulent transfer, insolvency,
fraudulent conveyance and similar laws), and each
Shareholder has and will have assets which, fairly
valued, exceed its indebtedness, liabilities and
obligations;
(v) All corporate acts and conditions required to be
performed and satisfied prior to the execution and
delivery of this Agreement, and to constitute this
Agreement as the valid, binding and enforceable
obligation of each Shareholder in accordance with
its terms, except to the extent that enforcement
may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights
generally and by principles of equity, have been
performed and satisfied in accordance with all
applicable laws;
(vi) Each Shareholder is familiar with, and has
independently reviewed books and records
regarding, the financial condition of Borrower and
is familiar with the value of any and all
Collateral and other collateral and security
intended to secure or to be created to secure the
Loans; however, each of Shareholders is not
relying on such financial condition or such
Collateral, collateral or security as an
inducement to enter into this Agreement; and
(vii) Except for the execution of the Loan Agreement by
Agent and Majority Banks, neither Agent, any of
the Banks nor any other Person has made any
representation, warranty or statement to, or
promise, covenant or agreement with, any
Shareholder in order to induce Shareholders to
execute this Agreement.
iv. Representations and Warranties of Borrower. In connection with this
Agreement, Borrower hereby represents and warrants to Shareholders,
Agent and the Banks as follows:
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 11
(i) Borrower is a corporation duly organized, validly
existing and in good standing under the laws of
the jurisdiction of its incorporation, has all
requisite corporate power and authority to own its
assets and carry on its business as now being or
as proposed to be conducted, and has the corporate
power and authority to execute, deliver and
perform its obligations under this Agreement;
(ii) The execution, delivery and performance by
Borrower of this Agreement have been duly
authorized by all requisite action on the part of
Borrower and do not and will not violate or
conflict with the articles of incorporation or
bylaws of Borrower or any law, rule or regulation
or any order, writ, injunction or decree of any
court, governmental authority or arbitrator to
which Borrower is subject, and do not and will not
result in the creation or imposition of any lien
upon any of the revenues or assets of Borrower.
The execution and delivery of this Agreement and
the performance of and compliance with the terms
of this Agreement will not conflict with,
constitute a default (or an event which with
notice or lapse of time or both would constitute a
default) under, or result in the breach of, any
material contract, agreement or other instrument
to which Borrower is a party or which may be
applicable to Borrower or any of its assets;
(iii) This Agreement, when executed and delivered by
each Shareholder and Borrower, will constitute the
valid, legal and binding obligation of Borrower
enforceable in accordance with its terms, except
to the extent that enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting the enforcement of
creditors' rights generally and by principles of
equity; and
(iv) All corporate acts and conditions required to be
performed and satisfied prior to the execution and
delivery of this Agreement, and to constitute this
Agreement as the valid, binding and enforceable
obligation of Borrower in accordance with its
terms, except to the extent that enforcement may
be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights
generally and by
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 12
principles of equity, have been performed and
satisfied in accordance with all applicable laws.
v. Cumulative Remedies; No Election. The rights of Agent and the Banks
under this Agreement shall be cumulative of any and all other rights
that Agent and the Banks may ever have against any Shareholder or
Borrower or arising under the Loan Documents, or at law or in
equity. The exercise by Agent or any Bank of any right or remedy
under this Agreement or under any other Loan Document, or at law or
in equity, shall not preclude the concurrent or subsequent exercise
of any other right or remedy. This Agreement may be enforced from
time to time as often as occasion therefor may arise, and it is
agreed that it shall not be necessary for Agent or any Bank, in
order to enforce the provisions of this Agreement, first to exercise
any rights against Borrower, any Shareholder or any other Person or
institute suit or to exhaust any available remedies against security
in its possession or under its control, or to resort to any other
sources or means of obtaining payment of the Loans. The obligations
and duties of Shareholders under this Agreement are independent of
the obligations and duties of Borrower under the Loan Agreement or
this Agreement, and a separate action or actions may be brought and
prosecuted against Shareholders or either of them, on a joint and
several basis, whether or not action is brought against Borrower or
any other Person obligated in respect of the Loan and whether or not
Borrower is joined in any such action or actions. In furtherance and
not in limitation of the foregoing, the obligations and duties of NL
Industries under this Agreement are independent of the obligations
and duties of NL Industries under the NL Guaranty, payments made by
NL Industries under the terms of this Agreement will not be credited
against payments made or required to be made under the NL Guaranty,
payments made by NL Industries under the NL Guaranty will not be
credited against payments made or required to be made hereunder and
the rights of Agent and the Banks under this Agreement are
cumulative of all rights Agent and the Banks may have against NL
Industries under the NL Guaranty.
vi. Binding Effect. This Agreement is for the benefit of Borrower, Agent
and the Banks, and their successors and assigns, and in the event of
an assignment by Agent or any Bank, its successors or assigns, of
the Loans, or any part of the Loans, the rights and benefits under
this Agreement, to the extent applicable to the indebtedness,
liabilities and obligations so assigned, may be transferred with
such indebtedness, liabilities and obligations. This Agreement is
binding, not only upon Shareholders and Borrower, but upon their
respective successors and assigns; provided that neither Borrower
nor any Shareholder may assign any of its rights or obligations
hereunder without the prior written consent of the Majority Banks.
vii. Right of Setoff. With respect to all obligations of Shareholders
hereunder owed to Agent or the Banks, each Shareholder hereby grants
to Agent and the Banks a right of setoff upon any and all monies,
securities or other property of
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 13
such Shareholder, and the proceeds therefrom, now or hereafter held
or received by or in transit to Agent or any Bank from or for the
account of such Shareholder, whether for safekeeping, custody,
pledge, transmission, collection or otherwise, and also upon any and
all deposits (general or special) and credits of such Shareholder,
and any and all claims of such Shareholder against Agent or any
Banks at any time existing.
viii. Further Assurances. Upon the reasonable request of Agent, each
Shareholder will, at any time and from time to time, duly execute
and deliver to Agent any and all such further agreements, documents
and instruments, and supply such additional information, as may be
necessary or advisable, in the reasonable opinion of Agent, to
obtain the full benefits of this Agreement, provided, however, that
delivery of such additional information is subject to receipt of an
executed Confidentiality Agreement with respect to confidential
information of any Shareholder or any Person Controlled directly or
indirectly by such Shareholder.
ix. Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be
fully severable, this Agreement shall be construed and enforced as
if such illegal, invalid or unenforceable provision had never
comprised a part of this Agreement, and the remaining provisions of
this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by
its severance from this Agreement. Furthermore, in lieu of such
illegal, invalid or unenforceable provision there shall be added
automatically as a part of this Agreement a provision as similar in
terms to such illegal, invalid or unenforceable provision as may be
possible and be legal, valid and enforceable.
x. Modification in Writing. No modification, consent, amendment or
waiver of any provision of this Agreement, and no consent to any
departure by any Shareholder or Borrower from the terms of this
Agreement, shall be effective unless the same shall be in writing
and signed by the Majority Banks and then shall be effective only in
the specific instance and for the specific purpose for which given;
provided that no amendment, waiver or other modification of, or
consent to any departure from, the provisions of Paragraph 2 of this
Agreement or this Paragraph 10 shall be effective unless the same
shall be in writing and signed by Banks who hold at least 80%
(eighty percent) of the aggregate unpaid principal amount of the
Loans.
xi. No Waiver, Etc. No notice to or demand on any Shareholder in any
case shall, of itself, entitle any Shareholder to any other or
further notice or demand in similar or other circumstances. No delay
or omission by Agent or any Bank in exercising any power or right
under this Agreement shall impair any such power or right or be
construed as a waiver thereof or any acquiescence therein, and no
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 14
single or partial exercise of any such power or right shall preclude
other or further exercise thereof or the exercise of any other power
or right under this Agreement.
xii. Expenses. If any Shareholder or Borrower should breach or fail to
perform any provision of this Agreement, Shareholders agree to pay
to Agent all reasonable costs and expenses (including court costs
and reasonable attorneys' fees of outside counsel) incurred by Agent
in the enforcement of this Agreement.
xiii. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE INTERNAL LAWS OF THE STATE OF NEW YORK.
xiv. Notices. Unless otherwise specifically provided in this Agreement,
any notice or other communication required or permitted to be given
under this Agreement shall be in writing and may be personally
served, telefaxed, telecopied, telexed or sent by courier service or
first class prepaid mail (airmail if to an address in a foreign
country from the party writing) and shall be deemed to have been
given when delivered in person or by courier service, upon
transmission of a telefax, telecopy or telex or four (4) days after
deposit in the mail (registered, with postage prepaid and properly
addressed). For the purposes of this Agreement, the addresses of
Borrower, Shareholders and Agent (until fifteen (15) days' prior
written notice of a change thereof is delivered as provided in this
Paragraph 14 ) shall be as set forth below on the signature pages
hereof in the case of Shareholders and Agent and as set forth in the
Loan Agreement in the case of Borrower.
xv. NO ORAL AGREEMENTS. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT
AMONG SHAREHOLDERS, BORROWER AND AGENT AND THE BANKS RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF
SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN OR
AMONG SUCH PARTIES.
xvi. Joint and Several Obligations, Etc. Except for certain
representations and warranties made by only one of Shareholders
pursuant to Paragraph 3 of this Agreement, all obligations,
covenants, agreements, representations and warranties under this
Agreement or contained in this Agreement shall constitute and be the
joint and several obligations, covenants, agreements,
representations and warranties of each Shareholder; provided
however, that in no event shall the amount of Capital Contributions
or Subordinated Loans made pursuant to this Agreement by
Shareholders exceed individually or in the aggregate DM 125,000,000
(Deutsche Mark One Hundred Twenty-Five Million).
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 15
xvii. Survival. All representations, warranties, covenants and agreements
of any Shareholder or Borrower in this Agreement shall survive the
execution of this Agreement.
xviii.Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of
which when taken together shall constitute one and the same
Agreement.
xix. CONSENT TO JURISDICTION, VENUE. EACH SHAREHOLDER REPRESENTS AND
WARRANTS THAT IT IS NOT ENTITLED TO IMMUNITY FROM JUDICIAL
PROCEEDINGS AND AGREES THAT, SHOULD AGENT OR ANY BANK BRING ANY
SUIT, ACTION OR PROCEEDING IN ANY JURISDICTION DESCRIBED BELOW TO
ENFORCE ANY OBLIGATION OR LIABILITY OF SUCH SHAREHOLDER UNDER THIS
AGREEMENT NO IMMUNITY FROM SUCH SUIT, ACTION OR PROCEEDING WILL BE
CLAIMED BY OR ON BEHALF OF SUCH SHAREHOLDER OR WITH RESPECT TO ITS
PROPERTY. EACH SHAREHOLDER IRREVOCABLY SUBMITS TO THE JURISDICTION
OF ANY FEDERAL OR STATE COURT SITTING IN THE CITY OF NEW YORK, STATE
OF NEW YORK, OR IN THE CITY OF HOUSTON, STATE OF TEXAS, OR IN THE
CITY OF DALLAS, STATE OF TEXAS, OVER ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH SHAREHOLDER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR MAY HEREAFTER HAVE TO THE LAYING OF
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH
SHAREHOLDER AGREES THAT A FINAL AND NON-APPEALABLE JUDGMENT IN ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT SHALL BE
CONCLUSIVE AND BINDING UPON SUCH SHAREHOLDER AND MAY BE ENFORCED IN
ANY OTHER COURTS TO THE JURISDICTION OF WHICH SUCH SHAREHOLDER IS
SUBJECT BY A SUIT UPON SUCH JUDGMENT, PROVIDED THAT SERVICE OF
PROCESS IS EFFECTED UPON SUCH SHAREHOLDER IN ONE OF THE MANNERS
SPECIFIED IN PARAGRAPH 21 BELOW OR AS OTHERWISE PERMITTED BY LAW.
xx. Appointment of Agent. Each Shareholder hereby irrevocably designates
and appoints Prentice-Hall Corporation System, Inc., 15 Columbus
Circle, New York, NY 10023, as its authorized agent to accept and
acknowledge on its behalf service of any and all process which may
be served in any suit, action or proceeding of the nature referred
to in Paragraph 19 of this Agreement in any court
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 16
sitting in the City of New York, State of New York, in the City of
Houston, State of Texas, or in the City of Dallas, State of Texas,
respectively. Said designation and appointment shall be irrevocable.
If such agent for service shall cease so to act, each Shareholder
covenants and agrees that it shall irrevocably designate and appoint
without delay another such agent satisfactory to Agent and shall
deliver promptly to Agent evidence in writing of such other agent's
acceptance of such appointment.
xxi. Service of Process. Each Shareholder hereby consents to process
being served in any suit, action or proceeding of the nature
referred to in Paragraph 19 of this Agreement either (a) by the
mailing of a copy thereof by registered mail (registered airmail if
addressed to a location in a country other than the country of
mailing), postage prepaid, return receipt requested, to the address
for such Shareholder set forth below such Shareholder's name on the
signature pages hereof or to any other address of which such
Shareholder shall have given written notice to Agent pursuant to
Paragraph 14 of this Agreement or (b) by serving a copy thereof upon
Prentice-Hall Corporation System, Inc. at its appropriate address
set forth in Paragraph 20 of this Agreement, as such Shareholder's
agent for service of process (provided that, to the extent lawful
and possible, written notice of said service upon said agent of such
Shareholder may be mailed by registered mail (registered airmail if
addressed to a location in a country other than the country of
mailing), postage prepaid, return receipt requested, to such
Shareholder at its address specified above or to any other address
of which such Shareholder shall have given written notice to Agent).
Each Shareholder irrevocably waives, to the fullest extent permitted
by law, all claim of error by reason of any such service and agrees
that such service (i) shall be deemed in every respect effective
service of process upon such Shareholder in any such suit, action or
proceeding and (ii) shall, to the fullest extent permitted by law,
be taken and held to be valid personal service upon and personal
delivery to such Shareholder.
xxii. No Limitation on Service or Suit. Nothing in Paragraphs 19, 20 or 21
of this Agreement shall (a) affect the right of Agent or any Bank to
serve process in any manner permitted by law or (b) limit the right
of Agent or any Bank or other holder to bring proceedings against
any Shareholder in the courts of any other jurisdiction.
xxiii.Financial Reporting. So long as this Agreement remains in effect,
Shareholders agree that they will deliver to Agent, in sufficient
copies for distribution to all Banks, the following financial
information:
(i) As soon as the same become available, but in any
event within 120 (one hundred twenty) days after
the end of the fiscal year, the audited
consolidated financial statements and
consolidating financial statements (which
consolidating
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 17
financial statements are not separately reported
on by independent public accountants) of NL
Industries and its subsidiaries for such fiscal
year and the consolidating financial statements
(not separately reported on by independent public
accountants) of Kronos and its subsidiaries for
such fiscal year; each presented in conformity
with U.S. GAAP with changes in accounting
principles, if any, from the prior fiscal year,
specified in the certificates described below,
together with certificates executed by a Vice
President of NL Industries, in form and substance
reasonably satisfactory to Agent, and otherwise
certifying that such financial statements have
been prepared in accordance with U.S. GAAP and
fairly present the financial condition and results
of operation of the Persons subject thereof.
(ii) Within 90 (ninety) days after the end of each
fiscal quarter (excluding the fourth quarter),
unaudited consolidated and consolidating financial
statements of NL Industries and its subsidiaries
and unaudited consolidating financial statements
of Kronos and its subsidiaries; each presented in
conformity with U.S. GAAP with changes in
accounting principles, if any, from the prior
fiscal year, specified in the certificates
described below, for each fiscal quarter
(excluding the fourth quarter), and certificates
executed by a Vice President of NL Industries, in
form and substance reasonably satisfactory to
Agent, and otherwise certifying that such
financial statements have been prepared in
accordance with U.S. GAAP and fairly present the
financial condition and results of operation of
the Persons subject thereof.
(iii) Promptly deliver notice thereof to Agent, upon the
commencement of any action or other proceedings by
or against any Shareholder under any bankruptcy,
insolvency or other similar law.
(iv) Upon request of Agent, furnish Agent with such
information about the business, assets and
financial condition of any Shareholder and/or any
other Persons Controlled directly or indirectly by
such Shareholder as Agent or any Bank may
reasonably request, provided, however, that
delivery of such information is subject to receipt
of an executed Confidentiality Agreement with
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 18
respect to confidential information of such
Shareholder or Person.
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 19
IN WITNESS WHEREOF, the undersigned have executed this Agreement effective
as of the date first written above.
NL INDUSTRIES, INC.
By: /s/ Susan E. Alderton
Name: Susan E. Alderton
Title: Vice President & Treasurer
By:
Name:
Title:
Address for Notices:
70 East 55th Street
New York, New York 10022
Attention: Ms. Susan E. Alderton
Telefax: 212-421-7209
KRONOS, INC.
By: /s/ Susan E. Alderton
Name: Susan E. Alderton
Title: Vice President & Treasurer
By:
Name:
Title:
Address for Notices:
c/o NL Industries, Inc.
70 East 55th Street
New York, New York 10022
Attention: Ms. Susan E. Alderton
Telefax: 212-421-7209
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 20
KRONOS INTERNATIONAL, INC.
By: /s/ E. Gaertner
Name: E. Gaertner
Title: President
By: /s/ V. Roth
Name: V. Roth
Title: Vice President & Controller
The undersigned has executed this Agreement solely for the purpose of
confirming receipt of this Agreement and reliance on this Agreement by Agent and
Banks effective as of the date first written above.
HYPOBANK INTERNATIONAL S.A.
By: /s/ Michael Bisch
Name: Michael Bisch
Title: Charge de Service
By:
Name:
Title:
Address for Notices:
4, rue Alphonse Weicker
L-2721 Luxembourg-Kirchberg
Attention: Michael Bisch
Telefax: (011) 352-4272-4510
SECOND AMENDED AND RESTATED LIQUIDITY UNDERTAKING - Page 21
EXHIBIT 10.5
GUARANTY
THIS GUARANTY (the "Guaranty"), dated as of January 31, 1997, is made by
NL INDUSTRIES, INC., a Delaware corporation (the "Guarantor"), in favor of
HYPOBANK INTERNATIONAL S.A. (the "Agent"), as agent for all the Banks listed on
Schedule 1 to the Loan Agreement (as hereinafter defined) and their successors
and assigns (collectively, with the Agent, the "Banks"). Capitalized terms used
herein, unless otherwise defined, shall have the meanings set forth in the Loan
Agreement.
W I T N E S S E T H:
WHEREAS, Kronos International, Inc., a Delaware corporation (the
"Borrower"), Kronos Titan-GmbH ("Kronos Titan"), the Agent and the Banks are,
concurrently herewith, entering into that certain Second Amended and Restated
Loan Agreement dated as of January 31, 1997 (as the same may be amended or
supplemented from time to time, the "Loan Agreement"), which Loan Agreement
amends and restates that certain Amended and Restated Loan Agreement dated as of
October 15, 1993, among the Borrower, the Agent, Banque Paribas, as Co-Agent
(the "Co-Agent"), and the Banks (or their predecessors in interest) (the "First
Restated Agreement"), which First Restated Agreement amends and restates that
certain Loan Agreement dated as of May 30, 1990, among the Borrower, the Agent,
the Co-Agent and the Banks (or their predecessors in interest) as amended by
that certain (i) First Amendment Agreement dated as of December 31, 1990, (ii)
Second Amendment Agreement dated as of March 22, 1991 and (iii) Third Amendment
Agreement dated as of June 15, 1992 (the "Original Agreement"), pursuant to
which the Banks (or their predecessors in interest) initially loaned to the
Borrower the principal amount of DM 1,600,000,000 (Deutsche Mark One Billion Six
Hundred Million) (the aggregate of any and all amounts advanced by the Banks or
their predecessors in interest under the Loan Agreement, the First Restated
Agreement and/or the Original Agreement and outstanding at any time, including
without limitation any and all amounts outstanding under the Term Portion or the
Revolving Portion (as such terms are defined in the Loan Agreement), is
hereinafter called the "Loans"); and
WHEREAS, in order to induce the Banks to amend and restate the First
Restated Agreement, the Guarantor is required to guarantee the prompt payment
when due of all principal, interest and other amounts that shall be at any time
payable by the Borrower or any of its Subsidiaries under the Loan Documents on
the terms and conditions set forth in this Guaranty;
NOW THEREFORE, for and in consideration of the above, and any and all
financial accommodations or extensions of credit (including, without limitation,
any loan or advance by renewal, refinancing or extension of the agreements
described herein) heretofore, now or hereafter made to or for the benefit of the
Borrower and/or Kronos Titan by the Banks, the Guarantor hereto covenants and
agrees as follows:
1
ARTICLE I
The Guaranty
SECTION 1.1 The Guaranty. The Guarantor hereby unconditionally guarantees
to the Agent and the Banks and their respective successors and assigns the
punctual payment, as and when due (whether by acceleration or otherwise), of
(i) The principal amount of the Loans and all interest and
prepayment and other charges accruing thereunder;
(ii) All charges, payments, and other obligations of the Borrower
and/or Kronos Titan accruing under the Loan Agreement, the First Restated
Agreement and/or the Original Agreement; and
(iii) All charges, payments and other obligations of the Borrower,
Kronos Titan and/or any of the Subsidiaries of the Borrower accruing under this
Guaranty or any of the other Loan Documents (all of the foregoing, collectively,
the "Secured Indebtedness").
Upon failure by the Borrower, Kronos Titan and/or any of the Subsidiaries
of the Borrower to pay punctually any such amount, the Guarantor agrees that it
will forthwith on demand pay the amount not so paid at the place and in the
manner specified in the Loan Documents or as otherwise notified to the Guarantor
by the Agent.
SECTION 1.2 Guarantor's Obligation. The Guarantor agrees that its
liability hereunder shall be as a sole and primary obligor and not merely as
surety and that its liability is absolute and unconditional, and shall not be
subject to any right of set-off or counterclaim and shall remain in full force
and effect until the entire Secured Indebtedness shall have been paid in full.
SECTION 1.3 Waiver. The Guarantor hereby waives, to the fullest extent
permitted by law, notice of the acceptance hereof, diligence, presentment,
demand of payment or otherwise, and any right to require a proceeding first
against the Borrower, Kronos Titan and/or any other Person (including without
limitation any other Guarantor).
SECTION 1.4 No Effect or Impairment. The Guarantor hereby consents to and
agrees that its obligations under this Guaranty will not be discharged or
affected by: (i) any acceptance, forbearance or release in respect of the rights
of the Agent or the Banks or any subsequent holder under the Loan Agreement or
the Loan Documents, including, without limitation, any release of any of the
Collateral or any other guaranty of the Loans; (ii) any waiver or release of any
right or option of the Agent or the Banks or any subsequent holder under the
terms of the Loan Agreement or other Loan Documents, including, without
limitation, any release of any of the Collateral or any other guaranty of the
Loans; (iii) any modification, extension, renewal or amendment of the terms of
the Loan Agreement or other Loan Documents; (iv) the fact that the Loan
Agreement or any other Loan Documents shall be invalid, illegal or
unenforceable, in whole or in part, for any reason; (v) the receipt and
acceptance of notes, checks or other instruments for
2
the payment of money by the Borrower, Kronos Titan and/or any Subsidiary and
extensions and renewals thereof; or (vi) except as otherwise provided herein,
any other act or omission of any kind by the Agent or the Banks or any
subsequent holder or the Borrower or Kronos Titan or any other circumstance
whatsoever which might constitute a legal or equitable discharge of the
Guarantor, including, without limitation, the bankruptcy of the Borrower, Kronos
Titan and/or any Subsidiary.
SECTION 1.5 Payments. All payments provided for herein shall be made in
immediately available funds in Deutsche Mark ("DM"); provided, however, that
payments provided for herein shall be made in immediately available funds in
U.S. Dollars if and to the extent that the payment provided for herein relates
to an amount payable by the Borrower and/or Kronos Titan in U.S. Dollars. The
obligation of the Guarantor to make payment in DM of any amounts due hereunder
to the Agent shall not be discharged or satisfied by any tender, or any recovery
pursuant to any judgment, which is expressed in or converted into any currency
other than DM, except to the extent that such tender or recovery shall result in
the actual receipt by the Agent of the full amount of DM expressed to be due and
owing in respect of the principal amount of and interest accrued on the Loans
and in regard to the other parts of the Secured Indebtedness expressed in DM.
The Guarantor agrees that the obligations to make payments in DM as aforesaid
shall be enforceable as an alternative or additional cause of action for the
purpose of recovery in DM of the amount (if any) by which such actual receipt
shall fall short of the full amount of DM expressed to be payable in respect of
any amount due hereunder, and shall not be affected by any judgment being
obtained for other sums in any other currency in enforcement of this Guaranty.
SECTION 1.6 Net Payments. All payments by the Guarantor under this
Agreement shall be made without setoff or counterclaim and free and clear of,
and without withholding or deduction for or on account of, any present or future
taxes (other than Excluded Taxes) now or hereafter imposed on the recipient of
such payment or its income, property, assets or franchises, except to the extent
that such withholding or deduction is required by applicable law or is permitted
under the Loan Agreement.
If any such withholding or deduction is required by applicable law or is
permitted under the Loan Agreement, the Guarantor will:
(i) pay to the relevant tax authorities the full amount so required
to be withheld or deducted when and as the same shall become due and payable to
such tax authorities;
(ii) promptly forward to the Agent and each of the affected Banks an
official receipt or other documentation satisfactory to the Agent evidencing
such payment to such tax authorities; and
(iii) except to the extent that such withholding or deduction is for
Excluded Taxes or, under the terms of the Loan Agreement, for additional amounts
which are not payable or have been waived, pay to the Agent for the account of
the relevant recipient such additional amount as is necessary to ensure that the
net amount actually received by each recipient will equal
3
the full amount such recipient would have received had no such withholding or
deduction been required.
SECTION 1.7 Subrogation. The Guarantor shall not have any right to, and
will not, exercise any rights that it may acquire by way of subrogation under
this Guaranty (by any payment made hereunder or otherwise) until all the Secured
Indebtedness shall have been paid in full. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when all the Secured
Indebtedness shall not have been paid in full, such amount shall be held in
trust for the benefit of the Agent and the Banks and shall forthwith be paid to
the Agent to be credited and applied to the payment of the Secured Indebtedness,
whether matured or unmatured, in accordance with the terms of the Loan
Agreement. If (i) all the Secured Indebtedness shall be paid in full, the Agent
and the Banks will, at the Guarantor's request, execute and deliver to the
Guarantor appropriate documents, without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to the Guarantor of
an interest in the Secured Indebtedness resulting from such payment by the
Guarantor.
SECTION 1.8 Revival of Obligation. If, after the Agent's or the other
Banks' receipt of any payment from the Borrower of all or any part of the
amounts paid under this Guaranty, or after the Agent's or the other Banks'
collection of the proceeds from the sale of any Collateral or from the payment
under any other guaranty, the Agent or the Banks are petitioned or compelled to
return any such payment or proceeds, because such payment or proceeds is
invalidated, declared fraudulent, set aside, determined to be void or voidable
as a preference, an impermissible setoff, or for any reason whatsoever, then the
Borrower's obligations (and Kronos Titan's obligations, if applicable) shall be
deemed to be revived and this Guaranty shall continue in full force as if such
payment or proceeds had not been received by the Agent or the Banks until
payment in full is made by the Guarantor. In addition, the Guarantor agrees to
indemnify and hold the Agent and the Banks harmless from and against and for any
and all damages, losses, costs or expenses (including without limitation,
reasonable attorneys' fees) incurred by them in connection with such surrender
or return.
ARTICLE II
Jurisdiction and Service
SECTION 2.1 Consent to Jurisdiction, Venue. The Guarantor represents and
warrants that it is not entitled to immunity from judicial proceedings and
agrees that, should the Agent bring any suit, action or proceeding in the
jurisdiction described below to enforce any obligation or liability of the
Guarantor under this Guaranty, no immunity from such suit, action or proceeding
will be claimed by or on behalf of the Guarantor or with respect to its assets
or property. The Guarantor irrevocably submits to the jurisdiction of any
federal or state court sitting in the City of New York, State of New York, or in
the City of Dallas, State of Texas, over any suit, action or proceeding arising
out of or relating to this Guaranty. The Guarantor irrevocably waives, to the
fullest extent permitted by law, any objection which it has or may hereafter
have to the laying of the venue of any such suit, action or proceeding brought
in such court and any claim that any such suit, action or proceeding brought in
such court has been
4
brought in an inconvenient forum. The Guarantor agrees that final and
non-appealable judgment in any such suit, action or proceeding brought in such a
court shall be conclusive and binding upon the Guarantor and may be enforced in
any other courts to the jurisdiction of which the Guarantor is subject by a suit
upon such judgment, provided that service of process is effected upon the
Guarantor in one of the manners specified in Section 2.3 below or as otherwise
permitted by law.
SECTION 2.2 Appointment of Agent. The Guarantor hereby irrevocably
designates and appoints The Prentice-Hall Corporation System, Inc., c/o
Corporation Service Company, 500 Central Avenue, Albany, New York 12206, as its
authorized agent to accept and acknowledge on its behalf service of any and all
process which may be served in any suit, action or proceeding of the nature
referred to in Section 2.1 in any court sitting in The City of New York, State
of New York. Said designation and appointment shall be irrevocable until the
Secured Indebtedness shall have been paid in full. If such agent for service
shall cease so to act, the Guarantor covenants and agrees that it shall
irrevocably designate and appoint without delay another such agent satisfactory
to the Agent and shall deliver promptly to the Agent evidence in writing of such
other agent's acceptance of such appointment.
SECTION 2.3 Service of Process. The Guarantor hereby consents to process
being served in any suit, action or proceeding of the nature referred to in
Section 2.1 either (a) by the mailing of a copy thereof by registered mail
(registered airmail if addressed to a location in a country other than the
country of mailing), postage prepaid, return receipt requested, to the address
for the Guarantor set forth on the signature page hereof or to any other address
of which the Guarantor shall have given written notice to Agent or such holder
or (b) by serving a copy thereof upon The Prentice-Hall Corporation System,
Inc., c/o Corporation Service Company, 500 Central Avenue, Albany, New York
12206, as the Guarantor's agent for service of process (provided that, to the
extent lawful and possible, written notice of said service upon said agent of
the Guarantor shall be mailed by registered mail (registered airmail if
addressed to a location in a country other than the country of mailing), postage
prepaid, return receipt requested, to the Guarantor at its address specified
above or to any other address of which the Guarantor shall have given written
notice to the Agent. The Guarantor irrevocably waives, to the fullest extent
permitted by law, all claim of error by reason of any such service (but does not
waive any right to assert lack of subject matter jurisdiction) and agrees that
such service (i) shall be deemed in every respect effective service of process
upon the Guarantor in any such suit, action or proceeding and (ii) shall, to the
fullest extent permitted by law, be taken and held to be valid personal service
upon and personal delivery to the Guarantor.
SECTION 2.4 No Limitation on Service or Suit. Nothing in Sections 2.1, 2.2
or 2.3 above shall affect the right of the Agent to serve process in any manner
permitted by law or limit the right of the Agent or other holder to bring
proceedings against the Guarantor in the courts of any other jurisdiction.
5
ARTICLE III
General Conditions
SECTION 3.1 Survival. All covenants, agreements, representations and
warranties made by the Guarantor in this Guaranty and in any certificates or
other documents delivered pursuant hereto shall survive and shall continue in
full force and effect until the Secured Indebtedness is paid in full.
SECTION 3.2 Assignment. The Agent may assign any and all rights it has
hereunder, either in whole or in part; the Guarantor may not assign any of its
rights or indebtedness, liabilities or obligations under this Guaranty except as
may be permitted in the Loan Agreement.
SECTION 3.3 Communications and Notices. All communications and notices
provided for in this Guaranty shall be in English, shall be in writing and shall
be in accord with Article 26 of the Loan Agreement.
SECTION 3.4 Stay of Acceleration. If acceleration of the time for payment
of any amount payable by the Borrower, Kronos Titan and/or any of the
Subsidiaries of the Borrower under the Loan Documents is stayed upon the
insolvency, bankruptcy or reorganization of the Borrower, Kronos Titan and/or
any such Subsidiary, all such amounts otherwise subject to acceleration under
the terms of the Loan Documents shall nonetheless be payable by the Guarantor
hereunder forthwith on demand by the Agent.
SECTION 3.5 Limitation on Guarantor's Obligations. The indebtedness,
liabilities and obligations of the Guarantor hereunder shall be limited to an
aggregate amount equal to the largest amount that would not render its
indebtedness, liabilities and obligations hereunder subject to avoidance under
Section 548 of the Bankruptcy Code or any applicable provisions of comparable
state law.
SECTION 3.6 Governing Law. This Guaranty shall be construed in accordance
with, and governed by the laws of, the State of New York.
SECTION 3.7 Headings of Articles and Sections. The headings of the
Articles and Sections of this Guaranty are inserted for convenience only and
shall not be deemed to constitute a part of this Guaranty.
SECTION 3.8 Severability. In case one or more of the provisions contained
in this Guaranty shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 3.9 Execution in Counterparts. This Guaranty may be executed in
one or more counterparts, each of which when executed and delivered shall be an
original and all of which shall together constitute one and the same instrument.
6
SECTION 3.10 Entire Agreement. This Guaranty embodies the entire agreement
and understanding between the Agent and the Guarantor relating to the subject
matter hereof and supersedes all prior agreements and understandings relating to
the subject matter hereof.
SECTION 3.11 No Waivers. No waiver by any party of any conditions, or of
any breach of any term, covenant, representation or warranty contained in the
instruments evidencing the Loans, the Loan Agreement, this Guaranty, or any of
the other Loan Documents in any one or more instances, shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach or
waiver of any other condition or of any breach of any other term, covenant,
representation or warranty thereof; nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
SECTION 3.12 Changes, Waivers, Amendments and Modifications. Neither this
Guaranty nor any provision hereof may be modified or amended orally, but only by
a statement in writing entered into by the Guarantor and the Agent, provided
however, that no such agreement shall (i) affect the indebtedness, liabilities
and obligations of the Guarantor under Article I hereof or (ii) modify the
provisions of this Section 3.12, without the consent of the Banks in accordance
with the Loan Agreement.
SECTION 3.13 Definitions. Terms used but not defined herein shall have the
meanings provided for in the Loan Agreement unless otherwise expressly provided
or unless the context hereof otherwise requires.
SECTION 3.14 Costs and Expenses. The Guarantor covenants and agrees to
reimburse the Agent for all reasonable out-of-pocket costs and expenses,
including without limitation reasonable attorneys' fees and court costs,
incurred by the Agent in enforcing this Guaranty, and the Guarantor acknowledges
and agrees that all such sums to be so reimbursed by it to the Agent are part of
the Secured Indebtedness.
SECTION 3.15 Limitation of Special Damages. The Guarantor hereby releases
each of the Agent and all of the Banks from any liability for, and waives, and
agrees not to claim or sue for any special, indirect or consequential damages,
suffered by the undersigned, in connection with any claim (whether sounding in
tort, contract or otherwise) in any way arising out of, related to, or connected
with the Loan Documents, whether such claim is asserted before or after
repayment in full of all of the Borrower's and/or Kronos Titan's indebtedness,
liabilities and obligations. This waiver shall inure to the benefit of the Agent
and the Banks and their respective successors and assigns and shall be binding
on the Guarantor and its successors and assigns.
7
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be
duly executed as of the date first stated above.
NL INDUSTRIES, INC.
By: /s/ Susan E. Alderton
Name: Susan E. Alderton
Title: Vice President & Treasurr
Address: 16825 Northchase Drive, Suite 1200
Houston, Texas 77060
HYPOBANK INTERNATIONAL S.A.
By: /s/ Michael Bisch
Name: Michael Bisch
Title: Charge de Service
Address: 4, rue Alphonse Weicker
L-2721 Luxembourg-Kirchberg
8
EXHIBIT 10.12
CONFORMED COPY
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
January 30, 1997
between
RHEOX, INC.
THE SUBSIDIARY GUARANTORS PARTY HERETO,
and
THE LENDERS PARTY HERETO,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
BANKERS TRUST COMPANY,
as Documentation Agent
TABLE OF CONTENTS
Page
ARTICLE I
Definitions..................................................... 1
SECTION 1.01. Defined Terms......................... 1
SECTION 1.02. Classification of Loans and Borrowings 26
SECTION 1.03. Terms Generally....................... 27
SECTION 1.04. Accounting Terms; GAAP................ 27
ARTICLE II
The Credits..................................................... 27
SECTION 2.01. Commitments........................... 27
SECTION 2.02. Loans and Borrowings.................. 28
SECTION 2.03. Requests for Borrowings............... 29
SECTION 2.04. Letters of Credit..................... 29
SECTION 2.05. Funding of Borrowings................. 34
SECTION 2.06. Interest Elections.................... 35
SECTION 2.07. Termination and Reduction of
Commitments.......................... 36
SECTION 2.08. Repayment of Loans; Evidence of Debt.. 37
SECTION 2.09. Prepayment of Loans................... 38
SECTION 2.10. Fees.................................. 41
SECTION 2.11. Interest.............................. 43
SECTION 2.12. Alternate Rate of Interest............ 44
SECTION 2.13. Increased Costs....................... 44
SECTION 2.14. Break Funding Payments................ 45
SECTION 2.15. Taxes................................. 46
SECTION 2.16. Payments Generally; Pro Rata Treatment;
Sharing of Set-Offs.................. 47
SECTION 2.17. Mitigation Obligations................ 49
ARTICLE III
Guarantee by Subsidiary Guarantors.............................. 50
SECTION 3.01. The Guarantee......................... 50
SECTION 3.02. Obligations Unconditional............. 50
SECTION 3.03. Reinstatement......................... 51
SECTION 3.04. Subrogation........................... 52
SECTION 3.05. Remedies.............................. 52
SECTION 3.06. Instrument for the Payment of Money... 52
(i)
Page
SECTION 3.07. Continuing Guarantee.................. 52
SECTION 3.08. Rights of Contribution................ 52
SECTION 3.09. General Limitation on Guarantee
Obligations.......................... 53
ARTICLE IV
Representations and Warranties.................................. 54
SECTION 4.01. Organization; Powers.................. 54
SECTION 4.02. Authorization; Enforceability......... 54
SECTION 4.03. Governmental Approvals; No Conflicts.. 54
SECTION 4.04. Financial Condition; No Material
Adverse Change....................... 54
SECTION 4.05. Properties............................ 55
SECTION 4.06. Litigation and Environmental Matters.. 56
SECTION 4.07. Compliance with Laws and Agreements... 58
SECTION 4.08. Investment and Holding Company Status. 58
SECTION 4.09. Taxes................................. 58
SECTION 4.10. ERISA................................. 58
SECTION 4.11. Disclosure............................ 58
SECTION 4.12. Capitalization........................ 59
SECTION 4.13. Material Agreements and Liens......... 59
SECTION 4.14. Subsidiaries.......................... 59
SECTION 4.15. Certain Documents..................... 60
ARTICLE V
Conditions...................................................... 60
SECTION 5.01. Effective Date........................ 60
SECTION 5.02. Each Extension of Credit.............. 65
ARTICLE VI
Affirmative Covenants........................................... 66
SECTION 6.01. Financial Statements and Other
Information.......................... 66
SECTION 6.02. Notices of Material Events............ 68
SECTION 6.03. Existence; Conduct of Business........ 68
SECTION 6.04. Payment of Obligations................ 69
SECTION 6.05. Maintenance of Properties............. 69
SECTION 6.06. Maintenance of Insurance.............. 69
SECTION 6.07. Books and Records; Inspection Rights.. 72
SECTION 6.08. Fiscal Year........................... 72
(ii)
Page
SECTION 6.09. Compliance with Laws.................. 72
SECTION 6.10. Use of Proceeds....................... 72
SECTION 6.11. Hedging Agreements.................... 72
SECTION 6.12. Certain Obligations Respecting
Subsidiaries and Collateral Security. 73
SECTION 6.13. Environmental Laws and Permits........ 74
SECTION 6.14. Environmental Notices................. 74
SECTION 6.15. Environmental Audit and Remedial
Action............................... 75
ARTICLE VII
Negative Covenants.............................................. 75
SECTION 7.01. Indebtedness.......................... 75
SECTION 7.02. Liens................................. 76
SECTION 7.03. Fundamental Changes................... 77
SECTION 7.04. Investments, Loans, Advances, Guarantees
and Acquisitions; Hedging Agreements. 78
SECTION 7.05. Restricted Payments................... 79
SECTION 7.06. Transactions with Affiliates.......... 79
SECTION 7.07. Restrictive Agreements................ 80
SECTION 7.08. Certain Financial Covenants........... 80
SECTION 7.09. Lines of Business..................... 82
SECTION 7.10. Modifications of Certain Documents.... 82
SECTION 7.11. Rheox International................... 82
SECTION 7.12. Subordinated Notes.................... 82
ARTICLE VIII
Events of Default............................................... 83
ARTICLE IX
The Administrative Agent........................................ 86
ARTICLE X
Miscellaneous................................................... 89
SECTION 10.01. Notices.............................. 89
SECTION 10.02. Waivers; Amendments.................. 89
SECTION 10.03. Expenses; Indemnity; Damage Waiver... 91
(iii)
SECTION 10.04. Successors and Assigns............... 93
SECTION 10.05. Survival............................. 96
SECTION 10.06. Counterparts; Integration;
Effectiveness....................... 97
SECTION 10.07. Severability......................... 97
SECTION 10.08. Right of Setoff...................... 97
SECTION 10.09. Governing Law; Jurisdiction; Consent
to Service of Process............... 97
SECTION 10.10. WAIVER OF JURY TRIAL................. 98
SECTION 10.11. Headings............................. 98
SECTION 10.12. Confidentiality...................... 99
SCHEDULES:
Schedule 1.01 -- Ancillary Agreements
Schedule 2.01 -- Commitments
Schedule 2.04 -- Existing Letters of Credit
Schedule 4.05 -- Intellectual Property Matters
Schedule 4.06 -- Disclosed Matters
Schedule 4.13 -- Material Agreements and Liens
Schedule 4.14 -- Subsidiaries
Schedule 6.10 -- Indebtedness To Be Paid From Term Loan Proceeds
Schedule 7.01 -- Existing Indebtedness
Schedule 7.02 -- Existing Liens
Schedule 7.04 -- Investments
Schedule 7.07 -- Existing Restrictions
EXHIBITS:
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Opinion of Counsel to the Credit Parties and NL
Exhibit C -- Form of Opinion of Special Counsel
Exhibit D -- Form of Security Agreement
Exhibit E -- Form of NL Pledge Agreement
Exhibit F -- Form of Mortgage
Exhibit G -- Form of Conditional Assignment of and Security Interest in
Patent Rights
Exhibit H -- Form of Conditional Assignment of and Security Interest in
Trademark Rights
Exhibit I -- Form of Copyright Security Agreement
(iv)
AMENDED AND RESTATED CREDIT AGREEMENT dated as of January 30, 1997
between RHEOX, INC., the SUBSIDIARY GUARANTORS party hereto, the LENDERS party
hereto and THE CHASE MANHATTAN BANK, as Administrative Agent.
WHEREAS, the Borrower, the Subsidiary Guarantors, certain of the
Lenders (the "Existing Lenders") and the Administrative Agent are party to a
Credit Agreement dated as of March 20, 1991 (as heretofore modified and
supplemented and in effect on the date hereof immediately before giving effect
to the amendment and restatement contemplated hereby, the "Existing Credit
Agreement"). Pursuant to the Existing Credit Agreement (a) certain of the
Existing Lenders committed to make Revolving Credit Loans (as defined in the
Existing Credit Agreement and referred to herein as "Existing Revolving Credit
Loans") in an original aggregate principal amount not exceeding $15,000,000 at
any one time outstanding (the "Existing Revolving Credit Commitments"), with a
portion of such commitments made available for the issuance of letters of credit
in an aggregate amount not exceeding $5,000,000 at any one time outstanding and
(b) certain of the Existing Lenders committed to make Term Loans (as defined in
the Existing Credit Agreement and referred to herein as "Existing Term Loans")
to the Borrower in an original aggregate principal amount not exceeding
$115,000,000 (the "Existing Term Loan Commitments");
WHEREAS, the Borrower has requested that the Existing Lenders (which
include all of the Persons that on the date hereof are Banks under, and as
defined in, the Existing Credit Agreement) and the Administrative Agent agree to
amend and restate the Existing Credit Agreement, and the Existing Lenders and
the Administrative Agent are willing to amend and restate the Existing Credit
Agreement, in order to, among other things, (a) increase the aggregate amount of
the Existing Revolving Credit Commitments to $25,000,000, redesignate the
Existing Revolving Credit Commitments as "Revolving Credit Commitments"
hereunder and decrease the amount thereof available for Letters of Credit to
$2,500,000 and (b) reinstate the Existing Term Loan Commitments, increase the
aggregate amount thereof to $125,000,000 and redesignate the Existing Term Loan
Commitments as "Term Loan Commitments" hereunder;
NOW, THEREFORE, the parties hereto hereby agree that the Existing
Credit Agreement shall be amended and restated as of the date hereof (but
subject to Section 5.01) to read in its entirety as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms have the meanings specified below:
Credit Agreement
- 2 -
"Acquisition" means any transaction, or any series of related
transactions, consummated after the date hereof, by which (a) the Borrower
and/or any of its Subsidiaries acquires the business of or all or substantially
all of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (b) any Person that was not
theretofore a Subsidiary of the Borrower becomes a Subsidiary of the Borrower;
provided however, the foregoing clauses (a) and (b) shall not include (i) any
transaction between the Borrower and any direct or indirect Wholly Owned
Subsidiary or between one or more direct or indirect Wholly Owned Subsidiaries,
or (ii) the organization of a newly formed Wholly Owned Subsidiary of the
Borrower.
"Adjusted Base Rate" means, for any day, a rate per annum equal to
the greater of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. Any change in the Adjusted Base Rate due to a change in
the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime
Rate, Base CD Rate or the Federal Funds Effective Rate, respectively.
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means The Chase Manhattan Bank in its capacity
as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire
in a form supplied by the Administrative Agent.
"Affiliate" means, with respect to a specified Person, another Person
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified. For purposes
of this definition, a Person shall be deemed to be an Affiliate of the Person
specified if such Person possesses, directly or indirectly, the power to vote
10% or more of the securities having ordinary voting power for the election of
directors of the Person specified. Notwithstanding anything in this definition
to the contrary, (a) the Borrower and its Subsidiaries shall not be Affiliates
of each other and (b) none of the Administrative Agent, the Lenders or the LC
Issuing Lender shall be an Affiliate of the Borrower or any of its Subsidiaries.
"Ancillary Agreements" means the Tax Sharing Agreement and each of
the other documents listed on Schedule 1.01.
"Applicable Percentage" means (a) with respect to any Revolving
Credit Lender for purposes of Section 2.04 and any related definitions, the
percentage of the total Revolving
Credit Agreement
- 3 -
Credit Commitments represented by such Lender's Revolving Credit Commitment and
(b) with respect to any Lender in respect of any indemnity claim under Section
10.03(b) or 10.03(c) arising out of an action or omission of the Administrative
Agent under any Loan Document, the percentage of the total Commitments of all
Classes hereunder represented by the aggregate amount of such Lender's
Commitment of all Classes hereunder.
"Applicable Rate" means, for Loans of any Type and commitment fees
for each Rate Period (as defined below), the respective rate per annum indicated
below for Loans of such Type or commitment fees, as applicable, opposite the
applicable Leverage Ratio indicated below for such Rate Period:
=========================================================================
Applicable Rate
---------------
Range
of Base Rate Eurodollar Commitment
Leverage Ratio Loans Loans Fee
- -------------------------------------------------------------------------
Greater than to 3.00 to 1 0.750% 1.750% 0.500%
- -------------------------------------------------------------------------
Greater than 2.00 to 1
but less than or equal to
3.00 to 1 0.500% 1.500% 0.500%
- -------------------------------------------------------------------------
Greater than 1.50 to 1
but less than or equal to
2.00 to 1 0.250% 1.250% 0.375%
- -------------------------------------------------------------------------
Greater than 1.00 to 1
but less than or equal to
1.50 to 1 0.000% 1.000% 0.375%
- -------------------------------------------------------------------------
Less than or equal to 1.00 to 1 0.000% 0.750% 0.375%
=========================================================================
For purposes hereof, (i) a "Rate Period" means (x) initially, the
period commencing on the date hereof to but not including the first Rate Reset
Date (as defined below) thereafter and (y) thereafter, the period commencing on
a Rate Reset Date to but not including the immediately following Rate Reset Date
and (ii) a "Rate Reset Date" means, with respect to any fiscal quarters or
fiscal year, the earlier of (x) the third Business Day after the date on which
the Borrower delivers the Financial Certificate in respect of such fiscal
quarter or fiscal year, as the case may be, and (y) the date on which the
Borrower is required to have delivered the financial statements under Section
6.01(a) or (b) in respect of such fiscal quarter or fiscal year, as the case may
be.
The Leverage Ratio for any Rate Period shall be the Leverage Ratio
set forth in the applicable Financial Certificate as at the last day of the
fiscal quarter or fiscal year, as the
Credit Agreement
- 4 -
case may be, in respect of which such Financial Certificate is delivered (i.e.,
the Leverage Ratio for the Rate Period commencing on the date on which the
Borrower delivers its financial statements pursuant to Section 6.01(b) for the
fiscal quarter ended on September 30, 1997 shall be the Leverage Ratio as at
September 30, 1997, the Leverage Ratio for the Rate Period commencing on the
date on which the Borrower delivers its financial statements pursuant to Section
6.01(a) for the fiscal year ended on December 31, 1997 shall be the Leverage
Ratio as at December 31, 1997, and so forth).
Anything in this Agreement to the contrary notwithstanding, the
Applicable Rate shall be the highest rates provided for above (i) during any
period when an Event of Default shall have occurred and be continuing, or (ii)
if the applicable Financial Certificate shall not be delivered within the time
that the applicable financial statements are required to be delivered by Section
6.01(a) or (b), as the case may be, (but only, in the case of this clause (ii),
with respect to the portion of such Rate Period prior to the delivery of such
Financial Certificate).
"Assessment Rate" means, for any day, the annual assessment rate in
effect on such day that is payable by a member of the Bank Insurance Fund
classified as "well-capitalized" and within supervisory subgroup "B" (or a
comparable successor risk classification) within the meaning of 12 C.F.R. Part
327 (or any successor provision) to the Federal Deposit Insurance Corporation
for insurance by such Corporation of time deposits made in dollars at the
offices of such member in the United States; provided that if, as a result of
any change in any law, rule or regulation, it is no longer possible to determine
the Assessment Rate as aforesaid, then the Assessment Rate shall be such annual
rate as shall be determined by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 10.04), and accepted by the Administrative Agent,
in the form of Exhibit A or any other form approved by the Administrative Agent.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Base Rate", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted Base Rate.
"Basic Documents" means the Loan Documents and the Ancillary
Agreements.
"Board" means the Board of Governors of the Federal Reserve System of
the United States of America.
Credit Agreement
- 5 -
"Borrower" means Rheox, Inc., a Delaware corporation.
"Borrowing" means Loans of a particular Class of the same Type, made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect.
"Borrowing Request" means a request by the Borrower for a Borrowing
in accordance with Section 2.03.
"Business" means the development, licensing, manufacture and
distribution of rheological additives and related and/or similar specialty
chemical products and services from time to time, now or hereafter, conducted by
the Borrower and its Subsidiaries.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Eurodollar Loan,
the term "Business Day" shall also exclude any day on which banks are not open
for dealings in U.S. dollar deposits in the London interbank market.
"Capital Assets" means, as to any Person, all fixed assets, plant,
equipment, land (to the extent the same constitutes a capital asset of such
Person) and other assets (including intangible assets) of such Person that
constitute capital assets of such Person under GAAP.
"Capital Expenditures" means expenditures made by the Borrower or any
Subsidiary to acquire or construct Capital Assets, computed in accordance with
GAAP.
"Capital Lease Obligations" of any Person means the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Casualty Event" means, with respect to any property of any Person,
any loss of or damage to, or any condemnation or other taking of, such property
for which such Person or any of its Subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.
"Change in Law" means (a) the adoption of any law, rule or regulation
by any Governmental Authority after the date of this Agreement, (b) any change
in any law, rule or regulation or in the interpretation or application thereof
by any Governmental Authority after the date of this Agreement or (c) compliance
by any Lender or the LC Issuing Lender (or, for
Credit Agreement
- 6 -
purposes of Section 2.13(b), by any lending office of such Lender or by such
Lender's or the LC Issuing Lender's holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Chase" means The Chase Manhattan Bank, a New York banking
corporation.
"Class", when used in reference to any Loan, Borrowing or Commitment,
refers to whether such Loan, the Loans comprising such Borrowing or the Loans
that a Lender holding such Commitment is obligated to make, are Revolving Credit
Loans or Term Loans.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commitments" means the Revolving Credit Commitments and Term Loan
Commitments, as applicable.
"Conditional Assignment of and Security Interest in Patent Rights"
means an amended and restated Conditional Assignment of and Security Interest in
Patent Rights substantially in the form of Exhibit G between the Borrower and
the Administrative Agent.
"Conditional Assignment of and Security Interest in Trademark Rights"
means an amended and restated Conditional Assignment of and Security Interest in
Trademark Rights substantially in the form of Exhibit H between the Borrower and
the Administrative Agent.
"Consolidated Subsidiary" means, for any Person, each Subsidiary of
such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should be) consolidated with the
financial statements of such Person in accordance with GAAP.
"Control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
"Copyright Security Agreement" means an amended and restated
Copyright Security Agreement substantially in the form of Exhibit I between the
Borrower and the Administrative Agent.
"Credit Parties" means the Borrower and the Subsidiary Guarantors.
"Debt Service" means, for any period, the sum, for the Borrower and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with
Credit Agreement
- 7 -
GAAP), of the following: (a) all payments of principal of Indebtedness scheduled
(excluding any mandatory prepayment made pursuant to Section 2.09 hereof) to be
made during such period, plus (b) all Interest Expense for such period.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings and the
environmental matters disclosed in Schedule 4.06.
"Disposition" means any sale, assignment, transfer or other
disposition of any property (whether now owned or hereafter acquired) by the
Borrower or any Subsidiary to any other Person (other than the Borrower or a
Wholly Owned Subsidiary) excluding any sale, assignment, transfer or other
disposition of (a) any property sold or disposed of in the ordinary course of
business, (b) any obsolete or worn-out tools and equipment no longer used or
useful in the business of the Borrower and its Subsidiaries and (c) any
Collateral under and as defined in the Security Agreement pursuant to an
exercise of remedies by the Administrative Agent under Section 5.05 thereof.
"Disposition Investment" means, with respect to any Disposition, any
promissory notes or other evidences of indebtedness or investments received by
the Borrower or any Subsidiary in connection with such Disposition.
"Distributor Affiliate Credit Extensions" shall mean extensions of
credit by the Borrower and its Subsidiaries to Affiliates of the Borrower under
Ancillary Agreements to finance the sale and distribution by such Affiliates of
products of the Borrower and its Subsidiaries.
"Domestic Subsidiary" means any Subsidiary that is organized or
created under the laws of the United States of America, any State or Territory
thereof or the District of Columbia.
"EBITDA" means, for any period, operating income for the Borrower and
its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) for such period (calculated before income taxes, Interest
Expense, depreciation, amortization and any other non-cash charges accrued for
such period and (except to the extent received or paid in cash by the Borrower
or any Subsidiary) income or loss attributable to equity in Affiliates for such
period) excluding any extraordinary and unusual gains or losses during such
period and excluding the proceeds of any Casualty Events and Dispositions.
Notwithstanding the foregoing, if during any period for which EBITDA
is being determined the Borrower shall have consummated any Acquisition or
Disposition then,
Credit Agreement
- 8 -
for all purposes of this Agreement (other than for purposes of the definition of
Excess Cash Flow), EBITDA shall be determined on a pro forma basis as if such
Acquisition or Disposition had been made or consummated on the first day of such
period.
"Effective Date" means the date on which the conditions specified in
Section 5.01 are satisfied (or waived in accordance with Section 10.02).
"Enenco" means Enenco, Inc., a New York corporation that, on the date
hereof, is a joint venture between the Borrower and Witco Corporation.
"Environmental Claim" means, with respect to any Person, any written
notice, claim, demand or other communication by any other Person alleging or
asserting such Person's liability for investigatory costs, cleanup costs,
governmental response costs, damages to natural resources or other property,
personal injuries, fines or penalties arising out of, based on or resulting from
(a) the presence or Release into the environment, of any Hazardous Material at
any location, whether or not owned by such Person, or (b) circumstances forming
the basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of natural
resources, the management, release or threatened release of any Hazardous
Material or to health and safety matters.
"Environmental Liability" means any known or unknown liability,
contingent or otherwise (including any claim or liability for damages, costs of
environmental remediation, fines, penalties or indemnities), of the Borrower or
any Subsidiary directly or indirectly resulting from or based upon (a) violation
of or non-compliance with any Environmental Law, (b) the generation, use,
handling, transportation, storage, treatment or disposal of any Hazardous
Materials, (c) exposure to any Hazardous Materials, (d) the Release or
threatened Release of any Hazardous Materials into the environment or (e) any
contract, agreement or other consensual arrangement pursuant to which liability
is assumed or imposed with respect to any of the foregoing.
"Equity Issuance" shall mean the sale or issuance by the Borrower to
any Person other than NL or a Subsidiary of NL or by any Subsidiary to any
Person other than the Borrower or any of the Borrower's Wholly Owned
Subsidiaries of (a) any capital stock of the Borrower or any Subsidiary, (b) any
options or warrants exercisable in respect of such capital stock or (c) any
other security or instrument representing an equity interest (or the right to
obtain an equity interest) in the Borrower or any Subsidiary; provided however
the foregoing clauses (a), (b) and (c) shall not include the issuance of shares
by a Foreign Subsidiary to a nominee for the Borrower or any of the Borrower's
Wholly Owned
Credit Agreement
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Subsidiaries if such issuance is required under the applicable corporate laws of
the country in which such Foreign Subsidiary is organized.
"Equity Rights" means, with respect to any Person, any subscriptions,
options, warrants, commitments, preemptive rights or agreements of any kind
(including any stockholders' or voting trust agreements) for the issuance or
sale of, or securities convertible into, any additional shares of capital stock
of any class, or partnership or other ownership interests of any type in, such
Person.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived), (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived, (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan, (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan,
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan, (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan, or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" has the meaning assigned to such term in Article
VIII.
"Excess Cash Flow" means, for any period, the excess of (a) EBITDA
for such period over (b) the sum for the Borrower and its Subsidiaries
(determined on a consolidated
Credit Agreement
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basis without duplication in accordance with GAAP) of (i) Debt Service for such
period plus (ii) the aggregate amount of all Capital Expenditures made during
such period plus (iii) the aggregate amount paid in cash during such period in
respect of income taxes, including payments under the Tax Sharing Agreement,
plus (iv) any decrease in Working Investment for such Period minus (v) any
increase in Working Investment for such Period.
"Excluded Taxes" means, with respect to the Administrative Agent, any
Lender, the LC Issuing Lender or any other recipient of any payment to be made
by or on account of any obligation of the Borrower hereunder, (a) income, net
worth or franchise taxes imposed on (or measured by) its net income or net worth
by the United States of America, or by the jurisdiction under the laws of which
such recipient is organized or in which its principal office is located or, in
the case of any Lender, in which its applicable lending office is located, (b)
any branch profits taxes imposed by the United States of America and (c) in the
case of a Foreign Lender, any withholding tax that is imposed on amounts payable
to such Foreign Lender on the date such Foreign Lender becomes a party to this
Agreement (or, in the case of any Foreign Lender that is a party to the Existing
Credit Agreement, on the date hereof) or that is attributable to such Foreign
Lender's failure or inability to comply with Section 2.15(e), except to the
extent that such Foreign Lender's assignor (if any) was entitled, at the time of
assignment, to receive additional amounts from the Borrower with respect to such
withholding tax pursuant to Section 2.15(a).
"Existing Credit Agreement" has the meaning assigned to such term in
the first paragraph of this Agreement.
"Existing Mortgages" means (a) the Deed of Trust, Assignment of
Permits, Rents and Benefits, Security Agreement and Fixture Filing dated as of
June 5, 1992 by the Borrower, as trustor, in favor of Lawyers Title Insurance
Corporation, as trustee, for the benefit of the Administrative Agent recorded
with the County Recorder in the Official Records of Alameda County, California
as Instrument Number 92-184190; (b) the Deed of Trust, Mortgage, Security
Agreement (Personal Property Including Minerals, Mineral Interests and Products
thereof), Assignment of Benefits and Fixture Filing dated as of June 18, 1992 by
the Borrower, as trustor, in favor of Lawyers Title Insurance Corporation, as
trustee, for the benefit of the Administrative Agent recorded with the County
Recorder in the Official Records of San Bernardino County, California as
Instrument No. 91-228659; (c) the Deed of Trust, Assignment of Permits, Rents
and Benefits, Security Agreement and Fixture Filing dated as of June 5, 1992 by
the Borrower, as trustor, in favor of Kenneth R. Hill, as trustee, for the
benefit of the Administrative Agent recorded in the St. Louis City Records in
Book M919 Page 0651 as amended by Amendment to Deed of Trust dated as of June 5,
1992 recorded in the St. Louis City Records in Book M926 Page 2018; and (d) the
Deed of Trust, Assignment of Permits, Rents and Benefits, Security Agreement and
Fixture Filing dated as of June 5, 1992 by the Borrower, as trustor, in favor of
Charles E. Barnett, as trustee, for the benefit of the Administrative Agent
recorded in the Recorder's Office of Kanawha County, West Virginia in Book 2046,
Page 164.
Credit Agreement
- 11 -
"Fair Market Value" means, with respect to any property, the amount
that may be realized within a reasonable period of time from the sale of such
property at market value, such market value being the amount that could be
obtained for such property within such period by a capable and diligent seller
from an interested buyer willing to purchase under prevailing selling
conditions.
"Federal Funds Effective Rate" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100 of l%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Final Maturity Date" means January 30, 2004 or, if such day is not a
Business Day, the next preceding Business Day.
"Financial Certificate" has the meaning assigned to such term in
Section 6.01(c).
"Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Borrower, as the case may be.
"Fixed Charges Ratio" means, as at any date, the ratio of (a) EBITDA
for the period of four consecutive fiscal quarters ending on or most recently
ended prior to such date to (b) the sum for the Borrower and its Subsidiaries
(determined on a consolidated basis without duplication in accordance with
GAAP), of the following: (i) all Debt Service for such period (excluding the
principal amount of the Subordinated Intercompany Note payable at maturity to
the extent the same is extended, renewed or refinanced on substantially the same
terms) plus (ii) the aggregate amount paid in cash during such period in respect
of income taxes, including payments under the Tax Sharing Agreement, plus (iii)
Restricted Payments (other than payments of the Special Dividend) made during
such period. Notwithstanding the foregoing, payments or prepayments of principal
of the Subordinated Note shall not be deemed to increase or decrease the Fixed
Charges Ratio.
"Foreign Intellectual Property" means, collectively, all non-United
States copyrights, copyright registrations and applications for copyright
registrations, including all renewals and extensions thereof, the right to
recover for all past, present and future infringements thereof, and all other
rights of any kind whatsoever accruing thereunder or pertaining thereto, all
non-United States patents and patent applications, including the inventions and
improvements described and claimed therein together with the reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, all income,
Credit Agreement
- 12 -
royalties, damages and payments now or hereafter due and/or payable under and
with respect thereto, including damages and payments for past or future
infringements thereof, the right to sue for past, present and future
infringements thereof and all rights corresponding thereto throughout the world,
and all non-United States trade names, trademarks and service marks, logos,
trademark and service mark registrations, and applications for trademark and
service mark registrations, including all renewals of trademark and service mark
registrations, the right to recover for all past, present and future
infringements thereof, all other rights of any kind whatsoever accruing
thereunder or pertaining thereto, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized by, each
such trade name, trademark and service mark, in each case, now owned or
hereafter acquired by any of the Borrower or any Subsidiary, together with (a)
all inventions, processes, production methods, proprietary information, know-how
and trade secrets used or useful in the Business; (b) all licenses or other
agreements granted to the Borrower or any Subsidiary with respect to any of the
foregoing to the extent legally assignable, in each case whether now or
hereafter owned or used including the licenses and other agreements with respect
to the Foreign Intellectual Property; (c) all existing, from time to time,
information, customer lists, identification of suppliers, data, plans,
blueprints, specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards, processing
standards, performance standards, catalogs, computer and automatic machinery
software and programs (to the extent a security interest may be granted), and
the like pertaining to the operation by the Borrower or any of its Subsidiaries
of the Business; (d) all existing, from time to time, field repair data, sales
data and other information relating to sales or service of products now or
hereafter manufactured and which pertain to the Business; (e) all existing, from
time to time, accounting information which pertains to the Business and all
media in which or on which any of the information or knowledge or data or
records which pertain to the Business may be recorded or stored and all computer
programs used for the compilation or printout of such information, knowledge,
records or data; (f) all licenses, consents, permits, variances, certifications
and approvals of governmental agencies now or hereafter held by the Borrower or
any of its Subsidiaries pertaining to the operation, by the Borrower and its
Subsidiaries, of the Business; and (g) all causes of action, claims and
warranties now or hereafter owned or required by the Borrower or any Subsidiary
in respect of any of the items listed above.
"Foreign Lender" means any Lender that is organized under the laws of
a jurisdiction other than the United States of America, a State thereof or the
District of Columbia.
"Foreign Subsidiary" means any Subsidiary that is not a Domestic
Subsidiary.
"GAAP" means generally accepted accounting principles in the United
States of America.
Credit Agreement
- 13 -
"General Assignment" has the meaning assigned to that term in Section
1(e) of the Restructuring Agreement.
"Generator" means any Person whose act or process produces Hazardous
Materials or whose act first causes a Hazardous Material to become subject to
regulation.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" means a guarantee, an endorsement, a contingent agreement
to purchase or to furnish funds for the payment or maintenance of, or otherwise
to be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor's
obligations or an agreement to assure a creditor against loss, and including
causing a bank or other financial institution to issue a letter of credit or
other similar instrument for the benefit of another Person, but excluding
endorsements for collection or deposit in the ordinary course of business. The
terms "Guarantee" and "Guaranteed" used as a verb shall have a correlative
meaning.
"Guaranteed Obligations" has the meaning assigned to such term in
Section 3.01.
"Hazardous Materials" means all explosive or radioactive substances
or wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Inactive Subsidiary" means, as at any date, any Subsidiary which, as
at the end of and for the quarterly accounting period ending on or most recently
ended prior to such date, shall have less than $50,000 in assets and less than
$25,000 in gross revenues.
Credit Agreement
- 14 -
"Indebtedness" of any Person means, without duplication: (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind; (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments; (c) all obligations of such Person
under conditional sale or other title retention agreements relating to property
acquired by such Person; (d) all obligations of such Person in respect of the
deferred purchase price of property or services; (e) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed; (f) all Guarantees by such Person of Indebtedness of others; (g)
all Capital Lease Obligations of such Person; (h) all obligations, contingent or
otherwise, of such Person as an account party in respect of letters of credit
and letters of guaranty; (i) all obligations, contingent or otherwise, of such
Person in respect of bankers' acceptances[; and (j) in the case of the Borrower
or any Subsidiary, Indebtedness of Enenco, Inc. (but only to the extent that the
Borrower or such Subsidiary is obligated in respect of such Indebtedness under
any arrangement entered into primarily for the benefit of one or more
creditors)]. The Indebtedness of any Person shall include the Indebtedness of
any other Person (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's ownership interest in or other relationship with such other Person,
except to the extent the terms of such Indebtedness provide that such Person is
not liable therefor. Notwithstanding the foregoing, Indebtedness shall not
include (x) obligations under Hedging Agreements and (y) trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business so long as such trade accounts are payable within
180 days of the date the respective goods are delivered or the respective
services are rendered.
"Indemnified Taxes" means all Taxes other than (a) Excluded Taxes and
Other Taxes and (b) amounts constituting penalties or interest imposed with
respect to Excluded Taxes or Other Taxes.
"Intangible Assets" means the book value of all properties of any of
the Borrower and its Subsidiaries that would be treated as intangibles under
GAAP, including goodwill, patents, trademarks, service marks, trade names,
copyrights and organization, reorganization and developmental expense and any
write-up in the book value of the properties of the Borrower and its
Subsidiaries resulting from a revaluation thereof subsequent to December 31,
1996.
"Intercompany Note Subordination Agreement" means the Subordination
Agreement, satisfactory in form and substance to each of the Lenders, dated as
of January 30, 1997 between NL, Rheox Inc. and the Administrative Agent
providing for the subordination of the Subordinated Intercompany Note to the
Indebtedness of the Borrower hereunder.
Credit Agreement
- 15 -
"Interest Coverage Ratio" means, as at any date, the ratio of (a)
EBITDA for the period of four consecutive fiscal quarters ending on or most
recently ended prior to such date to (b) Interest Expense for such period.
"Interest Election Request" means a request by the Borrower to
convert or continue a Borrowing in accordance with Section 2.06.
"Interest Expense" means, for any period, the sum, for the Borrower
and its Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of all interest in respect of Indebtedness (including
imputed interest expense in respect of Capital Lease Obligations, if any) paid,
accrued or capitalized during such period.
Notwithstanding the foregoing, if during any period for which
Interest Expense is being determined the Borrower shall have consummated any
Acquisition or Disposition then, for all purposes of this Agreement (other than
for purposes of the definition of Excess Cash Flow), Interest Expense shall be
determined on a pro forma basis as if such Acquisition or Disposition (and any
Indebtedness incurred by the Borrower or any of its Subsidiaries in connection
with such Acquisition or repaid as a result of such Disposition) had been made
or consummated (and such Indebtedness incurred or repaid) on the first day of
such period.
"Interest Payment Date" means (a) with respect to any Base Rate Loan,
each Quarterly Date and (b) with respect to any Eurodollar Loan, the last
Business Day of the Interest Period applicable to the Borrowing of which such
Loan is a part and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months' duration, each Business Day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period.
"Interest Period" means with respect to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided, that (a) if any Interest Period
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (b) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Borrowing. Notwithstanding the foregoing,
Credit Agreement
- 16 -
(i) if any Interest Period for any Revolving Credit Borrowing
would otherwise end after the Final Maturity Date, such Interest Period
shall not be available hereunder,
(ii) no Interest Period for any Term Loan Borrowing may commence
before and end after any Principal Payment Date unless, after giving
effect thereto, the aggregate principal amount of the Term Loans having
Interest Periods that end after such Principal Payment Date shall be equal
to or less than the aggregate principal amount of the Term Loans scheduled
to be outstanding after giving effect to the payments of principal
required to be made on such Principal Payment Date, and
(iii) notwithstanding the foregoing clauses (i) and (ii), no Interest
Period shall have a duration of less than one month and, if the Interest
Period for any Eurodollar Loan would otherwise be a shorter period, such
Loan shall not be available hereunder as a Eurodollar Loan for such
period.
"Investment" means, for any Person, the acquisition of capital stock,
evidences of Indebtedness or other securities or ownership interests (including
any option, warrant or other right to acquire any of the foregoing) of any other
Person, or the making of any loans or advances to, Guarantee of any obligations
of, or extensions of credit to any other Person (other than in the ordinary
course of business with respect to purchase or sale of inventory, supplies,
product or services).
"LC Collateral Account" has the meaning assigned to such term in
Section 2.04(i).
"LC Disbursement" means a payment made by the LC Issuing Lender
pursuant to a Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate amount of all LC Disbursements that have not yet been reimbursed by or
on behalf of the Borrower at such time. The LC Exposure of any Revolving Credit
Lender at any time shall be its Applicable Percentage of the total LC Exposure
at such time.
"LC Issuing Lender" means The Chase Manhattan Bank, in its capacity
as the issuer of Letters of Credit hereunder.
"Lenders" means the Persons listed on Schedule 2.01 and any other
Person that shall have become a party hereto pursuant to an Assignment and
Acceptance, other than any such Person that ceases to be a party hereto pursuant
to an Assignment and Acceptance.
"Letter of Credit" means any letter of credit issued pursuant to this
Agreement.
Credit Agreement
- 17 -
"Leverage Ratio" means, as at any date, the ratio of (a) all
Indebtedness of the Borrower and its Subsidiaries (determined on a consolidated
basis without duplication in accordance with GAAP) on such date to (b) EBITDA
for the period of four consecutive fiscal quarters ending on or most recently
ended prior to such date.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to U.S. dollar deposits in the London interbank
market) at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for U.S. dollar deposits with
a maturity comparable to such Interest Period. In the event that such rate is
not available at such time for any reason, then the "LIBO Rate" with respect to
such Eurodollar Borrowing for such Interest Period shall be the rate at which
U.S. dollar deposits of $5,000,000, and for a maturity comparable to such
Interest Period, are offered by the principal London office of Chase in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, hypothecation, encumbrance, charge or security interest in,
on or of such asset, (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with respect to such
securities.
"Loan Documents" means this Agreement, any promissory notes
evidencing Loans hereunder and the Security Documents.
"Loans" means the loans made by the Lenders to the Borrower pursuant
to this Agreement.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, operations or condition, financial or otherwise, of the
Borrower and its Subsidiaries taken as a whole, (b) the ability of any Credit
Party to perform any of its obligations under this Agreement, the other Loan
Documents or the Tax Sharing Agreement or (c) the rights of or benefits
available to the Lenders under this Agreement or the other Loan Documents.
"Material Obligations" means Indebtedness (other than the Loans or
Letters of Credit and other than Indebtedness owed by the Borrower to a
Subsidiary or by a Subsidiary to the Borrower or a Subsidiary), or obligations
in respect of one or more Hedging Agreements, of any one or more of the Borrower
or any Subsidiary in an aggregate principal
Credit Agreement
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amount exceeding $2,000,000. For purposes of determining Material Obligations,
the "principal amount" of the obligations of any Person in respect of any
Hedging Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that such Person would be required to pay if
such Hedging Agreement were terminated at such time.
"Mortgage" means the Mortgage, Assignment of Rents, Security
Agreement and Fixture Filing executed by the Borrower, for the benefit of the
Administrative Agent substantially in the form of Exhibit F and covering the
leasehold interest of the Borrower located in Mercer county, New Jersey pursuant
to that certain lease dated as of August 17, 1994 between the Borrower, as
tenant, and ABCJ East Windsor Associates L.P., as landlord.
"Mortgage Amendments" means amendments to the Existing Mortgages
satisfactory to the Agent in form and substance.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Net Available Proceeds" means:
(a) in the case of any Disposition, the aggregate amount of all cash
payments received by the Borrower and its Subsidiaries directly or
indirectly in connection with such Disposition, whether at the time of
such Disposition or after such Disposition under deferred payment
arrangements or investments entered into or received in connection with
such Disposition (including Disposition Investments) net of (i) the amount
of any legal, title, transfer and recording tax expenses, commissions and
other fees and expenses payable by the Borrower and its Subsidiaries in
connection with such Disposition, (ii) any Federal, state and local income
or other taxes estimated to be payable by the Borrower and its
Subsidiaries as a result of such Disposition, but only to the extent that
such estimated taxes are in fact paid to the relevant Federal, state or
local governmental authority or to NL under the Tax Sharing Agreement
within twelve months of the date of such Disposition and (iii) any
repayments by the Borrower or any of its Subsidiaries of Indebtedness to
the extent that (x) such Indebtedness is secured by a Lien on the property
that is the subject of such Disposition and (y) the transferee of (or
holder of a Lien on) such property requires that such Indebtedness be
repaid as a condition to the purchase of such property;
(b) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Borrower and its Subsidiaries in respect of such Casualty Event net
of (i) reasonable expenses incurred by the Borrower and its Subsidiaries
in connection therewith and (ii) contractually required repayments of
Indebtedness to the extent secured by a Lien
Credit Agreement
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on such property and any income and transfer taxes payable by the Borrower
or any of its Subsidiaries in respect of such Casualty Event; and
(c) in the case of any Equity Issuance, the aggregate amount of all
cash received by the Borrower and its Subsidiaries in respect of such
Equity Issuance net of reasonable expenses incurred by the Borrower and
its Subsidiaries in connection therewith.
"NL" means NL Industries, Inc., a corporation organized under the
laws of New Jersey.
"NL Pledge Agreement" means an amended and restated Pledge Agreement
substantially in the form of Exhibit E between NL and the Administrative Agent.
"Note Subordination Agreement" means the Subordination Agreement
dated as of September 17, 1996 between NL, the Borrower and the Administrative
Agent providing for the subordination of the Subordinated Note to the
Indebtedness of the Borrower hereunder.
"Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution, delivery
or enforcement of, or otherwise with respect to, this Agreement and the other
Loan Documents (and any Uniform Commercial Code financing statements required by
any Security Document to be filed with respect to the security interests in
personal property and fixtures created pursuant to any Security Document) or any
amendments thereof or supplements thereto, provided that there shall be excluded
from "Other Taxes" all Excluded Taxes.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA and any successor entity performing similar functions.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) Investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, a
credit rating obtainable from Standard & Poor's Ratings Service of A-1 or
better or from Moody's Investors Service of P-1 or better;
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(c) Investments in certificates of deposit, banker's acceptances and
time deposits (including Euro-deposits) maturing within 180 days from the
date of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any office of any
commercial bank organized under the laws of the United States of America
or any State thereof, or under the laws of any other member state of the
Organization for Economic Cooperation and Development, which has a
combined capital and surplus and undivided profits of not less than
$500,000,000; and
(d) fully collateralized repurchase agreements with a term of not
more than 180 days for securities described in clause (a) above and
entered into with a financial institution satisfying the criteria
described in clause (c) above or with an investment bank organized under
the laws of the United States or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000.
"Permitted Liens" means:
(a) Liens imposed by law for taxes that are not yet due or are being
contested in compliance with Section 6.04;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30
days or are being contested in compliance with Section 6.04 and Liens
securing judgments but only to the extent for an amount and for a period
not resulting in an Event of Default under Article VIII(k);
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
(d) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary
course of business;
(e) easements, reservations, covenant restrictions, zoning
restrictions, rights-of-way and similar encumbrances or restrictions on
real property imposed by law or arising in the ordinary course of business
that do not materially detract from the value of the affected property or
materially interfere with the ordinary conduct of business of the Borrower
or any Subsidiary;
(f) Liens arising under workers' compensation laws, unemployment
insurance laws or similar legislation or progress payments under
government contracts, deposits
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as security for import duties; deposits to secure public or statutory
obligations of the Borrower or any of its Subsidiaries; and
(g) Liens incident to the conduct of, or the operation of property or
assets in the ordinary course of the Business and not securing obligations
in the aggregate amount exceeding $500,000 at any one time outstanding.
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by The Chase Manhattan Bank, as its prime rate in effect at
its principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Principal Payment Dates" means the (a) 25 consecutive Quarterly
Dates falling on or nearest to March 31, June 30, September 30 and December 31
of each year, commencing with the Quarterly Date in September of 1997 and (b)
the Final Maturity Date.
"Quarterly Dates" means the last Business Day of March, June,
September and December in each year, the first of which shall be the first such
day after the date of this Agreement.
"Register" has the meaning assigned to such term in Section 10.04.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Release" means any "release" as such term is defined in 42 U.S.C.
Section 9601 (22), as amended, or any successor statute.
"Required Lenders" means, at any time, Lenders having Loans, LC
Exposure and unused Commitments representing more than 50% of the sum of the
total Loans, LC Exposure and unused Commitments at such time.
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"Required Revolving Credit Lenders" means, at any time, Lenders
having Revolving Credit Loans, LC Exposure and unused Revolving Credit
Commitments representing more than 50% of the sum of the total Revolving Credit
Loans, LC Exposure and unused Revolving Credit Commitments at such time.
"Required Term Loan Lenders" means, at any time, Lenders having Term
Loans and unused Term Loan Commitments representing more than 50% of the sum of
the total Term Loans and unused Term Loan Commitments at such time.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any shares of
any class of capital stock of the Borrower, or any payment (whether in cash,
securities or other property), including any sinking fund or similar deposit, on
account of the purchase, redemption, retirement, acquisition, cancellation or
termination of any such shares of capital stock of the Borrower.
"Restructuring" means the separation of NL's titanium dioxide
operations from the rheological additives operations, as effected through the
Restructuring Agreement.
"Restructuring Agreement" means that certain agreement dated June 30,
1990, between NL, Rheox International, Inc., Kronos, Inc. and the Borrower,
effecting the Restructuring.
"Restructuring Documents" means the Restructuring Agreement, the
Rheox Int'l IP Assignment, the Rheox IP Assignment, the General Assignment and
the Supplemental Agreements.
"Revolving Credit Availability Period" means the period from and
including the Effective Date to but excluding the earlier of (a) the Final
Maturity Date and (b) the date of termination of the Revolving Credit
Commitments.
"Revolving Credit Commitment" means, with respect to each Lender, the
commitment of such Lender to make Revolving Credit Loans and to acquire
participations in Letters of Credit hereunder, as such commitment may be (a)
reduced from time to time pursuant to Sections 2.07 and 2.09 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 10.04. The initial amount of each Lender's Revolving Credit
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Revolving Credit
Commitment, as applicable. The aggregate original amount of the Revolving Credit
Commitments is $25,000,000.
"Revolving Credit Exposure" means, with respect to any Revolving
Credit Lender at any time, the sum of the outstanding principal amount of such
Lender's Revolving Credit Loans and its LC Exposure at such time.
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"Revolving Credit Lender" means (a) initially, any Lender that has a
Revolving Credit Commitment set forth opposite its name on Schedule 2.01 and (b)
thereafter, the Lenders from time to time holding Revolving Credit Loans and
Revolving Credit Commitments, after giving effect to any assignments thereof
permitted by Section 10.04.
"Revolving Credit Loan" means a Loan made pursuant to Section 2.01(a)
that utilizes the Revolving Credit Commitments.
"Rheox Int'l IP Assignment" has the meaning assigned to that term in
Section l(c) of the Restructuring Agreement.
"Rheox International" means Rheox International, Inc., a Delaware
corporation.
"Rheox IP Assignment" has the meaning assigned to that term in
Section 1(d) of the Restructuring Agreement.
"Security Agreement" means an amended and restated Security Agreement
substantially in the form of Exhibit D between the Borrower, the Subsidiary
Guarantors and the Administrative Agent.
"Security Documents" means the Copyright Security Agreement, the
Conditional Assignment of and Security Interest in Patent Rights and the
Conditional Assignment of and Security Interest in Trademark Rights, the
Security Agreement, the NL Pledge Agreement, the Mortgage, each Existing
Mortgage and each Mortgage Amendment.
"Special Counsel" means Milbank, Tweed, Hadley & McCloy, in its
capacity as special counsel to The Chase Manhattan Bank, as Administrative Agent
of the credit facilities contemplated hereby.
"Special Dividend" means a dividend in an aggregate amount not to
exceed $30,000,000 to be paid by the Borrower to NL with the proceeds of Term
Loans and Revolving Credit Loans as provided herein.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to
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such reserve requirements without benefit of or credit for proration, exemptions
or offsets that may be available from time to time to any Lender under such
Regulation D or any comparable regulation. The Statutory Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in any
reserve percentage.
"Subordinated Note" means the $100,000,000 subordinated note dated
September 30, 1996 issued by the Borrower to NL.
"Subordinated Intercompany Note" means the (Pound Sterling) 3,423,292
note dated February 2, 1996 issued by Rheox Limited to NL.
"Subsidiary" means, with respect to any Person (the "parent") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the ordinary voting power or, in the case of a partnership, more
than 50% of the general partnership interests are, as of such date, owned,
controlled or held, or (b) that is, as of such date, otherwise Controlled, by
the parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent. References herein to "Subsidiaries" shall,
unless the context requires otherwise, be deemed to be references to
Subsidiaries of the Borrower.
"Subsidiary Guarantors" means the Persons listed under the caption
"SUBSIDIARY GUARANTORS" on the signature pages hereto and any other Person that
shall have become a party hereto pursuant to Section 6.12(a).
"Supplemental Agreements" has the meaning assigned to that term in
Section 6(a) of the Restructuring Agreement.
"Tangible Net Worth" means, at any time, the sum, for the Borrower
and its Consolidated Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) the amount of share
capital (less cost of treasury shares) but excluding share capital in respect of
any preferred or similar stock which, by its terms or at the option of the
holder or the issuer, is under any circumstances redeemable, or is convertible
into Indebtedness, or which requires payments to a sinking fund, on or prior to
the Final Maturity Date; plus (b) the amount of surplus and retained earnings
(or, in the case of a surplus or retained earnings deficit, minus the amount of
such deficit); minus (c) Intangible Assets of the Borrower and its Subsidiaries.
Notwithstanding anything in this definition to the contrary, cumulative foreign
currency translation gains (or losses) shall not be deemed to increase (or
decrease) Tangible Net Worth.
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"Tax Sharing Agreement" means the Tax Agreement between NL and Rheox
dated as of July 1, 1990.
"Taxes" means any and all present or future taxes, levies, imposts,
duties, deductions, charges or withholdings of any nature imposed by any
Governmental Authority, and any interest, penalties or fines thereon or other
additions thereto.
"Term Loan" means a Loan made pursuant to Section 2.01(b) that
utilizes the Term Loan Commitments.
"Term Loan Availability Period" means the period from and including
the Effective Date to but excluding the earlier of (a) the Term Loan Commitment
Termination Date and (b) the date of termination of the Term Loan Commitments.
"Term Loan Commitment" means, with respect to each Lender, the
commitment of such Lender to make Term Loans, as such commitment may be (a)
reduced from time to time pursuant to Sections 2.07 and 2.09 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 10.04. The initial amount of each Lender's Term Loan
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Term Loan Commitment, as
applicable. The aggregate original amount of the Term Loan Commitments is
$125,000,000.
"Term Loan Commitment Termination Date" means the Effective Date.
"Term Loan Lender" means (a) initially, any Lender that has a Term
Loan Commitment set forth opposite its name on Schedule 2.01 and (b) thereafter,
the Lenders from time to time holding Term Loans and Term Loan Commitments,
after giving effect to any assignments thereof permitted by Section 10.04.
"Three-Month Secondary CD Rate" means, for any day, the secondary
market rate for three-month certificates of deposit reported as being in effect
on such day (or, if such day is not a Business Day, the next preceding Business
Day) by the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of the
Board, be published in Federal Reserve Statistical Release H.15(519) during the
week following such day), or, if such rate is not so reported on such day or
such next preceding Business Day, the average of the secondary market quotations
for three-month certificates of deposit of major money center banks in New York
City received at approximately 10:00 a.m., New York City time, on such day (or,
if such day is not a Business Day, on the next preceding Business Day) by the
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.
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"Transactions" means (a) with respect to the Borrower, the execution,
delivery and performance by the Borrower of the Loan Documents to which it is a
party, the borrowing of Loans and the use of the proceeds thereof, and the
issuance of Letters of Credit hereunder and (b) with respect to any Credit Party
(other than the Borrower), the execution, delivery and performance by such
Credit Party of the Loan Documents to which it is a party.
"Type", when used in reference to any Loan or Borrowing, refers to
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBO Rate or the Adjusted
Base Rate.
"UCP" means the Uniform Customs and Practices for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500, or any
successor publication.
"U.S. dollars" or "$" refers to lawful money of the United States of
America.
"Wholly Owned Subsidiary" means, with respect to any Person at any
date, any corporation, limited liability company, partnership, association or
other entity of which securities or other ownership interests representing 100%
of the equity or ordinary voting power (other than directors' qualifying shares)
or, in the case of a partnership, 100% of the general partnership interests are,
as of such date, directly or indirectly owned, controlled or held by such Person
or one or more Wholly Owned Subsidiaries of such Person or by such Person and
one or more Wholly Owned Subsidiaries of such Person.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Working Investment" means, at any time, the sum of the following
(without duplication) for the Borrower and its Consolidated Subsidiaries
(determined on a consolidated basis in accordance with GAAP), in each case
generated in the ordinary course of business: (a) net inventory at such time;
plus (b) net accounts and current notes receivable at such time; minus (c) net
accounts and current notes payable (excluding current notes payable to financial
institutions in respect of Indebtedness) at such time; minus (d) accrued
expenses at such time; minus (e) current accrued taxes at such time.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of
this Agreement, Loans may be classified and referred to by Class (e.g., a
"Revolving Credit Loan" or "Term Loan") or by Type (e.g., a "Base Rate Loan" or
a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Credit
Loan" or a "Base Rate Revolving Credit Loan"). In similar fashion, (i)
Borrowings may be classified and referred to by Class, by Type and by Class and
Type, and (ii) Commitments may be classified and referred to by Class.
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SECTION 1.03. Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement, (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights and (f) references to
"the date hereof" and "the date of this Agreement" and similar references shall
be construed to mean January 30, 1997.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
The Credits
SECTION 2.01. Commitments.
(a) Revolving Credit Loans. Subject to the terms and conditions set
forth herein, each Revolving Credit Lender agrees to make Revolving Credit Loans
to the Borrower from time to time during the Revolving Credit Availability
Period in an aggregate principal
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amount that will not result in such Lender's Revolving Credit Exposure exceeding
such Lender's Revolving Credit Commitment. Within the foregoing limits and
subject to the terms and conditions set forth herein, the Borrower may borrow,
prepay and reborrow Revolving Credit Loans; provided that the Borrower may not
borrow Revolving Credit Loans hereunder unless it shall have theretofore
borrowed or is concurrently borrowing hereunder Term Loans in an aggregate
principal amount of $125,000,000.
(b) Term Loans. Subject to the terms and conditions set forth herein,
each Term Loan Lender agrees to make Term Loans to the Borrower in a single
drawing on a date falling during the Term Loan Availability Period in an
aggregate principal amount equal to such Lender's Term Loan Commitment.
SECTION 2.02. Loans and Borrowings.
(a) Subject to Section 2.01(b), each Loan of a particular Class shall
be made as part of a Borrowing consisting of Loans of such Class made by the
Lenders ratably in accordance with their respective Commitments of such Class.
The failure of any Lender to make any Loan required to be made by it shall not
relieve any other Lender of its obligations hereunder; provided that the
Commitments of the Lenders are several and no Lender shall be responsible for
any other Lender's failure to make Loans as required.
(b) Subject to Section 2.12, each Borrowing shall be comprised
entirely of Base Rate Loans or Eurodollar Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that (i) any exercise of such option shall not affect the
obligation of the Borrower to repay such Loan in accordance with the terms of
this Agreement and (ii) the Borrower shall not be required to pay any additional
amounts under Section 2.15(a) as a result of the exercise of such option unless
amounts payable by the Borrower to the relevant Lender under said Section
immediately after such exercise do not exceed amounts payable by the Borrower to
the relevant Lender under said Section immediately prior to such exercise.
(c) At the commencement of each Interest Period for a Eurodollar
Borrowing, such Borrowing shall be in an aggregate amount at least equal to
$5,000,000 or any greater integral multiple of $1,000,000 with respect to a Term
Loan, and at least equal to $1,000,000 with respect to a Revolving Credit Loan.
At the time that each Base Rate Borrowing is made, such Borrowing shall be in an
aggregate amount at least equal to $1,000,000 or any greater integral multiple
of $1,000,000; provided that a Base Rate Borrowing of Loans of any Class may be
in an aggregate amount that is equal to the entire unused balance of the total
Commitments of such Class. Borrowings of more than one Type and Class may be
outstanding at the same time; provided that there shall not at any time be more
than a total of six Eurodollar Borrowings outstanding.
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SECTION 2.03. Requests for Borrowings. To request a Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone (a)
in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before the date of the proposed Borrowing or (b) in
the case of a Base Rate Borrowing, not later than 11:00 a.m., New York City
time, on the date of the proposed Borrowing. Each such telephonic Borrowing
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Borrowing Request in a form
approved by the Administrative Agent and signed by the Borrower. Each such
telephonic and written Borrowing Request shall specify the following information
in compliance with Section 2.02:
(i) whether the requested Borrowing is to be a Revolving Credit
Borrowing or Term Loan Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be a Base Rate Borrowing or a
Eurodollar Borrowing;
(v) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(vi) the location and number of the Borrower's account to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.05.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be a Base Rate Borrowing. If no Interest Period is specified
with respect to any requested Eurodollar Borrowing, then the Borrower shall be
deemed to have selected an Interest Period of one month's duration. Promptly
following receipt of a Borrowing Request in accordance with this Section 2.03,
the Administrative Agent shall advise each Lender of the details thereof and of
the amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Letters of Credit.
(a) General. Subject to the terms and conditions set forth herein, in
addition to the Revolving Credit Loans provided for in Section 2.01(a), the
Borrower may request the issuance of Letters of Credit for its own account or
for the account of a Subsidiary by the LC Issuing Lender, in a form acceptable
to the LC Issuing Lender in its reasonable determination, at any time and from
time to time during the Revolving Credit Availability Period. Letters of
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Credit issued hereunder shall constitute utilization of the Revolving Credit
Commitments. In the event of any inconsistency between the terms and conditions
of this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by the Borrower to, or entered into by
the Borrower with, the LC Issuing Lender relating to any Letter of Credit, the
terms and conditions of this Agreement shall control.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. To request the issuance of a Letter of Credit (or the amendment,
renewal or extension of an outstanding Letter of Credit), the Borrower shall
hand deliver or telecopy (or transmit by electronic communication, if
arrangements for doing so have been approved by the LC Issuing Lender) to the LC
Issuing Lender and the Administrative Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice requesting
the issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, the date of issuance, amendment, renewal or
extension, the date on which such Letter of Credit is to expire (which shall
comply with paragraph (c) of this Section 2.04), the amount of such Letter of
Credit, the name and address of the beneficiary thereof and such other
information as shall be necessary to prepare, amend, renew or extend such Letter
of Credit. If requested by the LC Issuing Lender, the Borrower also shall submit
a letter of credit application on the LC Issuing Lender's standard form in
connection with any request for a Letter of Credit. A Letter of Credit shall be
issued, amended, renewed or extended only if (and upon issuance, amendment,
renewal or extension of each Letter of Credit the Borrower shall be deemed to
represent and warrant that), after giving effect to such issuance, amendment,
renewal or extension (i) the aggregate LC Exposure of the LC Issuing Lender
(determined for these purposes without giving effect to the participations
therein of the Revolving Credit Lenders pursuant to paragraph (d) of this
Section 2.04) shall not exceed $2,500,000 and (ii) the total Revolving Credit
Exposures shall not exceed the total Revolving Credit Commitments.
(c) Expiration Date. Each Letter of Credit shall expire at or prior
to the close of business on the earlier of (i) the date one year after the date
of the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the date
that is five Business Days prior to the Final Maturity Date.
(d) Participations. By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) by the LC Issuing
Lender, and without any further action on the part of the LC Issuing Lender, the
LC Issuing Lender hereby grants to each Revolving Credit Lender, and each
Revolving Lender hereby acquires from the LC Issuing Lender, a participation in
such Letter of Credit equal to such Revolving Credit Lender's Applicable
Percentage of the aggregate amount available to be drawn under such Letter of
Credit. In consideration and in furtherance of the foregoing, each Revolving
Credit Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of the LC Issuing Lender, such Revolving
Credit Lender's Applicable Percentage of each LC Disbursement made by the LC
Issuing Lender and not reimbursed by the
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Borrower on the date due as provided in paragraph (e) of this Section 2.04, or
of any reimbursement payment required to be refunded to the Borrower for any
reason. Each Revolving Credit Lender acknowledges and agrees that its obligation
to acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of a Default or reduction or
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the LC Issuing Lender shall make any LC
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse the
LC Issuing Lender in respect of such LC Disbursement by paying to the
Administrative Agent an amount equal to such LC Disbursement not later than
12:00 noon, New York City time, on the Business Day immediately following the
day that the Borrower receives such notice, provided that, the Borrower may,
subject to the conditions to borrowing set forth herein, request in accordance
with Section 2.03 that such payment be financed with a Revolving Credit Base
Rate Borrowing in an equivalent amount and, to the extent so financed, the
Borrower's obligation to make such payment shall be discharged and replaced by
the resulting Revolving Credit Base Rate Borrowing.
If the Borrower fails to make such payment when due, the
Administrative Agent shall notify each Revolving Credit Lender of the applicable
LC Disbursement, the payment then due from the Borrower in respect thereof and
such Revolving Credit Lender's Applicable Percentage thereof. Promptly following
receipt of such notice, each Revolving Credit Lender shall pay to the
Administrative Agent its Applicable Percentage of the payment then due from the
Borrower, in the same manner as provided in Section 2.05 with respect to
Revolving Credit Loans made by such Lender (and Section 2.05 shall apply,
mutatis mutandis, to the payment obligations of the Revolving Credit Lenders),
and the Administrative Agent shall promptly pay to the LC Issuing Lender the
amounts so received by it from the Revolving Credit Lenders. Promptly following
receipt by the Administrative Agent of any payment from the Borrower pursuant to
this paragraph, the Administrative Agent shall distribute such payment to the LC
Issuing Lender or, to the extent that the Revolving Credit Lenders have made
payments pursuant to this paragraph to reimburse the LC Issuing Lender, then to
such Lenders and the LC Issuing Lender as their interests may appear. Any
payment made by a Revolving Credit Lender pursuant to this paragraph to
reimburse the LC Issuing Lender for any LC Disbursement shall not constitute a
Loan and shall not relieve the Borrower of its reimbursement obligation in
respect of such LC Disbursement.
(f) Obligations Absolute. The Borrower's obligation to reimburse LC
Disbursements as provided in paragraph (e) of this Section 2.04 shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of
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validity or enforceability of any Letter of Credit, or any term or provision
therein, (ii) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect, (iii) in the absence of gross
negligence or wilful misconduct on the part of the LC Issuing Lender (as
determined by a court of competent jurisdiction), payment by the LC Issuing
Lender under a Letter of Credit against presentation of a draft or other
document that does not comply strictly or substantially with the terms of such
Letter of Credit and (iv) any other event or circumstance whatsoever, whether or
not similar to any of the foregoing, that might, but for the provisions of this
Section 2.04, constitute a legal or equitable discharge of the Borrower's
obligations hereunder.
Neither the Administrative Agent, the Lenders nor the LC Issuing
Lender, nor any of their Related Parties, shall have any liability or
responsibility by reason of or in connection with the issuance or transfer of
any Letter of Credit by the LC Issuing Lender or any payment or failure to make
any payment thereunder (irrespective of any of the circumstances referred to in
the preceding sentence), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to any Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of the LC Issuing Lender;
provided that the foregoing shall not be construed to excuse the LC Issuing
Lender from liability to the Borrower to the extent of any direct damages (as
opposed to consequential damages, claims in respect of which are hereby waived
by the Borrower to the extent permitted by applicable law) suffered by the
Borrower that are caused by the LC Issuing Lender's failure to exercise the
standard of care agreed hereunder to be applicable when determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof. The parties hereto expressly agree that such standard of care
shall be as follows, and that the LC Issuing Lender shall be deemed to have
exercised such standard of care in the absence of gross negligence or wilful
misconduct on its part (as determined by a court of competent jurisdiction):
(i) the LC Issuing Lender may accept documents that appear on
their face to be in substantial compliance with the terms of a Letter of
Credit without responsibility for further investigation, regardless of any
notice or information to the contrary, and may make payment upon
presentation of documents that appear on their face to be in substantial
compliance with the terms of such Letter of Credit; and
(ii) the LC Issuing Lender shall have the right, in its sole
discretion, to decline to accept such documents and to make such payment
if such documents are not in strict compliance with the terms of such
Letter of Credit.
(g) Disbursement Procedures. The LC Issuing Lender shall, to the
extent required by the UCP, examine all documents purporting to represent a
demand for payment under any Letter of Credit. The LC Issuing Lender shall, when
required by the UCP, notify
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the Administrative Agent and the Borrower by telephone (confirmed by telecopy)
of such demand for payment and whether the LC Issuing Lender has made or will
make an LC Disbursement thereunder; provided that any failure to give or delay
in giving such notice shall not relieve the Borrower of its obligation to
reimburse the LC Issuing Lender and the Revolving Credit Lenders with respect to
any such LC Disbursement.
(h) Interim Interest. If the LC Issuing Lender shall make any LC
Disbursement in respect of any Letter of Credit, then, unless the Borrower shall
reimburse such LC Disbursement in full on the date such LC Disbursement is made,
the unpaid amount thereof shall bear interest, for each day from and including
the date such LC Disbursement is made to but excluding the date that the
Borrower reimburses such LC Disbursement, at the rate per annum then applicable
to Revolving Credit Base Rate Loans; provided that, if the Borrower fails to
reimburse such LC Disbursement when due pursuant to paragraph (e) of this
Section 2.04, then Section 2.11(c) shall apply. Interest accrued pursuant to
this paragraph shall be for the account of the LC Issuing Lender, except that
interest accrued on and after the date of payment by any Revolving Credit Lender
pursuant to paragraph (e) of this Section 2.04 to reimburse the LC Issuing
Lender shall be for the account of such Lender to the extent of such payment.
(i) Cash Collateralization. If either (i) an Event of Default shall
occur and be continuing and the Borrower receives notice from the Administrative
Agent or the Required Revolving Credit Lenders demanding the deposit of cash
collateral pursuant to this paragraph, or (ii) the Borrower shall be required to
provide cover for LC Exposure pursuant to Section 2.09(b), the Borrower shall
immediately deposit into an account (the "LC Collateral Account") with the
Administrative Agent, in the name of the Administrative Agent and for the
benefit of the Lenders, an amount in cash equal to, in the case of an Event of
Default, the LC Exposure as of such date plus any accrued and unpaid interest
thereon and, in the case of cover pursuant to Section 2.09(b), the amount
required under 2.09(b); provided that the obligation to deposit such cash
collateral shall become effective immediately, and such deposit shall become
immediately due and payable, without demand or other notice of any kind, upon
the occurrence of any Event of Default described in clause (h) or (i) of Article
VIII. Such deposit shall be held by the Administrative Agent as collateral in
the first instance for the LC Exposure under this Agreement and thereafter for
the payment of any other obligations of the Credit Parties hereunder and under
the other Loan Documents. The Administrative Agent shall have exclusive dominion
and control, including the exclusive right of withdrawal, over the LC Collateral
Account. Such deposits shall not accrue interest other than any interest earned
on the investment of such deposits, which investments shall be Permitted
Investments made at the option and sole discretion of the Borrower prior to an
Event of Default and made at the sole discretion of the Administrative Agent
after the occurrence and during the continuance of an Event of Default, and in
any event shall be at the Borrower's risk and expense. Prior to an Event of
Default, income and profits, if any, on such investments shall be distributed to
the Borrower upon request. After the occurrence and during the continuance of an
Event of Default, interest and profits, if any, on such investments shall
accumulate in
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such account. If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, such
amount (to the extent not applied as aforesaid) shall be returned to the
Borrower upon request within three Business Days after all Events of Default
have been cured or waived.
(j) Existing Letters of Credit. There is outstanding on the date
hereof pursuant to the Existing Credit Agreements one or more letters of credit
issued by Chase (as the "Issuing Bank" thereunder) for the account of the
Borrower as set forth on Schedule 2.04. Upon the Effective Date each of such
letters of credit is hereby designated a "Letter of Credit" under and for all
purposes of this Agreement. In that connection, the Borrower hereby represents
and warrants to the LC Issuing Lender, each Revolving Credit Lender and the
Administrative Agent that each such letter of credit satisfies the requirements
of this Section 2.04 (including paragraph (c) above).
SECTION 2.05. Funding of Borrowings.
(a) Each Lender shall make each Loan to be made by it hereunder on
the proposed date thereof by wire transfer of immediately available funds by
1:00 p.m., New York City time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders. The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an account of the Borrower
maintained with the Administrative Agent in New York City and designated by the
Borrower in the applicable Borrowing Request; provided that Revolving Credit
Base Rate Loans made to finance the reimbursement of an LC Disbursement under
any Letter of Credit as provided in Section 2.04(e) shall be remitted by the
Administrative Agent to the LC Issuing Lender.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
2.05 and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and the Borrower severally agree to pay to the Administrative
Agent forthwith on demand such corresponding amount with interest thereon, for
each day from and including the date such amount is made available to the
Borrower to but excluding the date of payment to the Administrative Agent, at
(i) in the case of such Lender, the Federal Funds Effective Rate or (ii) in the
case of the Borrower, the interest rate applicable to Base Rate Loans. If such
Lender pays such amount to the Administrative Agent, then such amount shall
constitute such Lender's Loan included in such Borrowing.
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SECTION 2.06. Interest Elections.
(a) Each Borrowing initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request.
Thereafter, the Borrower may elect to convert such Borrowing to a different Type
or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may
elect Interest Periods therefor, all as provided in this Section 2.06. The
Borrower may elect different options for continuations and conversions with
respect to different portions of the affected Borrowing, in which case each such
portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing.
(b) To make an election pursuant to this Section 2.06, the Borrower
shall notify the Administrative Agent of such election by telephone by the time
that a Borrowing Request would be required under Section 2.03 if the Borrower
were requesting a Borrowing of the Type resulting from such election to be made
on the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies
and, if different options for continuations or conversions are being
elected with respect to different portions thereof, the portions thereof
to be allocated to each resulting Borrowing (in which case the information
to be specified pursuant to clauses (iii) and (iv) below shall be
specified for each resulting Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be a Base Rate Borrowing
or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
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(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each affected Lender of the details thereof
and of such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
a Base Rate Borrowing. Notwithstanding any contrary provision hereof, if an
Event of Default has occurred and is continuing and the Administrative Agent, at
the request of the Required Lenders, so notifies the Borrower, then, so long as
an Event of Default is continuing (i) no outstanding Borrowing may be converted
to or continued as a Eurodollar Borrowing and (ii) unless repaid, each
Eurodollar Borrowing shall be converted to a Base Rate Borrowing at the end of
the Interest Period applicable thereto.
SECTION 2.07. Termination and Reduction of Commitments.
(a) Unless previously terminated, (i) the Revolving Credit
Commitments shall terminate at the close of business on the Final Maturity Date
and (ii) the Term Loan Commitments shall terminate at the close of business on
the Term Loan Commitment Termination Date.
(b) The Borrower may at any time terminate, or from time to time
reduce, the Commitments of any Class; provided that (i) each reduction of the
Commitments of such Class shall be in an amount that at least equal to
$1,000,000 or any greater integral multiple of $500,000, (ii) the Borrower shall
not terminate or reduce the Term Loan Commitments if, after giving effect to any
concurrent prepayment of Term Loans in accordance with Section 2.09, the
outstanding Term Loans would exceed the total Term Loan Commitments and (iii)
the Borrower shall not terminate or reduce the Revolving Credit Commitments if,
after giving effect to any concurrent prepayment of the Revolving Credit Loans
in accordance with Section 2.09, the total Revolving Credit Exposures would
exceed the total Revolving Credit Commitments.
(c) The Borrower shall notify the Administrative Agent of any
election to terminate or reduce Commitments under paragraph (b) of this Section
2.07 at least three Business Days prior to the effective date of such
termination or reduction, specifying such election and the effective date
thereof. Promptly following receipt of any such notice, the Administrative Agent
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section 2.07 shall be irrevocable; provided that a
notice of termination of Commitments delivered by the Borrower may state that
such notice is conditioned upon the effectiveness of other credit facilities, in
which case such notice may be revoked by the Borrower (by notice to the
Administrative Agent on or prior to the specified effective date) if such
condition is not satisfied. Any termination or reduction of Commitments shall be
permanent. Each reduction of Commitments of any Class shall be
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made ratably among the Lenders in accordance with their respective Commitments
of such Class.
SECTION 2.08. Repayment of Loans; Evidence of Debt.
(a) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Revolving Credit Lender the then
unpaid principal amount of such Lender's Revolving Credit Loans on the Final
Maturity Date.
(b) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of the Term Loan Lenders the principal of
the Term Loans in twenty-six installments payable on the Principal Payment Dates
as follows:
Principal Payment Date
Falling on or Nearest to: Amount of Installment ($):
------------------------ -------------------------
September 30, 1997 .................................... $3,750,000
December 31, 1997 ..................................... $3,750,000
March 31, 1998 ........................................ $3,750,000
June 30, 1998 ......................................... $3,750,000
September 30, 1998 .................................... $3,750,000
December 31, 1998 ..................................... $3,750,000
March 31, 1999 ........................................ $3,750,000
June 30, 1999 ......................................... $3,750,000
September 30, 1999 .................................... $3,750,000
December 31, 1999 ..................................... $3,750,000
March 31, 2000 ........................................ $3,750,000
June 30, 2000 ......................................... $3,750,000
September 30, 2000 .................................... $3,750,000
December 31, 2000 ..................................... $3,750,000
March 31, 2001 ........................................ $5,625,000
June 30, 2001 ......................................... $5,625,000
September 30, 2001 .................................... $5,625,000
December 31, 2001 ..................................... $5,625,000
March 31, 2002 ........................................ $6,250,000
June 30, 2002 ......................................... $6,250,000
September 30, 2002 .................................... $6,250,000
December 31, 2002 ..................................... $6,250,000
March 31, 2003 ........................................ $6,250,000
June 30, 2003 ......................................... $6,250,000
September 30, 2003 .................................... $6,250,000
January 30, 2004 ...................................... $6,250,000
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(c) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(d) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(e) The entries made in the accounts maintained pursuant to paragraph
(c) or (d) of this Section 2.08 shall be prima facie evidence of the existence
and amounts of the obligations recorded therein; provided that the failure of
any Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(f) Any Lender may request that Loans of any Class made by it be
evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form reasonably acceptable to the Administrative Agent.
Thereafter, the Loans of such Class evidenced by such promissory note and
interest thereon shall at all times (including after assignment pursuant to
Section 10.04) be represented by one or more promissory notes in such form
payable to the order of the payee named therein (or, if such promissory note is
a registered note, to such payee and its registered assigns).
SECTION 2.09. Prepayment of Loans.
(a) Optional Prepayments. The Borrower shall have the right at any
time and from time to time to prepay any Borrowing in whole or in part, subject
to prior notice in accordance with paragraph (c) of this Section 2.09. Each
prepayment of Term Loans shall be applied to the installments thereof pro rata
in accordance with the respective aggregate principal amounts of the Term Loans
outstanding on the date of such prepayment.
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(b) Mandatory Prepayments. The Borrower shall make prepayments of the
Loans hereunder (and reduce the Commitments hereunder) as follows:
(i) Casualty Events. On the date of receipt by the Borrower or any
Subsidiary of Net Available Proceeds in excess of $100,000 of any
insurance, condemnation award or other compensation in respect of any
Casualty Event (excluding Net Available Proceeds from (x) business
interruption coverage or (y) other insurance coverage unrelated to the
repair and/or replacement of the damaged assets) the Borrower or such
Subsidiary, as the case may be, shall deposit such Net Available Proceeds
into the Collateral Account (under and as defined in the Security
Agreement). Upon request by the Borrower, the Administrative Agent shall
(unless a Default shall have occurred and be continuing) release the Net
Available Proceeds to the Borrower in an amount not exceeding the amount
required for repair or replacement of the property for which such Net
Available Proceeds were received; provided that if such Net Available
Proceeds have not been released or committed to be expended in respect of
such repair or replacement in an amount and manner reasonably acceptable
to the Administrative Agent within 180 days of receipt by the Borrower or
such Subsidiary, as the case may be, such Net Available Proceeds, to the
extent that such Net Available Proceeds, together with all other Net
Available Proceeds received by the Borrower or any Subsidiary in respect
of Casualty Events, not released or committed to be expended in respect of
repair or replacement within 180 days of receipt by the Borrower or any
Subsidiary exceeds $500,000, shall be used to prepay the Loans (and/or
provide cover for LC Exposure as specified in Section 2.04(i)) and
automatically reduce the Revolving Credit Commitments in an aggregate
amount, if any, equal to 100% of the Net Available Proceeds of such
Casualty Event not theretofore applied to the repair or replacement of
such property (such prepayment and reduction to be effected in each case
in the manner and to the extent specified in clause (vi) of this Section
2.09).
(ii) Sale of Assets. Without limiting the obligation of the
Borrower to obtain the consent of the Required Lenders to any Disposition
not otherwise permitted hereunder, the Borrower agrees, on or prior to the
occurrence of any Disposition which, together with the aggregate Net
Available Proceeds of all other Dispositions to date in the then current
fiscal year, would generate Net Available Proceeds in excess of $100,000
to deliver to the Administrative Agent a statement certified by a
Financial Officer, in form and detail reasonably satisfactory to the
Administrative Agent, of the estimated amount of the Net Available
Proceeds of such Disposition that will (on the date of such Disposition)
be received by the Borrower or any Subsidiary in cash and the Borrower
will prepay the Loans hereunder (and provide cover for LC Exposure as
specified in Section 2.04(i)), and the Commitments hereunder shall be
subject to automatic reduction, as follows:
(x) upon the date of such Disposition, in an aggregate amount
equal to 100% of the amount of the Net Available Proceeds of such
Disposition which,
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together with the aggregate Net Available Proceeds of all other
Dispositions to date in the then current fiscal year, would generate
Net Available Proceeds in excess of $100,000, to the extent received
by the Borrower or any of its Subsidiaries in cash on the date of
such Disposition; and
(y) thereafter, quarterly, on the date of the delivery by the
Borrower to the Administrative Agent pursuant to Section 6.01 of the
financial statements for any quarterly fiscal period or fiscal year,
to the extent the Borrower or any Subsidiary shall receive Net
Available Proceeds during the quarterly fiscal period ending on the
date of such financial statements in cash under deferred payment
arrangements or Disposition Investments entered into or received in
connection with any Disposition, an amount equal to (A) 100% of the
aggregate amount of such Net Available Proceeds received during such
quarterly fiscal period minus (B) any transaction expenses associated
with Dispositions and not previously deducted in the determination of
Net Available Proceeds plus (or minus, as the case may be) (C) any
other adjustment received or paid by the Borrower or any Subsidiary
pursuant to the respective agreements giving rise to Dispositions and
not previously taken into account in the determination of the Net
Available Proceeds of Dispositions, provided that if prior to the
date upon which the Borrower would otherwise be required to make a
prepayment under this clause (y) with respect to any quarterly fiscal
period the aggregate amount of such Net Available Proceeds (after
giving effect to the adjustments provided for in this clause (y))
shall exceed $1,000,000, then the Borrower shall within three
Business Days after receipt of such aggregate amount make a
prepayment under this clause (y) in an amount equal to such required
prepayment.
Prepayments of Loans (and cover for LC Exposure) and reductions of
Commitments shall be effected in each case in the manner and to the extent
specified in clause (vi) of this Section 2.09(b).
(iii) Excess Cash Flow. Not later than the date 120 days after the
end of each fiscal year of the Borrower beginning with Excess Cash Flow
for the fiscal year ending December 31, 1997, the Borrower shall prepay
the Loans (and/or provide cover for LC Exposure as specified in Section
2.04(i)), and the Commitments shall be subject to automatic reduction, in
an aggregate amount equal to the excess of (x) 60% of Excess Cash Flow for
such fiscal year over (y) the aggregate amount of prepayments of Term
Loans made during such fiscal year pursuant to Section 2.09(a) (other than
that portion, if any, of such prepayments applied to installments of the
Term Loans falling due in such fiscal year) and, after the payment in full
of the Term Loans, the aggregate amount of voluntary reductions of
Revolving Credit Commitments made during such fiscal year pursuant to
Section 2.07(b), such prepayment and reduction to be effected in each case
in the manner and to the extent specified in clause (vi) of this Section
2.09(b).
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(iv) Equity Issuance. Upon any Equity Issuance, the Borrower shall
prepay the Loans (and/or provide cover for LC Exposure as specified in
Section 2.04(i)), and the Commitments shall be subject to automatic
reduction, in an aggregate amount equal to 100% of the Net Available
Proceeds thereof, such prepayment and reduction to be effected in each
case in the manner and to the extent specified in clause (vi) of this
Section 2.09(b).
(v) Application. Upon each required reduction of Commitments and
prepayment of Loans (and cover for LC exposure) pursuant to clauses (i)
through (iv) of this Section 2.09(b), the amount of the required
prepayment shall be applied (x) first, to reduce the Term Loan Commitments
and if, after giving effect to such reduction, the aggregate principal
amount of Term Loans exceeds the amount of the Term Loan Commitments, the
Borrower shall prepay the Term Loans in an amount equal to such excess,
such prepayment to be applied to the installments of the Term Loans pro
rata in accordance with the respective aggregate principal amounts thereof
outstanding on the date of such prepayment and (y) second, to the reduce
the Revolving Credit Commitments and if, after giving effect to such
reduction, the aggregate principal amount of Revolving Credit Loans
exceeds the amount of the Revolving Credit Commitments, the Borrower shall
prepay the Revolving Credit Loans (and, to the extent necessary, provide
cover for LC Exposure pursuant to Section 2.04(i)) in an amount equal to
such excess.
(c) Notice of Prepayment. The Borrower shall notify the
Administrative Agent by telephone (confirmed by telecopy) of any prepayment
under this Section 2.09 (i) in the case of prepayment of a Eurodollar Borrowing,
not later than 11:00 a.m., New York City time, three Business Days before the
date of prepayment and (ii) in the case of a Base Rate Borrowing, not later than
11:00 a.m., New York City time, one Business Day before the date of prepayment.
Each such notice shall be irrevocable and shall specify the prepayment date and
the principal amount of each Borrowing or portion thereof to be prepaid;
provided that, if a notice of prepayment is given in connection with a
conditional notice of termination of the Commitments as contemplated by Section
2.07, then such notice of prepayment may be revoked if such notice of
termination is revoked in accordance with Section 2.07. Promptly following
receipt of any such notice related to a prepayment, the Administrative Agent
shall advise the Lenders of the contents thereof. Each partial prepayment of a
Borrowing shall be in an amount that would be permitted in the case of a
Borrowing of the same Class and Type as provided in Section 2.02. Each
prepayment of a Revolving Credit Borrowing shall be applied ratably to the
Revolving Credit Loans included in the prepaid Borrowing. Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.11.
SECTION 2.10. Fees.
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(a) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a commitment fee, which shall accrue at a rate per annum
equal to the Applicable Rate on the daily average unused amount of the
respective Commitments of such Lender during the period from and including the
Effective Date to but excluding the date on which such Commitment terminates.
Accrued commitment fees shall be payable in arrears on each Quarterly Date and,
in respect of any Commitments, on the date such Commitments terminate,
commencing on the first such date to occur after the date hereof. All commitment
fees shall be computed on the basis of a year of 360 days and shall be payable
for the actual number of days elapsed (including the first day but excluding the
last day).
(b) The Borrower agrees to pay with respect to Letters of Credit
outstanding hereunder the following fees:
(i) to the Administrative Agent for the account of each Revolving
Credit Lender a participation fee with respect to its participations in
Letters of Credit, which shall accrue at a rate per annum equal to the
Applicable Rate used in determining interest on Revolving Credit
Eurodollar Loans on the average daily amount of such Lender's LC Exposure
(excluding any portion thereof attributable to unreimbursed LC
Disbursements) during the period from and including the Effective Date to
but excluding the later of the date on which such Lender's Revolving
Credit Commitment terminates and the date on which there shall no longer
be any Letters of Credit outstanding hereunder, and
(ii) to the LC Issuing Lender (x) a fronting fee, which shall accrue
at the rate or rates per annum separately agreed upon between the Borrower
and the LC Issuing Lender on the average daily amount of the LC Exposure
of the LC Issuing Lender (determined for these purposes without giving
effect to the participations therein of the Revolving Credit Lenders
pursuant to paragraph (d) of Section 2.04, and excluding any portion
thereof attributable to unreimbursed LC Disbursements) during the period
from and including the Effective Date to but excluding the later of the
date of termination of the Revolving Credit Commitments and the date on
which there shall no longer be any Letters of Credit of the LC Issuing
Lender outstanding hereunder, and (y) the LC Issuing Lender's standard
fees with respect to the issuance, amendment, renewal or extension of any
Letter of Credit or processing of drawings thereunder.
Accrued participation fees and fronting fees shall be payable in arrears on each
Quarterly Date and on the date the Revolving Credit Commitments terminate,
commencing on the first such date to occur after the date hereof, provided that
any such fees accruing after the date on which the Revolving Credit Commitments
terminate shall be payable on demand. All participation fees and fronting fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).
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(c) The Borrower agrees to pay to the Administrative Agent, for its
own account, fees payable in the amounts and at the times separately agreed in
writing between the Borrower and the Administrative Agent.
(d) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent for distribution to the
Lenders entitled thereto. Fees paid shall not be refundable under any
circumstances, absent manifest error in the determination thereof.
SECTION 2.11. Interest.
(a) The Loans comprising each Base Rate Borrowing shall bear interest
at a rate per annum equal to the Adjusted Base Rate plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear
interest at a rate per annum equal to the Adjusted LIBO Rate for the Interest
Period in effect for such Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the
rate otherwise applicable to such Loan as provided above or (ii) in the case of
any other amount, 2% plus the rate applicable to Base Rate Loans as provided
above.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued pursuant
to paragraph (c) of this Section 2.11 shall be payable on demand, (ii) in the
event of any repayment or prepayment of any Loan (other than a prepayment of a
Base Rate Revolving Credit Loan prior to the end of the Revolving Credit
Availability Period), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment, (iii) in the event
of any conversion of any Eurodollar Loan prior to the end of the current
Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion and (iv) all accrued interest on Revolving
Credit Loans shall be payable upon termination of the Revolving Credit
Commitments.
(e) All interest hereunder shall be computed on the basis of a year
of 360 days, except that interest computed by reference to the Adjusted Base
Rate at times when the Adjusted Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Adjusted Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error.
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SECTION 2.12. Alternate Rate of Interest. If prior to the
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do
not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as
applicable, for such Interest Period; or
(b) if such Borrowing is of a particular Class of Loans, the
Administrative Agent is advised by the Required Revolving Credit Lenders
or the Required Term Loan Lenders, as the case may be, that the Adjusted
LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will
not adequately and fairly reflect the cost to such Lenders of making or
maintaining their Loans of such Class included in such Borrowing for such
Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
affected Lenders by telephone or telecopy as promptly as practicable thereafter
and, until the Administrative Agent notifies the Borrower and such Lenders that
the circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any such Borrowing to, or
continuation of any such Borrowing as, a Eurodollar Borrowing shall be
ineffective and (ii) if any Borrowing Request requests a Eurodollar Borrowing,
such Borrowing shall be made as a Base Rate Borrowing.
SECTION 2.13. Increased Costs.
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender (except any such reserve requirement
reflected in the Adjusted LIBO Rate) or the LC Issuing Lender; or
(ii) impose on any Lender or the LC Issuing Lender or the London
interbank market any other condition affecting this Agreement or
Eurodollar Loans made by such Lender or any Letter of Credit or
participation therein;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to increase the cost to such Lender or the
LC Issuing Lender of participating in, issuing or maintaining any Letter of
Credit or to reduce the amount of any sum received or receivable by such Lender
or the LC Issuing Lender hereunder (whether of principal, interest or
otherwise), then, upon delivery of the certificate provided for in Section
2.13(c), the Borrower will pay to such Lender or the LC Issuing Lender, as the
case may be, such additional amount
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or amounts as will compensate such Lender or the LC Issuing Lender, as the case
may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the LC Issuing Lender reasonably determines that
any Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on such Lender's or the LC Issuing Lender's capital
or on the capital of such Lender's or the LC Issuing Lender's holding company,
if any, as a consequence of this Agreement or the Loans made by, or
participations in Letters of Credit held by, such Lender, or the Letters of
Credit issued by the LC Issuing Lender, to a level below that which such Lender
or the LC Issuing Lender or such Lender's or the LC Issuing Lender's holding
company could have achieved but for such Change in Law (taking into
consideration such Lender's or the LC Issuing Lender's policies and the policies
of such Lender's or the LC Issuing Lender's holding company with respect to
capital adequacy), then from time to time the Borrower will pay to such Lender
or the LC Issuing Lender, as the case may be, such additional amount or amounts
as will compensate such Lender or the LC Issuing Lender, or such Lender's or the
LC Issuing Lender's holding company, for any such reduction suffered.
(c) A certificate of a Lender or the LC Issuing Lender setting forth
the amount or amounts necessary to compensate such Lender or the LC Issuing
Lender or its holding company, as the case may be, as specified in paragraph (a)
or (b) of this Section 2.13 shall be delivered to the Borrower and shall be
conclusive so long as it reflects a reasonable basis for the calculation of the
amounts set forth therein and does not contain any manifest error. The Borrower
shall pay such Lender or the LC Issuing Lender the amount shown as due on any
such certificate within 10 days after receipt thereof.
(d) Failure or delay on the part of any Lender or the LC Issuing
Lender to demand compensation pursuant to this Section 2.13 shall not constitute
a waiver of such Lender's or the LC Issuing Lender's right to demand such
compensation; provided that the Borrower shall not be required to compensate a
Lender or the LC Issuing Lender pursuant to this Section 2.13 for any increased
costs or reductions incurred more than six months prior to the date that such
Lender or the LC Issuing Lender, as the case may be, notifies the Borrower of
the Change in Law giving rise to such increased costs or reductions and of such
Lender's or the LC Issuing Lender's intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the six-month period referred to above shall
be extended to include the period of retroactive effect thereof.
SECTION 2.14. Break Funding Payments. In the event of (a) the payment
of any principal of any Eurodollar Loan other than on the last day of an
Interest Period applicable thereto (including as a result of an Event of
Default), (b) the conversion of any Eurodollar Loan other than on the last day
of the Interest Period applicable thereto or (c) the failure to borrow, convert,
continue or prepay any Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice is permitted to be revocable
and
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is revoked in accordance herewith), then, in any such event, the Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event.
In the case of a Eurodollar Loan, the loss to any Lender attributable
to any such event shall be deemed to include an amount determined by such Lender
to be equal to the excess, if any, of
(i) the amount of interest that such Lender would pay for a
deposit equal to the principal amount of such Loan for the period (the
"Breakage Period") from the date of such payment, conversion, failure or
assignment to the last day of the then current Interest Period for such
Loan (or, in the case of a failure to borrow, convert or continue, the
duration of the Interest Period that would have resulted from such
borrowing, conversion or continuation) if the interest rate payable on
such deposit were equal to the Adjusted LIBO Rate for such Interest
Period,
over
(ii) the amount of interest that such Lender would earn on such
principal amount for the Breakage Period if such Lender were to invest
such principal amount for the Breakage Period at the interest rate that
would be bid by such Lender (or an affiliate of such Lender) for U.S.
dollar deposits from other banks in the eurodollar market at the
commencement of the Breakage Period.
A certificate of any Lender setting forth any amount or amounts that such Lender
is entitled to receive pursuant to this Section 2.14 shall be delivered to the
Borrower and shall be conclusive absent manifest error. The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.
SECTION 2.15. Taxes.
(a) Any and all payments by or on account of any obligation of the
Borrower hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrower shall be
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.15) the Administrative Agent, Lender or the LC Issuing
Lender (as the case may be) 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 Governmental Authority in accordance with applicable law.
(b) In addition the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
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(c) The Borrower shall indemnify the Administrative Agent, each
Lender and the LC Issuing Lender, within 10 days after written demand therefor,
for the full amount of any Indemnified Taxes or Other Taxes (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section 2.15) paid by the Administrative Agent, such
Lender or the LC Issuing Lender, as the case may be, and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Borrower by a Lender or the LC
Issuing Lender, or by the Administrative Agent on its own behalf or on behalf of
a Lender or the LC Issuing Lender, shall be conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Any Foreign Lender that is entitled at any time under then
current law to an exemption from or reduction of withholding tax under the law
of the jurisdiction in which the Borrower is located, or any treaty to which
such jurisdiction is a party, with respect to payments under this Agreement
shall deliver to the Borrower (with a copy to the Administrative Agent), on or
before Effective Date or such later date on which such Person becomes a Foreign
Lender and at the time or times prescribed by applicable law or reasonably
requested by the Borrower, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding or at a reduced rate.
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of
Set-Offs.
(a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of LC
Disbursements, or under Section 2.13, 2.14 or 2.15, or otherwise) prior to 12:00
noon, New York City time, on the date when due, in immediately available funds,
without set-off or counterclaim. Any amounts received after such time on any
date may, in the discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon. All such payments shall be made to the Administrative Agent at
such of its offices in New York City as shall be notified to the relevant
parties from time to time, except payments to be made directly to the LC Issuing
Lender as expressly provided herein and except that payments pursuant to
Sections 2.13, 2.14, 2.15, 3.03 and 10.03 shall be made directly to the Persons
entitled thereto. The Administrative Agent shall distribute any such payments
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. If any payment hereunder shall be due on a
day that is
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not a Business Day, the date for payment shall be extended to the next
succeeding Business Day, and, in the case of any payment accruing interest,
interest thereon shall be payable for the period of such extension. All payments
hereunder shall be made in U.S. dollars.
(b) If at any time insufficient funds are received by and available
to the Administrative Agent to pay fully all amounts of principal, unreimbursed
LC Disbursements, interest and fees then due hereunder, such funds shall be
applied (i) first, to pay interest and fees then due hereunder, ratably among
the parties entitled thereto in accordance with the amounts of interest and fees
then due to such parties, and (ii) second, to pay principal and unreimbursed LC
Disbursements then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal and unreimbursed LC Disbursements then
due to such parties.
(c) Except to the extent otherwise provided herein: (i) each
borrowing of Loans of a particular Class from the Lenders under Section 2.01
shall be made from the relevant Lenders, each payment of commitment fee under
Section 2.10 in respect of Commitments of a particular Class shall be made for
account of the relevant Lenders, and each termination or reduction of the amount
of the Commitments of a particular Class under Section 2.03 shall be applied to
the respective Commitments of such Class of the relevant Lenders, pro rata
according to the amounts of their respective Commitments of such Class; (ii)
Eurodollar Loans of any Class having the same Interest Period shall be allocated
pro rata among the relevant Lenders according to the amounts of their
Commitments of such Class (in the case of the making of Loans) or their
respective Loans of such Class (in the case of conversions and continuations of
Loans); (iii) each payment or prepayment by the Borrower of principal of Loans
of a particular Class shall be made for account of the relevant Lenders pro rata
in accordance with the respective unpaid principal amounts of the Loans of such
Class held by them; (iv) each payment by the Borrower of interest on Loans of a
particular Class shall be made for account of the relevant Lenders pro rata in
accordance with the amounts of interest on such Loans then due and payable to
the respective Lenders; and (v) each payment by the Borrower of participation
fees in respect of Letters of Credit shall be made for the account of the
Revolving Credit Lenders pro rata in accordance with the amount of participation
fees then due and payable to the Revolving Credit Lenders.
(d) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans (or participations in LC Disbursements) of any
Class resulting in such Lender receiving payment of a greater proportion of the
aggregate principal amount of its Loans (and participations in LC Disbursements)
of such Class and accrued interest thereon than the proportion of such amounts
received by any other Lender of any other Class, then the Lender receiving such
greater proportion shall purchase (for cash at face value) participations in the
Loans (and LC Disbursements) of the other Lenders to the extent necessary so
that the benefit of such payments shall be shared by all the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans (and participations in LC Disbursements); provided that
(i) if any such participations are purchased and all or any
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portion of the payment giving rise thereto is recovered, such participations
shall be rescinded and the purchase price restored to the extent of such
recovery, without interest, and (ii) the provisions of this paragraph shall not
be construed to apply to any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans (or
participations in LC Disbursements) to any assignee or participant, other than
to any Credit Party or any subsidiary or Affiliate thereof (as to which the
provisions of this paragraph shall apply). The Borrower consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
law, that any Lender acquiring a participation pursuant to the foregoing
arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
(e) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders or the LC Issuing Lender entitled thereto
(the "Applicable Recipient") hereunder that the Borrower will not make such
payment, the Administrative Agent may assume that the Borrower has made such
payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Applicable Recipient the amount due. In such
event, if the Borrower has not in fact made such payment, then each Applicable
Recipient severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Applicable Recipient with interest
thereon, for each day from and including the date such amount is distributed to
it to but excluding the date of payment to the Administrative Agent, at the
Federal Funds Effective Rate.
(f) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.04(d), 2.04(e), 2.05(b) or 2.16(e), then the
Administrative Agent may, in its discretion (notwithstanding any contrary
provision hereof), apply any amounts thereafter received by the Administrative
Agent for the account of such Lender to satisfy such Lender's obligations under
such Section until all such unsatisfied obligations are fully paid.
(g) Anything in this Agreement to the contrary notwithstanding, each
Lender hereby agrees with each other Lender that no Lender shall take any action
to protect or enforce its rights arising out of this Agreement or any promissory
notes prepared pursuant to Section 2.09(f) (including, without limitation,
exercising any rights of setoff) without first obtaining the prior written
consent of the Administrative Agent or the Required Lenders, it being the intent
of the Lenders that any such action to protect or enforce rights under this
Agreement and any promissory notes prepared pursuant to Section 2.09(f) shall be
taken in concert and at the direction or with the consent of the Administrative
Agent or the Required Lenders and not individually by a single Lender.
SECTION 2.17. Mitigation Obligations. Upon the earliest to occur of
(i) notice or knowledge by Lender of any event that could result in or provide a
basis for a request for compensation under Section 2.13 and a determination by
such Lender that it will request such compensation, (ii) a request by Lender for
compensation under Section 2.13, or
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(iii) the Borrower being required to pay any additional amount to any Lender or
any Governmental Authority for the account of any Lender pursuant to Section
2.15, then such Lender shall use reasonable efforts to designate a different
lending office for funding or booking its Loans hereunder or to assign its
rights and obligations, hereunder to another of its offices, branches or
affiliates, if, in the judgment of such Lender, such designation or assignment
(i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15,
as the case may be, in the future and (ii) would not subject such Lender to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
Lender; provided that such Lender shall not be required to make any such
designation or assignment unless the Borrower agrees to pay all reasonable
out-of-pocket costs and expenses incurred by any Lender in connection therewith.
ARTICLE III
Guarantee by Subsidiary Guarantors
SECTION 3.01. The Guarantee. The Subsidiary Guarantors hereby jointly
and severally guarantee to each Lender, the LC Issuing Lender and the
Administrative Agent and their respective successors and assigns the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the principal of and interest on the Loans made by the Lenders to
the Borrower, all LC Disbursements and all other amounts from time to time owing
to the Lenders, the LC Issuing Lender or the Administrative Agent by the
Borrower hereunder or under any other Loan Document, and all obligations of the
Borrower to any Lender under any Hedging Agreement, in each case strictly in
accordance with the terms thereof and including any interest accruing after the
commencement of any proceeding referred to in Article VIII (h) or (i), whether
or not allowed as a claim in such proceeding (such obligations being herein
collectively called the "Guaranteed Obligations"). The Subsidiary Guarantors
hereby further jointly and severally agree that if the Borrower shall fail to
pay in full when due (whether at stated maturity, by acceleration or otherwise)
any of the Guaranteed Obligations, the Subsidiary Guarantors will promptly pay
the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
by acceleration or otherwise) in accordance with the terms of such extension or
renewal.
SECTION 3.02. Obligations Unconditional. The obligations of the
Subsidiary Guarantors under Section 3.01 are absolute and unconditional, joint
and several, irrespective of the value, genuineness, validity, regularity or
enforceability of this Agreement, the other Loan Documents or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guarantee of or security for any of the
Guaranteed Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable
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discharge or defense of a surety or guarantor, it being the intent of this
Section 3.02 that the obligations of the Subsidiary Guarantors hereunder shall
be absolute and unconditional, joint and several, under any and all
circumstances. Without limiting the generality of the foregoing, it is agreed
that the occurrence of any one or more of the following shall not alter or
impair the liability of the Subsidiary Guarantors hereunder which shall remain
absolute and unconditional as described above:
(a) at any time or from time to time, without notice to the
Subsidiary Guarantors, the time for any performance of or compliance with
any of the Guaranteed Obligations shall be extended, or such performance
or compliance shall be waived;
(b) any of the acts mentioned in any of the provisions hereof or of
the other Loan Documents or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(c) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right hereunder or under
the other Loan Documents or any other agreement or instrument referred to
herein or therein shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(d) any lien or security interest granted to, or in favor of, the
Administrative Agent, the LC Issuing Lender or any Lender or Lenders as
security for any of the Guaranteed Obligations shall fail to be perfected.
The Subsidiary Guarantors hereby expressly waive diligence, presentment, demand
of payment, protest and all notices whatsoever, and any requirement that the
Administrative Agent, the LC Issuing Lender or any Lender exhaust any right,
power or remedy or proceed against the Borrower hereunder or under the other
Loan Documents or any other agreement or instrument referred to herein or
therein, or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations.
SECTION 3.03. Reinstatement. The obligations of the Subsidiary
Guarantors under this Article III shall be automatically reinstated if and to
the extent that for any reason any payment by or on behalf of the Borrower in
respect of the Guaranteed Obligations is rescinded or must be otherwise restored
by any holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in bankruptcy or reorganization or otherwise, and the Subsidiary
Guarantors jointly and severally agree that they will indemnify the
Administrative Agent, the LC Issuing Lender and each Lender on demand for all
reasonable costs and expenses (including fees of counsel) incurred by the
Administrative Agent, any Lender or the LC Issuing Lender in connection with
such rescission or restoration, including any such costs and expenses incurred
in defending against any claim alleging that such payment constituted a
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preference, fraudulent transfer or similar payment under any bankruptcy,
insolvency or similar law.
SECTION 3.04. Subrogation. Each Subsidiary Guarantor hereby waives
all rights of subrogation or contribution, whether arising by contract or
operation of law (including any such right arising under the Federal Bankruptcy
Code of 1978, as amended) or otherwise by reason of any payment by it pursuant
to the provisions of this Article III and further agrees, to the extent valid
under applicable law, with the Borrower for the benefit of each of its creditors
(including the LC Issuing Lender, each Lender and the Administrative Agent) that
any such payment by it shall constitute a dividend by such Subsidiary Guarantor
to the Borrower.
SECTION 3.05. Remedies. The Subsidiary Guarantors jointly and
severally agree that, as between the Subsidiary Guarantors on the one hand and
the Administrative Agent, the Lenders and the LC Issuing Lender on the other
hand, the obligations of the Borrower hereunder may be declared to be forthwith
due and payable as provided in Article VIII or Section 2.04(i), as applicable
(and shall be deemed to have become automatically due and payable in the
circumstances provided in Article VIII or Section 2.04(i), as applicable) for
purposes of Section 3.01 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against the Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by the
Borrower) shall forthwith become due and payable by the Subsidiary Guarantors
for purposes of Section 3.01.
SECTION 3.06. Instrument for the Payment of Money. Each Subsidiary
Guarantor hereby acknowledges that the guarantee in this Article III constitutes
an instrument for the payment of money, and consents and agrees that the LC
Issuing Lender, any Lender or the Administrative Agent, at its sole option, in
the event of a dispute by the Subsidiary Guarantors in the payment of any moneys
due hereunder, shall have the right to bring a motion-action under New York CPLR
Section 3213.
SECTION 3.07. Continuing Guarantee. The guarantee in this Article III
is a continuing guarantee, and shall apply to all Guaranteed Obligations
whenever arising.
SECTION 3.08. Rights of Contribution. The Subsidiary Guarantors
hereby agree, as between themselves, that if any Subsidiary Guarantor shall
become an Excess Funding Guarantor (as defined below) by reason of the payment
by such Subsidiary Guarantor of any Guaranteed Obligations, each other
Subsidiary Guarantor shall, on demand of such Excess Funding Guarantor (but
subject to the next sentence), pay to such Excess Funding Guarantor an amount
equal to such Subsidiary Guarantor's Pro Rata Share (as defined below and
determined, for this purpose, without reference to the properties, debts and
liabilities of such Excess Funding Guarantor) of the Excess Payment (as defined
below) in respect of such
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Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to any
Excess Funding Guarantor under this Section 3.08 shall be subordinate and
subject in right of payment to the prior payment in full of the obligations of
such Subsidiary Guarantor under the other provisions of this Article III and
such Excess Funding Guarantor shall not exercise any right or remedy with
respect to such excess until payment and satisfaction in full of all of such
obligations.
For purposes of this Section 3.08, (a) "Excess Funding Guarantor"
means, in respect of any Guaranteed Obligations, a Subsidiary Guarantor that has
paid an amount in excess of its Pro Rata Share of such Guaranteed Obligations,
(b) "Excess Payment" means, in respect of any Guaranteed Obligations, the amount
paid by an Excess Funding Guarantor in excess of its Pro Rata Share of such
Guaranteed Obligations and (c) "Pro Rata Share" means, for any Subsidiary
Guarantor, the ratio (expressed as a percentage) of (i) the amount by which the
aggregate fair saleable value of all properties of such Subsidiary Guarantor
(excluding any shares of stock of, or ownership interest in, any other
Subsidiary Guarantor) exceeds the amount of all the debts and liabilities of
such Subsidiary Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Subsidiary
Guarantor hereunder and any obligations of any other Subsidiary Guarantor that
have been Guaranteed by such Subsidiary Guarantor) to (ii) the amount by which
the aggregate fair saleable value of all properties of all of the Credit Parties
exceeds the amount of all the debts and liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities, but excluding the
obligations of the Borrower and the Subsidiary Guarantors hereunder and under
the other Loan Documents) of all of the Credit Parties, determined (x) with
respect to any Subsidiary Guarantor that is a party hereto on the Effective
Date, as of the Effective Date, and (y) with respect to any other Subsidiary
Guarantor, as of the date such Subsidiary Guarantor becomes a Subsidiary
Guarantor hereunder.
SECTION 3.09. General Limitation on Guarantee Obligations. In any
action or proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the obligations of any Subsidiary Guarantor under
Section 3.01 would otherwise, taking into account the provisions of Section
3.08, be held or determined to be void, invalid or unenforceable, or
subordinated to the claims of any other creditors, on account of the amount of
its liability under Section 3.01, then, notwithstanding any other provision
hereof to the contrary, the amount of such liability shall, without any further
action by such Subsidiary Guarantor, any Lender, the Administrative Agent or any
other Person, be automatically limited and reduced to the highest amount that is
valid and enforceable and not subordinated to the claims of other creditors as
determined in such action or proceeding.
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ARTICLE IV
Representations and Warranties
The Borrower and each Subsidiary Guarantor represents and warrants to
the Lenders, the LC Issuing Lender and the Administrative Agent, as to itself
and each of its Subsidiaries, that:
SECTION 4.01. Organization; Powers. The Borrower and each Subsidiary
is duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization. The Borrower and each Subsidiary has all requisite
power and authority under its organizational documents to carry on its business
as now conducted and, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
SECTION 4.02. Authorization; Enforceability. The Transactions are
within the corporate power of each Credit Party and have been duly authorized by
all necessary corporate and, if required, stockholder action on the part of such
Credit Party. Each of this Agreement and the other Loan Documents has been duly
executed and delivered by each Credit Party party thereto and constitutes a
legal, valid and binding obligation of such Credit Party, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.
SECTION 4.03. Governmental Approvals; No Conflicts. The Transactions
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, (b) will not violate any
applicable law, policy or regulation or the charter, by-laws or other
organizational documents of any Credit Party or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture,
agreement or other instrument binding upon any Credit Party, or any of its
assets, or give rise to a right thereunder to require any payment to be made by
any Credit Party, and (d) except for the Liens created by the Security
Documents, will not result in the creation or imposition of any Lien on any
asset of the Credit Parties.
SECTION 4.04. Financial Condition; No Material Adverse Change.
(a) The Borrower has heretofore delivered to the Lenders the
following financial statements:
(i) the respective audited consolidated balance sheet and statements
of income, retained earnings and cash flow of the Borrower and its
Consolidated
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Subsidiaries as of and for the fiscal years ended December 31, 1994 and
December 31, 1995, reported on by Coopers & Lybrand, independent public
accountants; and
(ii) the unaudited consolidated balance sheet and statements of
income, retained earnings and cash flow of the Borrower and its
Consolidated Subsidiaries as of and for the nine-month period ended
September 30, 1996, certified by a Financial Officer.
Such financial statements present fairly, in all material respects, the
consolidated financial position and results of operations and cash flows of the
Borrower and its Consolidated Subsidiaries as of such dates and for such periods
in accordance with GAAP, subject to year-end audit adjustments and the absence
of footnotes in the case of such unaudited statements.
(b) Since December 31, 1995, there has been no material adverse
change in the business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and its Consolidated Subsidiaries taken as a whole.
(c) None of the Borrowers nor any of its Subsidiaries has on the date
of this Agreement any contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments in each case that are material (as determined in
accordance with GAAP), except as referred to or reflected or provided for in the
balance sheets as at September 30, 1996 referred to above.
SECTION 4.05. Properties.
(a) Each of the Borrower and its Subsidiaries has good title to, or
valid leasehold interests in, all its real and personal property material to its
business, except for minor defects in title that do not materially interfere
with its ability to conduct its business as currently conducted or to utilize
such properties for their intended purposes.
(b) Except as set forth on Schedule 4.05 hereto, as of the date
hereof, (i) each of the Borrower and its Subsidiaries owns, or is licensed to
use, all trademarks, tradenames, copyrights, patents and other intellectual
property material to its business, and (ii) the conduct of the business of the
Borrower and its Subsidiaries does not infringe upon the rights of any other
Person, in both cases except for any such failure to own or have a license to
use, and except for any such infringements, that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. In the opinion of the Borrower, the matters set forth on Schedule 4.05
hereto, both individually and in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect.
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SECTION 4.06. Litigation and Environmental Matters.
(a) There are no actions, suits or proceedings by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of any
of the Credit Parties, threatened against or affecting, the Borrower or any
Subsidiary (i) as to which there is a reasonable possibility of an adverse
determination and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect (other
than the Disclosed Matters listed on Schedule 4.06) or (ii) that involve any of
the Loan Documents, the Tax Sharing Agreement or the Transactions.
(b) The Borrower and each of its Subsidiaries have obtained all
permits, licenses, registrations and other authorizations which are required
under all Environmental Laws, except to the extent failure to have any such
permit, license, registration or authorization could not reasonably be expected
to have a Material Adverse Effect. The Borrower and each of its Subsidiaries are
in compliance with the terms and conditions of all such permits, licenses,
registrations and authorizations, and are also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Environmental
Law or in any judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder except to the extent failure to comply could
not reasonably be expected to have a Material Adverse Effect. No action to
revoke any permit, license or other authorization, the lack of which could
reasonably be expected to have a Material Adverse Effect, is pending or
threatened in writing. In addition, except for the Disclosed Matters listed on
Schedule 4.06, as of the date of this Agreement:
(i) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed,
no penalty has been assessed and no investigation or review is pending or,
to the best knowledge of the Borrower, threatened by any governmental or
other entity with respect to any alleged failure by the Borrower or any
Subsidiary to have any permit, license or authorization required in
connection with the conduct of the business of the Borrower or any
Subsidiary or with respect to any handling generation, treatment, storage,
recycling, transportation, discharge or disposal, or any threatened
Release or Release of any Hazardous Materials generated by the Borrower or
any Subsidiary that has not been fully satisfied or discharged as of the
date hereof.
(ii) Neither the Borrower nor any Subsidiary has Released Hazardous
Material on any property now or previously owned or leased by the Borrower
or any Subsidiary in a manner or to an extent that it has, or may
reasonably be expected to have, a Material Adverse Effect; and to the best
knowledge of the Borrower after due inquiry, (w) no polychlorinated
biphenyl is present, (x) no asbestos is present, and (y) there are no
underground storage tanks, active or abandoned, at, or under any property
now or previously owned or leased by the Borrower or any Subsidiary,
during any
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period that the Borrower or any Subsidiary owned or leased such property
or, to the knowledge of the Borrower or any Subsidiary, prior thereto.
(iii) To the best knowledge of the Borrower after due inquiry,
neither the Borrower nor any Subsidiary has transported or arranged for
the transportation of any Hazardous Material to any location which is
listed or proposed for listing on the National Priorities List under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), or any similar state list.
(iv) No written notification of a Release of a Hazardous Material
has been filed by or on behalf of the Borrower or any Subsidiary and no
property now or previously owned or leased by the Borrower or any
Subsidiary is listed or, to the best knowledge of the Borrower, proposed
for listing on the National Priorities list promulgated pursuant to
CERCLA.
(v) To the best knowledge of the Borrower, no Liens have arisen
under or pursuant to any Environmental Laws on any of the real property or
properties owned or leased by the Borrower or any Subsidiary, and, to the
best knowledge of the Borrower, no government actions have been taken or
are in process which could subject any of such properties to such Liens
and neither the Borrower nor any Subsidiary would be required to place any
notice or restriction relating to the presence of Hazardous Materials at
any property owned by it in any deed to such property.
(vi) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by third party
consultants which are in the possession of the Borrower or any Subsidiary
in relation to any property or facility now or previously owned or leased
by the Borrower or any Subsidiary which have not been made available to
the Lenders except analyses conducted in the ordinary course of business
including without limitation, waste water monitoring and air emissions
measurements.
(vii) Neither the Borrower nor any Subsidiary has retained or
assumed any liabilities (contingent or otherwise) in respect of any
Environmental Claims (x) under the terms of any contract or agreement or
(y) by operation of law as a result of the sale of assets or stock, which
liabilities could reasonably be expected to have a Material Adverse
Effect.
(c) Since the date of this Agreement, there has been no change in the
status of the Disclosed Matters that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
Effect.
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SECTION 4.07. Compliance with Laws and Agreements. Each of the
Borrower and its Subsidiaries is in compliance with all laws, regulations,
policies and orders of any Governmental Authority applicable to it or its
property and all indentures, agreements and other instruments binding upon it or
its property, except where the failure to be in compliance, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 4.08. Investment and Holding Company Status. Neither the
Borrower nor any Subsidiary is (a) an "investment company" as defined in, or
subject to regulation under, the Investment Company Act of 1940, as amended, or
(b) a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935, as amended.
SECTION 4.09. Taxes. Each of the Credit Parties and their respective
subsidiaries has timely filed or caused to be filed all Tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes required
to have been paid by it, except (a) Taxes that are being contested in good faith
by appropriate proceedings and for which such Credit Party has set aside on its
books adequate reserves with respect thereto in accordance with GAAP or (b) to
the extent that the failure to do so could not reasonably be expected to result
in a Material Adverse Effect.
SECTION 4.10. ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
hereof, exceed by more than $13,000,000 the fair market value of the assets of
such Plan, and the present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of
Financial Accounting Standards No. 87) did not, as of the date hereof, exceed by
more than $13,000,000 the fair market value of the assets of all such
underfunded Plans.
SECTION 4.11. Disclosure. None of the financial statements,
certificates or other information (including, without limitation, the
Information Memorandum dated December, 1996 prepared by the Borrower in
contemplation hereof) furnished in writing by or on behalf of the Credit Parties
to the Administrative Agent or any Lender in connection with this Agreement or
delivered hereunder (as modified or supplemented by other information so
furnished) contain, as of the date hereof, any material misstatement of fact or
omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not materially
misleading; provided that, with respect to projected financial information, the
Borrower and its Subsidiaries represent only that such information was prepared
in good faith based upon assumptions believed to be reasonable at the time.
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SECTION 4.12. Capitalization. The authorized capital stock of the
Borrower consists, on the date hereof, of an aggregate of 1,000 shares
consisting of (i) 1,000 shares of common stock, par value $10.00 per share, of
which, as at the date hereof, 1,000 shares are duly and validly issued and
outstanding, each of which shares is fully paid and nonassessable. As of the
date hereof, (x) there are no outstanding Equity Rights with respect to the
Borrower and (y) there are no outstanding obligations of the Borrower or any
Subsidiary to repurchase, redeem, or otherwise acquire any shares of capital
stock of the Borrower nor are there any outstanding obligations of the Borrower
or any Subsidiary to make payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market value or equity value of the Borrower or any Subsidiary.
SECTION 4.13. Material Agreements and Liens.
(a) Schedule 4.13 is a complete and correct list, as of the date of
this Agreement, of each credit agreement, loan agreement, indenture, guarantee
or other arrangement providing for or otherwise relating to any Indebtedness of,
the Borrower or any Subsidiary (other than such arrangements between the
Borrower and a Subsidiary or between one or more Subsidiaries), the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed)
$100,000 (other than the Loan Documents) and, as of the date of this Agreement,
the aggregate principal or face amount outstanding or which may become
outstanding under each such arrangement is correctly described in Schedule 4.13.
(b) Schedule 4.13 hereto is a complete and correct list, as of the
date of this Agreement, of each Lien securing Indebtedness of any Person the
aggregate principal or face amount of which equals or exceeds (or may equal or
exceed) $100,000 and covering any property of the Borrower or any Subsidiary,
and the aggregate Indebtedness secured (or which may be secured) by each such
Lien and the Property covered by each such Lien is correctly described in
Schedule 4.13.
SECTION 4.14. Subsidiaries.
(a) Set forth in Schedule 4.14 is a complete and correct list of all
of the Subsidiaries of the Borrower as of the date hereof and of all Investments
held by the Borrower or any of its Subsidiaries in any joint venture or other
Persons of the date hereof together with, for each such Subsidiary, (i) the
jurisdiction of organization of such Subsidiary, (ii) each Person holding
ownership interests in such Subsidiary and (iii) the nature of the ownership
interests held by each such Person and the percentage of ownership of such
Subsidiary represented by such ownership interests. Except as disclosed in
Schedule 4.14, (x) the Borrower and its respective subsidiaries owns, free and
clear of Liens (other than Liens created pursuant to the Security Documents),
and has the unencumbered right to vote, all outstanding ownership interests in
each Person and all Investments shown to be held by it in Schedule 4.14, (y) all
of the issued and outstanding capital stock of each such Person organized as a
corporation is validly issued, fully paid and nonassessable and (z) there are no
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outstanding Equity Rights with respect to such Person. Except as set forth on
Schedule 4.14, all of the capital stock of each of the Foreign Subsidiaries that
is owned, directly or indirectly, by the Borrower is owned, directly or
indirectly, by Rheox International.
(b) Except as provided in the arrangements described on Schedule 4.13
or on Schedule 4.14, as of the date of this Agreement, none of the Subsidiaries
of the Borrower is subject to any indenture, agreement, instrument or other
arrangement containing any provision of the type described in Section 7.07.
SECTION 4.15. Certain Documents. The Borrower heretofore or on the
date hereof has furnished to the Administrative Agent true and complete copies
of (a) the Tax Sharing Agreement, as amended and in effect on the date hereof
or, if not in effect on the date hereof, in substantially the form in which such
Tax Sharing Agreement will be executed, (b) each other Ancillary Agreement in
effect on the date hereof or if not in effect on the date hereof, in
substantially the form in which such Ancillary Agreement will be executed and
(c) the Restructuring Documents, as amended and in effect on the date hereof.
ARTICLE V
Conditions
SECTION 5.01. Effective Date. The amendment and restatement of the
Existing Credit Agreement provided for herein shall not become effective until
the date on which each of the following conditions is satisfied (or waived in
accordance with Section 10.02):
(a) Counterparts of Agreement. The Administrative Agent (or Special
Counsel) shall have received from each party hereto either (i) a
counterpart of this Agreement signed on behalf of such party or (ii)
written evidence satisfactory to the Administrative Agent (which may
include telecopy transmission of a signed signature page of this
Agreement) that such party has signed a counterpart of this Agreement.
(b) Opinions of Counsel to Credit Parties and NL. The Administrative
Agent (or Special Counsel) shall have received a favorable written opinion
(addressed to the Administrative Agent and the Lenders and dated the
Effective Date) of (i) Bartlit, Beck, Herman, Palenchar & Scott, counsel
to the Credit Parties, substantially in the form of Exhibit B, and
covering such other matters relating to the Credit Parties, this
Agreement, the other Loan Documents or the Transactions as the Required
Lenders shall request and (ii) counsel to the Borrower in the states where
the properties covered by the Mortgage and each Existing Mortgage is
located, satisfactory to the Administrative Agent in form and substance
(and each Credit Party hereby requests such counsel to deliver such
opinion).
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(c) Opinion of Special Counsel. The Administrative Agent shall have
received a favorable written legal opinion (addressed to the
Administrative Agent and the Lenders and dated the Effective Date) of
Special Counsel, substantially in the form of Exhibit C (and the
Administrative Agent requests Special Counsel to deliver such opinion).
(d) Corporate Matters. The Administrative Agent (or Special Counsel)
shall have received such documents and certificates as the Administrative
Agent or Special Counsel may reasonably request relating to the
organization, existence and good standing of each Credit Party and NL, the
authorization of the Transactions and any other legal matters relating to
the Credit Parties, NL, this Agreement, the other Loan Documents or the
Transactions, all in form and substance reasonably satisfactory to the
Administrative Agent and its counsel.
(e) Financial Officer Certificate. The Administrative Agent (or
Special Counsel) shall have received a certificate, dated the Effective
Date and signed by the President, a Vice President or a Financial Officer
of the Borrower, confirming compliance with the conditions set forth in
paragraphs (a) and (b) of Section 5.02.
(f) Notes. The Administrative Agent (or Special Counsel) shall have
received for each Lender that shall have requested a promissory note, a
duly completed and executed promissory note for such Lender.
(g) NL Pledge Agreement. The Administrative Agent (or Special
Counsel) shall have received (i) from NL a counterpart of the NL Pledge
Agreement signed on behalf of NL and (ii) the stock certificates
identified under the name of NL in Annex 1 thereto, accompanied by undated
stock powers executed in blank. In addition, NL shall have taken such
other action (including delivering to the Administrative Agent, for
filing, appropriately completed and duly executed copies of Uniform
Commercial Code financing statements) as the Administrative Agent shall
have requested in order to perfect the security interests created pursuant
to the NL Pledge Agreement to give effect to the priority contemplated
therefor.
(h) Security Agreement. The Administrative Agent (or Special Counsel)
shall have received (i) from the Borrower and each Subsidiary Guarantor, a
counterpart of the Security Agreement signed on behalf of such Credit
Party and (ii) the stock certificates identified under the name of such
Credit Party in Annex 1 thereto, accompanied by undated stock powers
executed in blank. In addition, each of the Borrower and the Subsidiary
Guarantors shall have taken such other action (including delivering to the
Administrative Agent, for filing, appropriately completed and duly
executed copies of Uniform Commercial Code financing statements) as the
Administrative Agent shall have requested in order to perfect the security
interests
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created pursuant to the Security Agreement to give effect to the priority
contemplated therefor.
(i) Mortgage and Title Insurance. The Administrative Agent (or
Special Counsel) shall have received (i) from the Borrower, a counterpart
of the Mortgage signed on behalf of the Borrower, (ii) one or more
mortgagee policies of title insurance on forms of and issued by one or
more title companies satisfactory to the Administrative Agent (the "Title
Companies"), insuring the validity and priority of the Liens created under
the Mortgage for and in amounts satisfactory to the Administrative Agent,
subject only to such exceptions as are satisfactory to the Administrative
Agent and containing such affirmative coverage and endorsements as the
Lenders may require and, to the extent necessary under applicable law, for
filing in the appropriate county land office(s), Uniform Commercial Code
financing statements covering fixtures, in each case appropriately
completed and duly executed, (iii) an as-built survey of recent date of
the facilities to be covered by the Mortgage, showing such matters as may
be required by the Administrative Agent, which surveys shall be in form
and content acceptable to the Administrative Agent, and certified to the
Administrative Agent and the Title Companies, and shall have been prepared
by a registered surveyor acceptable to the Administrative Agent, and (iv)
certified copies of permanent and unconditional certificates of occupancy
(or, if it is not the practice to issue certificates of occupancy in the
jurisdiction in which the facilities to be covered by the Mortgage is
located, then such other evidence reasonably satisfactory to each Lender)
permitting the fully functioning operation and occupancy of each such
facility and of such other permits as the Administrative Agent may request
necessary for the use and operation of each such facility issued by the
respective Governmental Authorities having jurisdiction over each such
facility. In addition, the Borrower shall have paid to the Title Companies
all expenses and premiums of the Title Companies in connection with the
issuance of such policies and in addition shall have paid to the Title
Companies an amount equal to the recording and stamp taxes payable in
connection with recording the Mortgage in the appropriate county land
office(s).
(j) Mortgage Amendments. The Administrative Agent (or Special
Counsel) shall have received (i) from any Credit Party party to any
Existing Mortgage, a counterpart of a Mortgage Amendment signed on behalf
of such Credit Party and amending such Mortgage and (ii) commitments for
title insurance policies or endorsements to existing title insurance
policies in a form acceptable to the Administrative Agent insuring the
validity and priority of the Liens created under each of the Existing
Mortgages (as amended by the Mortgage Amendments) for and in amounts
satisfactory to the Administrative Agent, subject only to such exceptions
as are satisfactory to the Agent and containing such affirmative coverage
and endorsements as the Lenders may require and, to the extent necessary
under applicable law, for filing in the appropriate county and offices,
Uniform Commercial Code financing statements covering fixtures, in each
case appropriately completed and duly
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executed. In addition, the applicable Credit Parties shall have (x) caused
to be delivered to the applicable title companies such affidavits and
other documents required by such title companies, including, if required
by the respective title companies in order to provide title insurance
coverage acceptable to the Administrative Agent, a re-certification by a
registered surveyor acceptable to the applicable title company of as-built
surveys of each of the facilities covered by the Existing Mortgages, which
surveys shall be in form and content acceptable to the applicable title
company and certified to the Administrative Agent and the applicable title
insurance company, necessary to omit from the title insurance policies or
endorsements thereto the standard survey exception and (y) caused to be
paid to the applicable title insurance company all expenses and premiums
in connection with the issuance of the title insurance and an amount equal
to the recording and stamp taxes payable in connection with recording each
Mortgage Amendment in the appropriate county land office.
(k) Intercompany Note Subordination Agreement. The Administrative
Agent (or Special Counsel) shall have received (i) from each of NL and
Rheox, Inc., a counterpart of the Intercompany Note Subordination
Agreement signed on behalf of NL and Rheox Inc.
(l) Insurance. The Administrative Agent (or Special Counsel) shall
have received certificates of insurance evidencing the existence of all
insurance required to be maintained by the Borrower and its Subsidiaries
pursuant to Section 6.06 and the designation of the Administrative Agent
as the loss payee thereunder to the extent required by Section 6.06 in
respect of all insurance covering tangible property, such certificates to
be in such form and contain such information as is specified in Section
6.06.
(m) Other Loan Documents. The Administrative Agent (or Special
Counsel) shall have received (i) from the Borrower and each Subsidiary
Guarantor, a counterpart of the Conditional Assignment of and Security
Interest in Patent Rights, the Conditional Assignment of and Security
Interest in Trademark Rights and the Copyright Security Agreement signed
on behalf of such Credit Party. In addition, each of the Borrower and the
Subsidiary Guarantors shall have taken such other action (including
delivering to the Administrative Agent, for filing, appropriately
completed and duly executed copies of Uniform Commercial Code financing
statements) as the Administrative Agent shall have requested in order to
perfect the security interests created pursuant to the Security Agreement
to give effect to the priority contemplated therefor.
(n) Solvency Analysis. The Administrative Agent (or Special Counsel)
shall have received (i) analyses from Valuation Research Corporation, or
any other firm of independent solvency analysts of nationally recognized
standing, to the effect that, as
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of the Effective Date and after giving effect to the making of the Loans
hereunder and to the other transactions contemplated hereby, (x) the
aggregate value of all properties of the Borrower and its Subsidiaries at
their present fair saleable value (i.e., the amount which may be realized
within a reasonable time, considered to be six months to one year, either
through collection or sale at the regular market value, conceiving the
latter as the amount which could be obtained for the property in question
within such period by a capable and diligent businessman from an
interested buyer who is willing to purchase under ordinary selling
conditions), exceeds the amount of all the debts and liabilities
(including contingent, subordinated, unmatured and unliquidated
liabilities) of the Borrower and its Subsidiaries, (y) the Borrower and
its Subsidiaries will not, on a consolidated basis, have an unreasonably
small capital with which to conduct their business operations as
heretofore conducted and (z) the Borrower and its Subsidiaries will have,
on a consolidated basis, sufficient cash flow to enable them to pay their
debts as they mature and (ii) a certificate from a Financial Officer of
the Borrower certifying that the financial projections were at the time
made, and on the Effective Date are, based on reasonable assumptions and
are accurately computed based on such assumptions, and containing such
other certifications relating to the valuation analyses as the
Administrative Agent may reasonably request.
(o) Financial Projections. The Administrative Agent shall have
received financial projections prepared in good faith and based on
reasonable assumptions by a Financial Officer, satisfactory in scope and
substance to the Lenders, as to the annual financial results of the
Borrower and its Subsidiaries for a period of seven years after the
Effective Date.
(p) Ancillary Agreements. The Administrative Agent (or Special
Counsel) shall have received (i) copies of each of the Ancillary
Agreements, including, but not limited to, the Tax Sharing Agreement as
executed and delivered by the parties thereto, and (ii) a certificate from
a senior officer of the Borrower to the effect that such copies are true
and complete copies the Ancillary Agreements as in effect on the Effective
Date.
(q) Other Documents. The Administrative Agent shall have received
such other documents as the Administrative Agent or any Lender or Special
Counsel shall have reasonably requested.
(r) Amounts Owing under the Existing Credit Agreement. The
Administrative Agent shall have received evidence that the Borrower shall
have paid or provided for the payment to the Agent under the Existing
Credit Agreement the principal amount of all loans outstanding thereunder
and all accrued and unpaid interest, fees and expenses owing by the
Borrower thereunder.
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(s) Fees and Expenses. The Administrative Agent shall have received
all fees and other amounts due and payable on or prior to the Effective
Date, including, to the extent invoiced, reimbursement or payment of all
legal fees and expenses and other out-of-pocket expenses required to be
reimbursed or paid by the Borrower hereunder.
(t) Special Dividend. The Administrative Agent shall have received a
certificate of a Financial Officer of the Borrower, dated the Effective
Date, confirming that the Special Dividend, in the amount of $30,000,000,
will be paid on the Effective Date.
The Administrative Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing, the amendment and restatement of the Existing Credit Agreement
contemplated hereby shall not become effective unless each of the foregoing
conditions is satisfied (or waived pursuant to Section 10.02) at or prior to
3:00 p.m., New York City time, on February 28, 1997 (and, in the event such
conditions are not so satisfied or waived, the Commitments shall terminate at
such time).
SECTION 5.02. Each Extension of Credit. The obligation of each Lender
to make a Loan on the occasion of any Borrowing, and of the LC Issuing Lender to
issue, amend, renew or extend any Letter of Credit, is subject to the
satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties of each Credit Party set forth in this Agreement and the other
Loan Documents, and the representations and warranties of NL set forth in
the NL Pledge Agreement, shall be true and correct on and as of the date
of such Borrowing, or (as applicable) the date of issuance, amendment,
renewal or extension of such Letter of Credit, both before and after
giving effect thereto and to the use of the proceeds thereof (or, if any
such representation or warranty is expressly stated to have been made as
of a specific date, such representation or warranty shall be true and
correct as of such specific date).
(b) No Defaults. At the time of such Borrowing, and based upon the
intended use thereof and immediately after giving effect to such Borrowing
and the intended use thereof, or (as applicable) the date of issuance,
amendment, renewal or extension of such Letter of Credit, no Default shall
have occurred and be continuing.
Each Borrowing Request, or request for issuance, amendment, renewal or extension
of a Letter of Credit, shall be deemed to constitute a representation and
warranty by the Borrower (both as of the date of such Borrowing Request, or
request for issuance, amendment, renewal or extension, and as of the date of the
related Borrowing or issuance, amendment, renewal or extension) as to the
matters specified in paragraphs (a) and (b) of this Section 5.02.
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ARTICLE VI
Affirmative Covenants
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full and all Letters of Credit shall have expired or terminated and
all LC Disbursements shall have been reimbursed, each of the Borrower and the
Subsidiary Guarantors covenants and agrees with the Lenders that:
SECTION 6.01. Financial Statements and Other Information. The
Borrower will furnish to the Administrative Agent and each Lender:
(a) as soon as available and in any event within 105 days after the
end of each fiscal year of the Borrower:
(i) consolidated and consolidating statements of income and
retained earnings and consolidated statements of cash flow of the
Borrower and its Subsidiaries for such fiscal year and the related
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as at the end of such fiscal year, setting forth in each
case in comparative form with respect to consolidated statements
only, the corresponding consolidated figures for the preceding fiscal
year,
(ii) an opinion of independent certified public accountants of
recognized national standing (without a "going concern" or like
qualification or exception and without any qualification or exception
as to the scope of such audit) stating that said consolidated
financial statements referred to in the preceding clause (i) present
fairly, in all material respects, the consolidated financial
condition and consolidated results of operations of the Borrower and
its Subsidiaries as at the end of, and for, such fiscal year in
conformity with generally accepted accounting principles, and
(iii) a certificate of a Financial Officer stating that said
consolidating financial statements referred to in the preceding
clause (i) present fairly, in all material respects, the financial
condition and results of operations on a consolidating basis of the
Borrower and of each of its Subsidiaries, in each case in accordance
with generally accepted accounting principles, consistently applied,
as at the end of, and for, such fiscal year;
(b) as soon as available and in any event within 60 days after the
end of each of the first three quarterly fiscal periods of each fiscal
year of the Borrower:
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(i) consolidated statements of income and retained earnings
and consolidated statements of cash flow of the Borrower and its
Subsidiaries for such period and for the period from the beginning of
the respective fiscal year to the end of such period, and the related
consolidated balance sheet of the Borrower and its Subsidiaries as at
the end of such period, setting forth in each case in comparative
form, the corresponding consolidated figures for the corresponding
period in the preceding fiscal year (except that, in the case of
balance sheets, such comparison shall be to the last day of the prior
fiscal year),
(ii) a certificate of a Financial Officer, which certificate
shall state that said financial statements referred to in the
preceding clause (i) present fairly, in all material respects, the
consolidated financial condition and results of operations of the
Borrower and its Subsidiaries;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Financial Officer (the
"Financial Certificate") (i) certifying as to whether a Default has
occurred and, if a Default has occurred, specifying the details thereof
and any action taken or proposed to be taken with respect thereto, (ii)
setting forth reasonably detailed calculations demonstrating compliance
with Section 7.08, including a calculation of the Leverage Ratio as at the
last day of the fiscal quarter or fiscal year, as the case may be, in
respect of which such financial statements are delivered, and setting
forth a reasonably detailed calculation of EBITDA for (x) in the case of
financial statements delivered under clause (a) above, the fiscal year in
respect of which such financial statements are being delivered and (y) in
the case of financial statements delivered under clause (b) above, the
period of the four consecutive fiscal quarters ending on the last day of
the fiscal quarter in respect of which such financial statements are being
delivered and (iii) stating whether any material change in GAAP or in the
application thereof has been adopted by the Borrower since the date of the
audited financial statements referred to in Section 4.04 and, if any such
change has been adopted by the Borrower, specifying the effect of such
change on the financial statements accompanying such certificate;
(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained knowledge during
the course of their examination of such financial statements of any
Default (which certificate may be limited to the extent required by
accounting rules or guidelines);
(e) within 105 days following the last day of each fiscal year of the
Borrower, commencing with fiscal year 1997, a report of a qualified
employee or agent (familiar with the identification of toxic and hazardous
substances) stating that, except as expressly described in such report, to
the best of such Person's knowledge, after due
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inquiry, each of the Borrower and its Subsidiaries is, as of the last day
of such fiscal year, in compliance with all applicable Environmental Laws
(except to the extent failure so to comply could not reasonably be
expected to have a Material Adverse Effect); and
(f) not later than April 15 of each year, commencing with April 15,
1998, financial projections prepared in good faith based on reasonable
assumptions by a Financial Officer, of the projected annual consolidated
financial statements of the Borrower and its Subsidiaries through the
period ending on December 31, 2003;
(g) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrower or any Subsidiary, or compliance with the terms of this
Agreement, as the Administrative Agent or any Lender may reasonably
request.
SECTION 6.02. Notices of Material Events. The Borrower will furnish
to the Administrative Agent and each Lender prompt written notice of the
following:
(a) the occurrence of any Default describing the same in reasonable
detail and describing the steps being taken to remedy same;
(b) the filing or commencement of any action, suit or proceeding by
or before any arbitrator or Governmental Authority against or affecting
the Borrower, any Subsidiary that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event that, alone or together with
any other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate
amount exceeding $2,000,000; and
(d) any other event that results in, or could reasonably be expected
to result in, a Material Adverse Effect.
Each notice delivered under this Section 6.02 shall be accompanied by a
statement of a Financial Officer or other executive officer of the Borrower
setting forth the details of the event or development requiring such notice and
any action taken or proposed to be taken with respect thereto.
SECTION 6.03. Existence; Conduct of Business. The Borrower will, and
will cause each of its Subsidiaries (other than Inactive Subsidiaries) to, do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence and the rights, licenses, permits, privileges and
franchises material to the conduct of its business, except to the extent the
failure to preserve, renew and keep in full force and effect any thereof
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could not reasonably be expected to have a Material Adverse Effect; provided
that the foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 7.03.
SECTION 6.04. Payment of Obligations. The Borrower will, and will
cause each of its Subsidiaries to, pay its obligations, including Tax
liabilities, that, if not paid, could result in a Material Adverse Effect before
the same shall become delinquent or in default, except where (a) the validity or
amount thereof is being contested in good faith by appropriate proceedings, (b)
the Borrower or such Subsidiary has set aside on its books adequate reserves
with respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 6.05. Maintenance of Properties. The Borrower will, and will
cause each of its Subsidiaries to, keep and maintain all property material to
the conduct of its business in good working order and condition, ordinary wear
and tear excepted, except where the failure to so maintain such properties could
not reasonably be expected to have a Material Adverse Effect.
SECTION 6.06. Maintenance of Insurance. The Borrower will, and will
cause each of its Subsidiaries to, keep insured by financially sound and
reputable insurers all property of a character usually insured by corporations
engaged in the same or similar business similarly situated against loss or
damage of the kinds and in the amounts customarily insured against by such
corporations and carry such other insurance as is usually carried by such
corporations, provided that in any event the Borrower will maintain (with
respect to itself and each of its Subsidiaries):
(a) Property Insurance -- insurance against loss or damage covering
all of the tangible real and personal property and improvements of the
Borrower and each of its Subsidiaries by reason of any Peril (as defined
below) in such amounts (subject to reasonable deductibles) as shall be
reasonable and customary and sufficient to avoid the insured named therein
from becoming a co-insurer of any loss under such policy but in any event
in an amount (i) in the case of fixed assets and equipment, at least equal
to 100% of the actual replacement cost of such assets, subject to
deductibles as aforesaid and (ii) in the case of inventory, not less than
the fair market value thereof, subject to deductibles as aforesaid.
Without limiting the foregoing, the Borrower shall in any event cover any
property constituting improved real estate located in a "special flood
hazard area" in a "participating community" as described in 12 CFR Part 22
with flood insurance in an amount at least equal to the lesser of the
outstanding principal amount of the Obligations or the replacement cost of
that property in the "special flood hazard area".
(b) Automobile Liability Insurance for Bodily Injury and Property
Damage --insurance in respect of all vehicles (whether owned, hired or
rented by the Borrower or
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any of its Subsidiaries) at any time located at, or used in connection
with, its properties or operations against liability for bodily injury and
property damage in such amounts as are then customary for vehicles used in
connection with similar properties and businesses, but in any event to the
extent required by applicable law.
(c) Comprehensive General Liability Insurance -- insurance against
claims for bodily injury, death or property damage occurring on, in or
about the properties (and adjoining streets, sidewalks and waterways) of
the Borrower and its Subsidiaries, in such amounts as are then customary
for property similar in use in the jurisdictions where such properties are
located.
(d) Workers' Compensation Insurance -- workers' compensation
insurance (including Employers' Liability Insurance) to the extent
required by applicable law.
(e) Product Liability Insurance -- insurance against claims for
bodily injury, death or property damage resulting from the use of products
sold by the Borrower or any of its Subsidiaries in such amounts as are
then customarily maintained by responsible persons engaged in businesses
similar to that of the Borrower and its Subsidiaries.
(f) Business Interruption Insurance -- insurance against loss of
operating income (subject to a deductible, or self-insured amount, not in
excess of $1,000,000) by reason of any Peril.
(g) Other Insurance -- such other insurance, in each case as
generally carried by owners of similar properties in the jurisdictions
where such properties are located, in such amounts and against such risks
as are then customary for property similar in use.
Such insurance shall be written by financially responsible companies selected by
the Borrower and having an A.M. Best rating of "A+" or better and being in a
financial size category of XIV or larger, or by other companies reasonably
acceptable to the Administrative Agent (including an insurer that is an
Affiliate of the Borrower provided that all insurance with such Affiliate is
reinsured on terms (including an insolvency provision) and with reinsurers
reasonably acceptable to the Administrative Agent), and (other than workers'
compensation) shall name the Administrative Agent as an additional insured to
the extent of the Borrower's liability under this Agreement, or loss payee, as
its interests may appear. Each policy referred to in this Section 6.06 shall
provide that it will not be canceled or reduced, or allowed to lapse without
renewal, except after not less than 30 days' written notice to the
Administrative Agent and shall also provide that the interests of the
Administrative Agent, the Lenders and the LC Issuing Lender shall not be
invalidated by any act or negligence of the Borrower or any Person having an
interest in any property covered by any mortgage nor by occupancy or use of any
such property for purposes more hazardous than permitted by such policy nor by
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any foreclosure or other proceedings relating to such property. The Borrower
will advise the Administrative Agent promptly of any policy cancellation,
material reduction or other material amendment.
On or before the Effective Date the Borrower will deliver to the
Administrative Agent certificates of insurance satisfactory to the
Administrative Agent evidencing the existence of all insurance required to be
maintained by the Borrower hereunder setting forth the respective coverages,
limits of liability, carrier, policy number and period of coverage and showing
that such insurance is in effect. Thereafter, on or before the date 30 days
after the expiration or renewal date of each insurance policy required hereunder
the Borrower will deliver to the Administrative Agent certificates of insurance
evidencing that all insurance required to be maintained by the Borrower
hereunder is in effect. In addition, the Borrower will not modify in any
material (in the reasonable judgment of the Borrower) respect any of the
provisions of any policy with respect to property insurance, without notifying
the Administrative Agent and providing such information in respect thereof as
the Administrative Agent may request. The Borrower will not obtain or carry
separate insurance concurrent in form or contributing in the event of loss with
that required by this Section 6.06 unless the Administrative Agent is an
additional insured thereunder, with loss payable as provided herein. The
Borrower will immediately notify the Administrative Agent whenever any such
separate insurance is obtained and shall deliver to the Administrative Agent the
certificates evidencing the same.
Without limiting the obligations of the Borrower under the foregoing
provisions of this Section 6.06, in the event the Borrower shall fail to
maintain in full force and effect insurance as required by the foregoing
provisions of this Section 6.06, then the Administrative Agent may, but shall
have no obligation so to do, procure insurance covering the interests of the
Administrative Agent, the Lenders and the LC Issuing Lender in such amounts and
against such risks as the Administrative Agent (or the Required Lenders) shall
deem appropriate and the Borrower shall reimburse the Administrative Agent in
respect of any reasonable premiums paid by the Administrative Agent in respect
thereof.
For purposes hereof, the term "Peril" means, collectively, fire,
lightning, flood, windstorm, hail, earthquake, explosion, riot and civil
commotion, vandalism and malicious mischief, damage from aircraft, vehicles and
smoke and all other perils covered by the "all-risk" endorsement then in use in
the jurisdictions where the properties of the Borrower and its Subsidiaries are
located.
The requirements of this Section 6.06 shall apply only to insurance
coverage with respect to the Borrower and its Subsidiaries and shall not affect
or limit any insurance, amendments, cancellations or any changes with regard to
insurance coverage for other entities insured under policies that also cover the
Borrower and its Subsidiaries.
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SECTION 6.07. Books and Records; Inspection Rights. The Borrower
will, and will cause each of its Subsidiaries to, keep proper books of record
and account in which full, true and correct entries are made of all dealings and
transactions in relation to its business and activities. Subject to Section
10.12, the Borrower will, and will cause each of its Subsidiaries to, permit any
representatives designated by the Administrative Agent or any Lender, upon
reasonable prior notice, to visit and inspect its properties, to examine and
make extracts from its books and records, and to discuss its affairs, finances
and condition with its officers and independent accountants, all at such
reasonable times and as often as reasonably requested.
SECTION 6.08. Fiscal Year. The Borrower and its Subsidiaries will not
change the last day of their fiscal year from December 31 of each year, or the
last days of the first three fiscal quarters in each of their fiscal years from
March 31, June 30, and September 30 of each year, respectively.
SECTION 6.09. Compliance with Laws. The Borrower will, and will cause
each of its Subsidiaries (other than Inactive Subsidiaries) to, comply with all
laws, rules, regulations and orders of any Governmental Authority applicable to
it or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 6.10. Use of Proceeds.
(a) Term Loans. The proceeds of the Term Loans shall be used solely
(i) to pay certain Indebtedness of the Borrower, including interest thereon,
outstanding on the date hereof listed on Schedule 6.10, (ii) to finance, on the
Effective Date, the payment of $15,000,000 of the Special Dividend and (iii) to
pay related fees and expenses of the Borrower. The Borrower shall repay in full
the indebtedness evidenced by the Subordinated Note on the Effective Date.
(b) Revolving Credit Loans. The proceeds of the Revolving Credit
Loans shall be used solely (i) for working capital and general corporate
purposes and (ii) to finance, on the Effective Date, the payment, in a single
installment, of $15,000,000 of the Special Dividend.
No part of the proceeds of any Loan will be used, whether directly or
indirectly, for any purpose that entails a violation of any of the Regulations
of the Board, including Regulations G, U and X.
SECTION 6.11. Hedging Agreements. Within 120 days after the Effective
Date, the Borrower will enter into and, thereafter maintain in full force and
effect for a period at all times of at least four years, one or more Hedging
Agreements with one or more of the
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Lenders (and/or with a bank or other financial institution having capital,
surplus and undivided profits of at least $500,000,000), that satisfy the
following requirements:
(a) the notional principal amount of such Hedging Agreement(s), shall
be at least equal to $50,000,000; and
(b) each such Hedging Agreement shall enable the Borrower, as at any
date, to protect itself in a manner reasonably satisfactory to the
Required Lenders against interest rate fluctuations.
SECTION 6.12. Certain Obligations Respecting Subsidiaries and
Collateral Security.
(a) Subsidiary Guarantors. The Borrower shall take such action, and
shall cause each of its Subsidiaries to take such action, from time to time as
shall be necessary to ensure that all Domestic Subsidiaries (other than Inactive
Subsidiaries) are Subsidiary Guarantors, and, thereby, "Credit Parties"
hereunder and under the Security Agreement. Without limiting the generality of
the foregoing, in the event that the Borrower shall form or acquire any new
Domestic Subsidiary after the date hereof which the Borrower or such Subsidiary
anticipates will not be an Inactive Subsidiary (or in the event that any
theretofore Inactive Subsidiary that is a Domestic Subsidiary shall cease to be
an Inactive Subsidiary), the Borrower will, and will cause each of its
Subsidiaries to, cause such new Domestic Subsidiary (or such theretofore
Inactive Subsidiary) within ten Business Days of such formation or acquisition
notify the Administrative Agent of such formation or acquisition and promptly
take all such actions as the Administrative Agent may request to cause such
Subsidiary to become a "Subsidiary Guarantor" (and thereby, a "Credit Party")
hereunder and under the Security Agreement pursuant to a written instrument in
form and substance reasonably satisfactory to the Administrative Agent, to
become a party to the Security Agreement and to deliver such proof of corporate
action, incumbency of officers, opinions of counsel and other documents
(including Uniform Commercial Code Financing Statements) as are consistent with
those delivered by Credit Party pursuant to Section 5.01 or as the Required
Lenders or the Administrative Agent shall have requested.
(b) Ownership of Subsidiaries. The Borrower will, and will cause each
of its Subsidiaries to, take such action from time to time as shall be necessary
to ensure that the Borrower and each of its Subsidiaries at all times owns
(subject only to the Lien of the Security Agreement) at least the same
percentage of the issued and outstanding shares of each class of stock of or
other ownership interest in each of its Subsidiaries as is owned on the date
hereof (except as otherwise permitted by Section 7.03 and subject to Section
7.11). Without limiting the generality of the foregoing, none of the Borrower
nor any of its Subsidiaries shall sell, transfer or otherwise dispose of any
shares of stock of or other ownership interest in any Subsidiary owned by them,
nor permit any Subsidiary to issue any shares of stock of any class whatsoever
to any Person (except as otherwise permitted by
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Section 7.03 and, subject to Section 7.11, to the Borrower or a Subsidiary). In
the event that any such additional shares of stock or other ownership interest
shall be issued by any Domestic Subsidiary, the respective Credit Party agrees
forthwith to deliver to the Administrative Agent pursuant to the Security
Agreement the certificates evidencing such shares of stock, accompanied by
undated stock powers duly executed in blank and shall take such other action as
the Administrative Agent shall request to perfect the security interest created
therein pursuant to the Security Agreement.
SECTION 6.13. Environmental Laws and Permits. Without limiting the
Borrower's obligations under Section 6.09, the Borrower will, and will cause
each of its Subsidiaries to, (a) comply in all material respects with all
Environmental Laws now or hereafter applicable to the Borrower and its
Subsidiaries, (b) when and to the extent required by any Governmental Authority
after exhaustion of all available administrative and judicial remedies, carry
out environmental investigatory and response actions at any property of the
Borrower or any of its Subsidiaries under applicable Environmental Laws, and (c)
obtain, at or prior to the time required by applicable Environmental Laws, all
environmental, health and safety permits, licenses and other authorizations
necessary for its operations and maintain such authorizations in full force and
effect.
SECTION 6.14. Environmental Notices.
(a) The Borrower will, and will cause each of its Subsidiaries to,
promptly and in no event later than thirty days after it has received the same,
furnish to the Administrative Agent (i) all written notices of violation,
orders, claims, citations, complaints, penalty assessments, suits or other
proceedings, administrative, civil or criminal, at law or in equity, received by
the Borrower or any Subsidiary or of which it has notice, pending or threatened
against the Borrower or any Subsidiary by any Governmental Authority with
respect to any alleged violation of or non-compliance with any Environmental
Laws or any permits, licenses or authorizations, if such alleged violation or
non-compliance could reasonably be expected to have a Material Adverse Effect
and (ii) written notification of any condition or occurrence at, on, or arising
from the property of the Borrower or any Subsidiary that results in its
non-compliance with any applicable Environmental Law, which violation or
non-compliance could reasonably be expected to have a Material Adverse Effect.
(b) The Borrower will, and will cause each of its Subsidiaries to,
promptly and in no event later than thirty days after it has received the same,
furnish to the Administrative Agent all requests for information, notices of
claim, demand letters, and other notifications, received by the Borrower or any
Subsidiary, that in connection with its ownership or use of any real estate or
the conduct of its business, it may be potentially responsible with respect to
any investigation or clean-up of Hazardous Material at any location, which
investigation or clean-up could reasonably be expected to have a Material
Adverse Effect.
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(c) Upon receipt of any notice provided to the Administrative Agent
pursuant to clause (a) or (b) of this Section 6.14, the Required Lenders shall
have the right to retain the services of an independent environmental consulting
firm acceptable to the Borrower (the "Environmental Consultant") to conduct an
environmental assessment of the property, operation or environmental condition
described in such notice. As a result of such environmental assessment, the
Environmental Consultant may prepare a written recommendation of what, if any,
technical action should be taken by the Borrower or its Subsidiaries to remedy
the environmental condition in accordance with good commercial practices or in
compliance with applicable Environmental Laws. The environmental assessment
shall be conducted during normal business hours and with reasonable prior notice
to the Borrower but such environmental assessment shall not include the physical
collection of any samples. The Borrower shall have sole responsibility for all
costs and reasonable out-of-pocket expenses associated with such environmental
assessment.
SECTION 6.15. Environmental Audit and Remedial Action. Upon the
occurrence and during the continuation of an Event of Default, the Borrower
will, and will cause each of its Subsidiaries to, conduct and complete all
investigations, studies, sampling and testing and all remedial, removal and
other actions reasonably requested by the Administrative Agent on behalf of the
Required Lenders.
ARTICLE VII
Negative Covenants
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in full
and all Letters of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, the Borrower and the Subsidiary
Guarantors covenant and agree with the Lenders that:
SECTION 7.01. Indebtedness. The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the date hereof and set forth in
Schedule 7.01, and any extensions, renewals, refinancings and replacements
of any such Indebtedness that do not increase the principal amount thereof
from the amount set forth in Schedule 7.01 or, in the case of the lines of
credit, the aggregate amount of lines of credit set forth on Schedule 7.01
and that do not contain terms and conditions that are materially more
restrictive to the Borrower and its Subsidiaries than the terms and
conditions of the Indebtedness so extended, renewed, refinanced or
replaced;
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(c) Indebtedness of the Borrower and its Subsidiaries to each other,
provided that (i) no such Indebtedness shall be owed by the Borrower or
any of the Domestic Subsidiaries other than Rheox International to any of
the Foreign Subsidiaries and no such Indebtedness shall be owed by any of
the Foreign Subsidiaries to any of the Borrower and the Domestic
Subsidiaries other than Rheox International and (ii) if the aggregate
outstanding principal amount of Indebtedness owed by Rheox International
to the Borrower and the Domestic Subsidiaries exceeds $2,000,000 at any
time, an amount equal to the excess shall be evidenced solely by one or
more promissory notes of Rheox International pledged to the Administrative
Agent under the Security Agreement;
(d) until the initial borrowing hereunder, Indebtedness of the
Borrower to NL evidenced by the Subordinated Note;
(e) Indebtedness of Rheox Limited to NL evidenced by the Subordinated
Intercompany Note;
(f) Indebtedness of up to $500,000 in the form of Guarantees of
Indebtedness of Enenco, so long as the Borrower owns, directly or
indirectly, at least 50% of the equity interests in Enenco; and
(g) additional Indebtedness of the Borrower in an aggregate principal
amount up to but not exceeding $2,000,000 at any one time outstanding.
SECTION 7.02. Liens. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Liens created under the Security Documents;
(b) Permitted Liens; and
(c) Liens (including Capital Leases) on real and/or personal property
acquired and/or constructed by the Borrower or any Subsidiary after the
date hereof securing Indebtedness of the Borrower or such Subsidiary
permitted by Section 7.01 in respect of the purchase price and/or
construction cost of such property (including Indebtedness incurred to
finance such acquisition and/or construction), provided that the aggregate
principal amount of Indebtedness secured by each such Lien does not at any
time exceed (i) the acquisition and/or construction cost of the related
property referred to above or (ii) in the case of property subject to a
Capital Lease, the Fair Market Value of the related property referred to
above; and
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(d) any Lien on any property or asset of the Borrower or any
Subsidiary existing on the date hereof and set forth in Schedule 7.02 and
Liens securing any Indebtedness incurred in connection with the
refinancing of any Indebtedness secured by any Lien existing on the date
hereof and set forth in Schedule 7.02, provided however that no property
or asset may secure such Liens other than the property or asset covered by
the related Lien existing on the date hereof and provided further that
such Liens may not secure Indebtedness in a principal amount in excess of
the principal amount set forth on Schedule 7.02.
SECTION 7.03. Fundamental Changes. The Borrower will not, and will
not permit any Subsidiary to, merge into or consolidate with any other Person,
or permit any other Person to merge into or consolidate with it, or sell,
transfer, lease or otherwise dispose of (in one transaction or in a series of
transactions) all or any substantial part of its assets, or all or substantially
all of the stock of any of its Subsidiaries (in each case, whether now owned or
hereafter acquired), or liquidate or dissolve, except that, if at the time
thereof and immediately after giving effect thereto no Default shall have
occurred and be continuing:
(a) any Subsidiary other than Rheox International may merge into the
Borrower in a transaction in which the Borrower is the surviving
corporation;
(b) any Subsidiary other than Rheox International may merge into
another Subsidiary; provided that (i) if any such transaction shall be
between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned
Subsidiary shall be the continuing or surviving corporation and (ii) if
any such transaction shall be between a Subsidiary Guarantor and a
Subsidiary not a Subsidiary Guarantor, and such Subsidiary Guarantor is
not the continuing or surviving corporation, then the continuing or
surviving corporation shall have assumed all of the obligations of such
Subsidiary Guarantor hereunder and under the other Loan Documents;
(c) any Subsidiary may sell, transfer, lease or otherwise dispose of
its assets or property to the Borrower or to another Subsidiary;
(d) the Borrower or any Subsidiary may make Dispositions to third
parties with the approval of the Required Lenders;
(e) the Borrower or any Subsidiary may sell, transfer, lease or
otherwise dispose of any inventory or other assets or property in the
ordinary course of business;
(f) the Borrower or any Subsidiary may sell, transfer, lease or
otherwise dispose of obsolete or worn-out property, tools or equipment no
longer used or useful in its business so long as the amount thereof sold
in any single fiscal year by the Borrower and its Subsidiaries shall not
have a Fair Market Value in excess of $500,000; and
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(g) the Borrower may sell, transfer, lease or otherwise dispose of
the surplus parcels of real property in Alameda County, California owned
by the Borrower and encumbered for the benefit of the Lenders as described
in section (b) of the definition of "Existing Mortgages".
SECTION 7.04. Investments, Loans, Advances, Guarantees and
Acquisitions; Hedging Agreements.
(a) The Borrower will not, and will not permit any its Subsidiary to,
purchase, hold or acquire (including pursuant to any merger with any Person that
was not a Wholly Owned Subsidiary prior to such merger) any Investment, or
purchase or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person constituting a business unit, except:
(i) Investments outstanding on the date hereof and set forth in
Schedule 7.04, including such Investments in Enenco so set forth;
(ii) Permitted Investments;
(iii) Investments by the Borrower and any Subsidiary in the
capital stock of and other ownership interests in other Subsidiaries
(subject to Section 7.11);
(iv) Indebtedness and advances permitted by Section 7.01(c);
(v) Guarantees constituting Indebtedness permitted by Section
7.01;
(vi) operating deposit accounts with banks;
(vii) Distributor Affiliate Credit Extensions not exceeding
$5,000,000 in the aggregate at any one time outstanding, provided that
each Distributor Affiliate Credit Extension shall mature and be payable no
later than the date 45 days after the date made;
(viii) Capital Expenditures (including but not limited to
Acquisitions constituting Capital Expenditures) made by the Borrower or
any Subsidiary as permitted under Section 7.08(e); and
(ix) Investments in Enenco after the date of this Agreement of up
to $750,000 in the form of capital contributions or loans and of up to
$500,000 in the form of Guarantees of Indebtedness of Enenco, so long as
the Borrower owns, directly or indirectly, at least 50% of the equity
interests in Enenco; and
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(x) Investments of the LC Collateral Account as provided in
Section 2.04(i).
(b) The Borrower will not, and will not permit any Subsidiary to,
enter into any Hedging Agreement, other than (i) Hedging Agreements required by
Section 6.11 and (ii) any other Hedging Agreements entered into in the ordinary
course of business to hedge or mitigate risks to which the Borrower or any
Subsidiary is exposed in the conduct of its business or the management of its
liabilities.
SECTION 7.05. Restricted Payments. The Borrower will not, and will
not permit any Subsidiary to, declare or make, or agree to pay or make, directly
or indirectly, any Restricted Payment, except that so long as no Default exists
or would result therefrom:
(a) the Borrower may (i) declare and pay the portion of the Special
Dividend payable from the proceeds of the Term Loans in cash; and (ii)
declare and pay the portion of the Special Dividend payable from the
proceeds of the Revolving Credit Loans in cash, provided that after giving
effect thereto the aggregate unutilized amount of the Revolving Credit
Commitments shall not be less than $7,500,000; and
(b) the Borrower may declare and pay dividends in cash with respect
to its capital stock after the second anniversary of the Effective Date,
provided that (i) at the time of the declaration and at the time of
payment of such dividends (and after giving effect thereto), the Fixed
Charges Ratio shall not be less than 1.10 to 1 and (ii) the aggregate
amount of such dividends paid in such fiscal year shall not exceed 40% of
Excess Cash Flow for the immediately preceding fiscal year.
SECTION 7.06. Transactions with Affiliates. Except as expressly
permitted by this Agreement, the Borrower will not, and will not permit any
Subsidiary to, sell, lease or otherwise transfer any property or assets to, or
purchase, lease or otherwise acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except that:
(a) the Borrower or any Subsidiary may enter into transactions with
Affiliates (other than extension of Indebtedness by the Borrower or any
Subsidiary to an Affiliate) in the ordinary course of business at prices
and on terms and conditions not less favorable to the Borrower or such
Subsidiary than could be obtained on an arm's-length basis from unrelated
third parties;
(b) any Affiliate who is an individual may serve as a director,
officer, employee or consultant of the Borrower or any of Subsidiary and
receive reasonable compensation for his or her services in such capacity;
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(c) Rheox GmbH, a German corporation, may pay dividends to all
holders of interests in Rheox GmbH, provided that any such dividends are
paid together with dividends to each holder of interest in Rheox GmbH
ratably in accordance with their respective interests;
(d) the Borrower and its Subsidiaries may enter into and perform the
Tax Sharing Agreement, the other Ancillary Agreements and the
Restructuring Documents;
(e) the Borrower may engage in the transactions with Enenco permitted
under Sections 7.01, 7.03 and 7.04; and
(f) the Borrower and its Subsidiaries may enter into Distributor
Affiliate Credit Extensions permitted by Section 7.04.
SECTION 7.07. Restrictive Agreements. The Borrower will not, and will
not permit any of its Subsidiaries to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon the ability of any Subsidiary to pay dividends or
other distributions with respect to any shares of its capital stock or to make
or repay loans or advances to the Borrower or any other Subsidiary or to
Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that
(i) the foregoing shall not apply to restrictions and conditions imposed by law
or by this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 7.07 or related to
the Indebtedness set forth in Schedule 7.01 (but shall apply to any extension or
renewal of, or any amendment or modification resulting in any such restriction
or condition becoming more restrictive), (iii) the foregoing shall not apply to
customary restrictions and conditions contained in agreements relating to the
sale of a Subsidiary pending such sale, provided that such restrictions and
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, and (iv) the foregoing shall not apply to (x) restrictions
or conditions imposed by any agreement relating to secured Indebtedness
permitted by this Agreement if such restrictions or conditions apply only to the
property or assets securing such Indebtedness and (y) to customary provisions in
leases and other contracts restricting the assignment thereof.
SECTION 7.08. Certain Financial Covenants.
(a) Leverage Ratio. The Borrower will not permit the Leverage Ratio
at any time during any of the periods set forth below to exceed the ratio set
opposite such period below:
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Period Ratio
------ -----
From and including the Effective Date
through June 30, 1997 ....................................... 3.75 to 1
From and including July 1, 1997
through September 30, 1997 .................................. 3.60 to 1
From and including October 1, 1997
through December 31, 1997 ................................... 3.50 to 1
From and including January 1, 1998
through December 31, 1998 ................................... 3.25 to 1
From and including January 1, 1999
through December 31, 2000 ................................... 3.00 to 1
From and including January 1, 2001 .......................... 2.50 to 1
and at all times thereafter
(b) Tangible Net Worth. The Borrower will not permit Tangible Net
Worth on any date to be less than an amount equal to negative (-) $52,000,000
plus the sum, for all of the fiscal quarters of the Borrower starting on or
after January 1, 1997 and ending on or before such date for which the
consolidated net income of the Borrower and its Subsidiaries was greater than
zero (and excluding each fiscal quarter for which the consolidated net income of
the Borrower and its Subsidiaries was less than zero), of 60% of the
consolidated net income of the Borrower and its Subsidiaries for such fiscal
quarters minus the Special Dividend.
(c) Fixed Charges Ratio. The Borrower will not permit the Fixed
Charges Ratio to be less than 1.000 to 1 at any time from and including the
Effective Date through June 30, 1997 or 1.025 at any time thereafter.
(d) Interest Coverage Ratio. The Borrower will not permit the
Interest Coverage Ratio at any time during any of the periods set forth below to
be less than the ratio set opposite such period below:
Period Ratio
------ -----
From and including the Effective
Date through December 31, 1998 ............................. 3.00 to 1
From and including January 1, 1999
and at all times thereafter ................................ 3.50 to 1
(e) Capital Expenditures. The Borrower will not permit the aggregate
amount of Capital Expenditures to exceed $5,000,000 in any calendar year.
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SECTION 7.09. Lines of Business. Neither the Borrower nor any of its
Subsidiaries shall engage to any substantial extent in any line or lines of
business activity other than the Business.
SECTION 7.10. Modifications of Certain Documents. The Borrower will
not, and will not permit any Subsidiary to, agree or consent to any
modification, supplement or waiver of (a) any of the provisions of any of the
Restructuring Documents or the Ancillary Agreements (other than the Tax Sharing
Agreement) if such modification, supplement or waiver could reasonably be
expected to have a Material Adverse Effect or (b) the Subordinated Note, the
Subordinated Intercompany Note (excluding any modification, supplement or waiver
regarding waiver or deferral of the payment of interest or principal or
extending the final maturity thereof), the Note Subordination Agreement, the
Intercompany Note Subordination Agreement or the Tax Sharing Agreement, in each
case without the prior consent of the Administrative Agent (with the approval of
the Required Lenders).
SECTION 7.11. Rheox International. Notwithstanding anything to the
contrary contained in this Agreement, but without limiting the effect of Section
6.12(b):
(a) the Borrower will cause all shares of capital stock or other
ownership interests in any of the Foreign Subsidiaries at any time owned
by any of the Borrower and the Domestic Subsidiaries to be owned solely by
Rheox International, directly or indirectly through other Foreign
Subsidiaries; and
(b) the Borrower will not permit Rheox International to (i) merge or
consolidate with any Person, (ii) engage in any business other than (x)
owning and administering the business of the Foreign Subsidiaries
(including, but not limited to, owning, licensing and administering the
Foreign Intellectual Property) and (y) extending Indebtedness permitted by
Sections 7.04(iii) and 7.04(viii) and incurring Indebtedness permitted by
Section 7.01(c) hereof or (iii) incur any Indebtedness other than
Indebtedness of (A) Rheox International under the Loan Documents and (B)
Indebtedness of Rheox International to the Borrower and its other
Subsidiaries permitted by Section 7.01(c).
SECTION 7.12. Subordinated Notes. The Borrower will not (except, with
respect to the Subordinated Note, as required by Section 6.10(a)), and will not
permit any Subsidiary to, purchase, redeem, retire or otherwise acquire for
value, or set apart any money for a sinking, defeasance or other analogous fund
for the purchase, redemption, retirement or other acquisition of, or make any
voluntary payment or prepayment of the principal of or interest on, or any other
amount owing in respect of, the Subordinated Note or the Subordinated
Intercompany Note, except (a) in the case of the Subordinated Note, (i) as
required by Section 6.10(a) and (ii) subject to the Note Subordination
Agreement, for regularly scheduled payments of interest thereon required
pursuant thereto and (b) in the case of the Subordinated Intercompany Note,
subject to the Intercompany Note Subordination
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Agreement, for regularly scheduled payments of principal and interest thereon
required pursuant thereto.
ARTICLE VIII
Events of Default
If any of the following events ("Events of Default") shall occur and
be continuing:
(a) the Borrower shall fail to pay any principal of any Loan or any
reimbursement obligation in respect of any LC Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or otherwise;
(b) any Credit Party shall fail to pay any interest on any Loan or
any fee or other amount (other than an amount referred to in clause (a) of
this Article VIII) payable under this Agreement or under any other Loan
Document, when and as the same shall become due and payable and such
failure shall continue unremedied for a period of three or more Business
Days;
(c) any representation or warranty made or deemed made by or on
behalf any Credit Party or NL in or in connection with this Agreement, any
of the other Loan Documents or any amendment or modification hereof or
thereof, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with this Agreement, any
of the other Loan Documents or any amendment or modification hereof or
thereof, shall prove to have been incorrect when made or deemed made in
any material respect;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 6.02(a), 6.03 (with respect to
the Borrower's existence), 6.09 or 6.10 or in Article VII;
(e) any Credit Party or NL shall fail to observe or perform any
covenant, condition or agreement contained in this Agreement (other than
those specified in clause (a), (b) or (d) of this Article VIII), any other
Loan Document or the Tax Sharing Agreement, and such failure shall
continue unremedied for a period of 30 days after notice thereof from the
Administrative Agent (given at the request of any Lender) to the Borrower;
(f) the Borrower or any Subsidiary shall fail after any applicable
period of grace to make any payment of principal of, interest on or fees
payable to lenders in
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respect of any Material Obligations, when and as the same shall become due
and payable;
(g) any event or condition occurs that results in any Material
Obligations becoming due prior to its scheduled maturity or, for so long
as such event or condition is continuing, that enables or permits (with or
without the giving of notice, the lapse of time or both) the holder or
holders of any Material Obligations or any trustee or agent on its or
their behalf or cause any Material Obligations to become due, or to
require the prepayment, repurchase, redemption or defeasance thereof,
prior to its scheduled maturity; provided that this clause (g) shall not
apply to secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such
Indebtedness or the voluntary termination of a Hedging Agreement;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other
relief in respect of NL, the Borrower any Subsidiary other than an
Inactive Subsidiary or its debts, or of a substantial part of its assets,
under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect or (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for NL, the Borrower or any Subsidiary other than an Inactive
Subsidiary or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue undismissed for 60 days or an
order or decree approving or ordering any of the foregoing shall be
entered;
(i) NL, the Borrower or any Subsidiary other than an Inactive
Subsidiary shall (i) voluntarily commence any proceeding or file any
petition seeking liquidation, reorganization or other relief under any
Federal, state or foreign bankruptcy, insolvency, receivership or similar
law now or hereafter in effect, (ii) consent to the institution of, or
fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (h) of this Article VIII, (iii) apply for or
consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for NL, the Borrower or any
Subsidiary other than an Inactive Subsidiary or for a substantial part of
its assets, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) NL, the Borrower or any Subsidiary other than an Inactive
Subsidiary shall become unable, admit in writing or fail generally to pay
its debts as they become due;
(k) one or more final judgments for the payment of money in excess of
$2,500,000 shall be rendered against the Borrower or any Subsidiary or any
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combination thereof and the same shall not be discharged for a period of
30 consecutive days during which the execution shall not be effectively
stayed, or any action shall be legally taken by a judgment creditor to
attach or levy upon any assets of the Borrower or any Subsidiary to
enforce any such judgment, or any action shall be legally taken by a
judgment creditor of NL to attach or levy upon the collateral pledged
under the NL Pledge Agreement;
(l) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other ERISA Events that
have occurred, could reasonably be expected to result in a Material
Adverse Effect;
(m) A reasonable basis shall exist for the assertion against NL, the
Borrower or any Subsidiary of (or there shall have been asserted against
NL, the Borrower or any Subsidiary) claims or liabilities, whether
accrued, absolute or contingent, based on or arising from the generation,
storage, transport, handling or disposal of Hazardous Materials by NL, the
Borrower or any of the Borrower's Subsidiaries or Affiliates, or any
predecessor in interest of NL, the Borrower or any of the Borrower's
Subsidiaries or Affiliates, or relating to any site or facility owned,
operated or leased by NL, the Borrower or any of the Borrower's
Subsidiaries or Affiliates, which claims or liabilities (insofar as they
are payable by NL, the Borrower or any Subsidiary but after deducting any
portion thereof which is reasonably expected to be paid by other
creditworthy Persons jointly and severally liable therefor), in the
judgment of the Required Lenders are reasonably likely to be determined
adversely to NL, the Borrower or any Subsidiary, and the amount thereof
is, singly or in the aggregate, reasonably likely to have a Material
Adverse Effect;
(n) NL shall at any time and for any reason cease to be the
beneficial owner of 100% of the outstanding shares of capital stock of the
Borrower; or any Person or Persons not having beneficial ownership in the
aggregate of 50% or more of the outstanding shares of capital stock of NL
on the date hereof shall acquire beneficial ownership in aggregate of 50%
or more of the outstanding shares of capital stock of NL; or during any
period of 25 consecutive calendar months, (i) individuals who were
directors of NL on the first day of such period and (ii) other individuals
whose election or nomination by the Board of Directors of NL was approved
by at least a majority of the Board of Directors of NL who either were
directors on the first day of such period or whose election or nomination
was previously so approved shall no longer constitute a majority of the
Board of Directors of NL; or
(o) Any of the following shall occur: (i) the Lien created by any
Security Document shall at any time (other than by reason of the
Administrative Agent relinquishing possession of certificates evidencing
shares of stock of Subsidiaries pledged thereunder) cease to constitute a
valid and perfected (to the extent such Lien is required to be perfected
under the Security Documents) Lien on the collateral intended
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to be covered thereby; (ii) except for expiration in accordance with its
terms, any Security Document shall for whatever reason be terminated, or
shall cease to be in full force and effect; or (iii) the enforceability of
any Security Document or the validity of any subordination provision in
the Note Subordination Agreement or in the Intercompany Note Subordination
Agreement shall be contested by any Credit Party or by NL;
then, and in every such event (other than an event described in clause (h) or
(i) of this Article), and at any time thereafter during the continuance of such
event, the Administrative Agent may, and at the request of the Required Lenders
shall, by notice to the Borrower, take either or both of the following actions,
at the same or different times: (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately, and (ii) declare the Loans then
outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; and in the case of any event
described in clause (h) or (i) of this Article, the Commitments shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all fees and other obligations of the
Borrower accrued hereunder, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower.
ARTICLE IX
The Administrative Agent
Each of the Lenders and the LC Issuing Lender hereby irrevocably
appoints the Administrative Agent as its agent and authorizes the Administrative
Agent to take such actions on its behalf and to exercise such powers as are
delegated to the Administrative Agent by the terms of this Agreement and the
other Loan Documents, together with such actions and powers as are reasonably
incidental thereto.
Chase shall have the same rights and powers in its capacity as a
Lender hereunder as any other Lender and may exercise the same as though Chase
were not the Administrative Agent, and Chase and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
any Credit Party or any Subsidiary or other Affiliate of any thereof as if it
were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations
except those expressly set forth in this Agreement and the other Loan Documents.
Without limiting the
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generality of the foregoing, (a) the Administrative Agent shall not be subject
to any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) the Administrative Agent shall not have any duty
to take any discretionary action or exercise any discretionary powers, except
discretionary rights and powers expressly contemplated by this Agreement and the
other Loan Documents that the Administrative Agent is required to exercise in
writing by the Required Lenders, and (c) except as expressly set forth herein
and in the other Loan Documents, the Administrative Agent shall not have any
duty to disclose, and shall not be liable for the failure to disclose, any
information relating to any Credit Party, NL or any of their respective
Subsidiaries that is communicated to or obtained by Chase or any of its
Affiliates in any capacity. The Administrative Agent shall not be liable for any
action taken or not taken by it with the consent or at the request of the
Required Lenders or, if provided herein, with the consent or at the request of
the Required Revolving Credit or the Required Term Loan Lenders, or in the
absence of its own gross negligence or wilful misconduct. The Administrative
Agent shall not be deemed to have knowledge of any Default unless and until
written notice thereof is given to the Administrative Agent by the Borrower or a
Lender (whereupon the Administrative Agent shall promptly deliver a copy thereof
to the Lenders), and the Administrative Agent shall not be responsible for or
have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement or the other Loan
Documents, (ii) the contents of any certificate, report or other document
delivered hereunder or under any of the other Loan Documents or in connection
herewith of therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein or in any
other Loan Document, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement, the other Loan Documents or any other agreement,
instrument or document, or (v) the satisfaction of any condition set forth in
Article V or elsewhere herein, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent.
The Administrative Agent shall not, except to the extent expressly
instructed by the Required Lenders with respect to collateral security under the
Security Documents, be required to initiate or conduct any litigation or
collection proceedings hereunder or under any other Loan Document.
The Administrative Agent shall be entitled to rely upon, and shall
not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to be
genuine and to have been signed or sent by the proper Person. The Administrative
Agent also may rely upon any statement made to it orally or by telephone and
believed by it to be made by the proper Person, and shall not incur any
liability for relying thereon. The Administrative Agent may consult with legal
counsel (who may be counsel for the Borrower), independent accountants and other
experts selected by it, and shall not be liable for any action taken or not
taken by it in accordance with the advice of any such counsel, accountants or
experts.
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The Administrative Agent may perform any and all of its duties, and
exercise its rights and powers, by or through any one or more sub-agents
appointed by the Administrative Agent. The Administrative Agent and any such
sub-agent may perform any and all its duties and exercise its rights and powers
through its Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to its activities
in connection with the syndication of the credit facilities provided for herein
as well as activities as the Administrative Agent.
Subject to the appointment and acceptance of a successor
Administrative Agent, as provided in this paragraph, the Administrative Agent
may resign at any time by notifying the Lenders, the LC Issuing Lender and the
Borrower. Upon any such resignation, the Required Lenders shall have the right,
in consultation with the Borrower, to appoint a successor Administrative Agent.
If no successor shall have been so appointed and shall have accepted such
appointment within 30 days after such retiring Administrative Agent gives notice
of its resignation, then such retiring Administrative Agent may, on behalf of
the Lenders and the LC Issuing Lender, appoint a successor Administrative Agent,
which shall be a bank with an office in New York, New York, or an Affiliate of
any such bank. Upon the acceptance of its appointment as Administrative Agent,
by a successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder and under the other Loan Documents. The fees payable by
the Borrower to a successor Administrative Agent shall be the same as those
payable to its predecessor unless otherwise agreed between the Borrower and such
successor. After an Administrative Agent's resignation hereunder, the provisions
of this Article IX and Sections 3.03 and 10.03 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without
reliance upon the Administrative Agent, the LC Issuing Lender or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon
the Administrative Agent, the LC Issuing Lender or any other Lender and based on
such documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement and the other Loan Documents, any related agreement or any
document furnished hereunder or thereunder.
The Documentation Agent identified on the cover page of this
Agreement shall have no duties or responsibilities hereunder other than as a
Lender hereunder.
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ARTICLE X
Miscellaneous
SECTION 10.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, (i) to Rheox, Inc. c/o NL Industries, Inc. at
70 East 55th Street, New York, New York 10022, Attention of Susan E.
Alderton (Telecopy No. (212) 421-7209) and (ii) to Rheox, Inc., P.O. Box
700, Wycoffs Mill Road, Hightstown, New Jersey 08520, Attention of Debbie
Young;
(b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan
and Agency Services Group, One Chase Manhattan Plaza, 8th Floor, New York,
New York 10081, Attention of Terri Williams (Telecopy No. (212) 552-5277),
with a copy to The Chase Manhattan Bank, 1 Chase Manhattan Plaza, 5th
Floor, New York, New York 10081, Attention of Peter Dedousis (Telecopy No.
(212) 552-7175); and
(c) if to any Lender (including to Chase in its capacity as the LC
Issuing Lender), to it at its address (or telecopy number) set forth in
its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 10.02. Waivers; Amendments.
(a) No failure or delay by the Administrative Agent, the LC Issuing
Lender or any Lender in exercising any right or power hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Administrative Agent, the
LC Issuing Lender and the Lenders hereunder are cumulative and are not exclusive
of any rights or remedies that they would otherwise have. No waiver of any
provision of this Agreement or consent to any departure by any Credit Party
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section 10.02, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of
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a Loan or issuance of a Letter of Credit shall not be construed as a waiver of
any Default, regardless of whether the Administrative Agent, any Lender or the
LC Issuing Lender may have had notice or knowledge of such Default at the time.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower and the Required Lenders or by the Borrower and the
Administrative Agent with the consent of the Required Lenders; provided that no
such agreement shall:
(i) increase the Commitment of any Lender without the written
consent of such Lender;
(ii) reduce the principal amount of any Loan or LC Disbursement or
reduce the rate of interest thereon, or reduce any fees payable hereunder,
without the written consent of each Lender affected thereby;
(iii) postpone the scheduled date of payment of the principal
amount of any Loan or LC Disbursement, or any interest thereon, or any
fees payable hereunder, or reduce the amount of, waive or excuse any such
payment, or postpone the scheduled date of expiration of any Commitment,
without the written consent of each Lender affected thereby;
(iv) change Section 2.09 in a manner that would reduce or alter
the application of prepayments thereunder, or change Section 2.16(b), (c)
or (d) in a manner that would alter the pro rata sharing of payments
required thereby, without in each case the written consent of each Lender;
(v) alter the rights or obligations of the Borrower to prepay
Loans without the written consent of each Lender;
(vi) change any of the provisions of this Section 10.02 or the
definition of "Required Lenders", "Required Revolving Credit Lenders", or
"Required Term Loan Lenders", or any other provision hereof specifying the
number or percentage of Lenders required to waive, amend or modify any
rights hereunder or under any other Loan Document or make any
determination or grant any consent hereunder or thereunder, without the
written consent of each Lender; or
(vii) release all or substantially all of the Subsidiary
Guarantors from their obligations in respect of their Guarantee under
Article III, without the written consent of each Lender;
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provided further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the Administrative Agent or the LC Issuing Lender
hereunder without the prior written consent of the Administrative Agent or the
LC Issuing Lender, as the case may be.
Anything in this Agreement to the contrary notwithstanding, no waiver
or modification of any provision of this Agreement that has the effect (either
immediately or at some later time) of enabling the Borrower to satisfy a
condition precedent to the making of Revolving Credit Loans or Term Loans shall
be effective against the Revolving Credit Lenders or Term Loan Lenders,
respectively, unless the Required Revolving Credit Lenders or Required Term Loan
Lenders, respectively, shall have concurred with such waiver or modification.
(c) Neither any Security Document nor any provision thereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Credit Parties party thereto, and by the
Administrative Agent with the consent of the Required Lenders, provided that,
without the prior consent of each Lender, the Administrative Agent shall not
(except as provided herein or in the applicable Security Document) release all
or substantially all of the collateral thereunder or otherwise terminate any
Lien under any Security Document, agree to additional obligations being secured
by such collateral (unless the Lien for such additional obligations shall be
junior to the Lien in favor of the other obligations secured by such Security
Document, in which event the Administrative Agent may consent to such junior
Lien provided that it obtains the consent of the Required Lenders thereto),
alter the relative priorities of the obligations entitled to the benefits of the
Liens created under such Security Document, except that no such consent shall be
required, and the Administrative Agent is hereby authorized, to release any Lien
covering property that is the subject of either a Disposition of property
permitted hereunder or a Disposition to which the Required Lenders have
consented.
SECTION 10.03. Expenses; Indemnity; Damage Waiver.
(a) The Credit Parties jointly and severally agree to pay, or
reimburse the Administrative Agent or Lenders for paying, (i) all reasonable
out-of-pocket expenses incurred by the Administrative Agent and its Affiliates,
including the reasonable fees, charges and disbursements of Special Counsel, in
connection with the syndication of the credit facilities provided for herein,
the preparation of this Agreement and the other Loan Documents (and any Uniform
Commercial Code financing statements required by any Security Document to be
filed with respect to the security interests in personal property and fixtures
created pursuant thereto) or any amendments, modifications or waivers of the
provisions hereof or thereof (whether or not the transactions contemplated
hereby or thereby shall be consummated), (ii) all out-of-pocket expenses
incurred by the LC Issuing Lender in connection with the issuance, amendment,
renewal or extension of any Letter of Credit or any demand for payment
thereunder, (iii) all out-of-pocket expenses incurred by the Administrative
Agent, the LC Issuing Lender or any Lender, including the fees, charges and
disbursements of any
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counsel for such Administrative Agent, LC Issuing Lender or Lender, in
connection with the enforcement or protection of its rights in connection with
this Agreement and the other Loan Documents, including its rights under this
Section 10.03, or in connection with the Loans made or Letters of Credit issued
hereunder, including in connection with any workout, restructuring or
negotiations in respect thereof, and (iv) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Agreement or any of the other Loan
Documents or any other document referred to herein or therein and all costs,
expenses, taxes, assessments and other charges incurred in connection with any
filing, registration, recording or perfection of any security interest
contemplated by any Security Document, by any Uniform Commercial Code financing
statements required by any Security Document to be filed with respect to the
security interests in personal property and fixtures created pursuant thereto,
or by any other document referred to therein. Notwithstanding anything to the
contrary in this Section 10.03(a), the Borrower shall not be obligated to pay
the fees and expenses of more than one law firm representing the Administrative
Agent and the Lenders (which law firm shall be selected by the Administrative
Agent, or if the Required Lenders so decide, by the Required Lenders) unless (x)
the Administrative Agent or the Required Lenders reasonably determine that the
retention of more than one law firm is advisable because questions arise under
laws of jurisdictions in which the principal law firm engaged is not authorized
to practice law or (y) in the case of the foregoing clause (iii), the
Administrative Agent or any Lender or Lenders have different or conflicting
interests.
(b) The Credit Parties jointly and severally agree to indemnify the
Administrative Agent, the LC Issuing Lender and each Lender, and each Related
Party of any of the foregoing Persons (each such Person being called an
"Indemnitee") against, and hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including the fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement, the other Loan
Documents or any agreement or instrument contemplated hereby, the performance by
the parties hereto and thereto of their respective obligations hereunder or
thereunder or the consummation of the Transactions or any other transactions
contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use of
the proceeds therefrom (including any refusal by the LC Issuing Lender to honor
a demand for payment under a Letter of Credit if the documents presented in
connection with such demand do not strictly comply with the terms of such Letter
of Credit), (iii) any actual or alleged presence, Release or threatened Release
of Hazardous Materials related to any property owned or operated by any Credit
Party or any of their Subsidiaries, or any Environmental Liability related in
any way to any Credit Party or any of their Subsidiaries, or (iv) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses (are determined by a
court of competent jurisdiction by final and
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nonappealable judgment to have) resulted from the gross negligence or wilful
misconduct of such Indemnitee. Notwithstanding anything to the contrary in this
Section 10.03(b), the Borrower shall not be obligated to pay or otherwise
indemnify the Administrative Agent or any Lender for the fees and expenses of
more than one law firm representing the Administrative Agent and the Lenders
(which law firm shall be selected by the Administrative Agent, or if the
Required Lenders so decide, by the Required Lenders) unless (x) the
Administrative Agent or the Required Lenders reasonably determine that the
retention of more than one law firm is advisable because questions arise under
laws of jurisdictions in which the principal law firm engaged is not authorized
to practice law or (y) the Administrative Agent or any Lender or Lenders have
different or conflicting interests.
(c) To the extent that the Credit Parties fail to pay any amount
required to be paid by them to the Administrative Agent under paragraph (a) or
(b) of this Section 10.03, each Lender severally agrees to pay to the
Administrative Agent such Lender's Applicable Percentage (determined as of the
time that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Administrative Agent in its capacity as such. To the
extent that the Credit Parties fail to pay any amount required to be paid by
them to the LC Issuing Lender under paragraph (a) or (b) of this Section 10.03,
each Revolving Credit Lender severally agrees to pay to the LC Issuing Lender
such Lender's Applicable Percentage (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss, claim,
damage, liability or related expense, as the case may be, was incurred by or
asserted against the Administrative Agent in its capacity as such.
(d) To the extent permitted by applicable law, none of the Credit
Parties shall assert, and each Credit Party hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement, the other Loan Documents or
any agreement or instrument contemplated hereby or thereby, the Transactions,
any Loan or Letter of Credit or the use of the proceeds thereof.
(e) All amounts due under this Section 10.03 shall be payable
promptly after written demand therefor.
SECTION 10.04. Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
each Lender (and any attempted assignment or transfer by the Borrower without
such consent shall be null and void). Nothing in this
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Agreement, expressed or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent, the Issuing Lender and the Lenders)
any legal or equitable right, remedy or claim under or by reason of this
Agreement.
(b) Any Lender may assign to one or more assignees all or a portion
of its rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans at the time owing to it); provided that
(i) except in the case of an assignment to a Lender or an
Affiliate of a Lender, the Borrower and the Administrative Agent (and, in
the case of an assignment of all or a portion of a Commitment or any
Lender's obligations in respect of its LC Exposure, the LC Issuing Lender)
must give its prior written consent to such assignment (which consent
shall not be unreasonably withheld or delayed),
(ii) except in the case of an assignment to a Lender or an
Affiliate of a Lender or an assignment of the entire remaining amount of
the assigning Lender's Commitment and Loans, the amount (without
duplication) of the Commitment and Loans of the assigning Lender subject
to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the
Administrative Agent) shall not be less than $10,000,000 unless each of
the Borrower and the Administrative Agent otherwise consent,
(iii) the parties to each assignment shall execute and deliver to
the Administrative Agent an Assignment and Acceptance, together with a
processing and recordation fee of $3,500,
(iv) the assignee, if it shall not be a Lender, shall deliver to
the Administrative Agent an Administrative Questionnaire, and
(v) written notice of each assignment and the forms required under
Section 2.15(e) are given to the Borrower.
provided further that any consent of the Borrower otherwise required under this
paragraph shall not be required if an Event of Default has occurred and is
continuing.
Upon acceptance and recording pursuant to paragraph (d) of this
Section 10.04, from and after the effective date specified in each Assignment
and Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of the interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this Agreement
(and,
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in the case of an Assignment and Acceptance covering all of the assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of Sections
2.13, 2.14, 2.15, 3.03 and 10.03). Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
paragraph (b) shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans and LC Disbursements owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries in
the Register shall be conclusive, and the Borrower, the Administrative Agent,
the LC Issuing Lender and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. The
Register shall be available for inspection by the Borrower, the LC Issuing
Lender and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section 10.04 and any written consent to such assignment required by
paragraph (b) of this Section 10.04, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
and until it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the LC Issuing Lender, sell participations to one or
more banks or other entities (a "Participant") in all or a portion of such
Lender's rights and obligations under this Agreement (including all or a portion
of its Commitment and the Loans owing to it); provided that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations; and (iii) the Borrower, the Administrative Agent, the LC
Issuing Lender and the other Lenders shall continue to deal solely and directly
with such Lender in connection with such Lender's rights and obligations under
this Agreement. Any agreement or instrument pursuant to which a Lender sells
such a participation shall provide that such Lender shall retain the sole right
to enforce this Agreement and to approve any amendment, modification or waiver
of any provision of this Agreement; provided that such agreement or instrument
may provide that such Lender will not, without the consent of the Participant,
agree to any amendment, modification or waiver described in the first proviso to
Section 10.02(b), or the
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first provision to Section 10.02(c), that affects such Participant. Subject to
paragraph (f) of this Section 10.04, the Borrower agrees that each Participant
shall be entitled, subject to the obligations of Section 2.17, to the benefits
of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and
had acquired its interest by assignment pursuant to paragraph (b) of this
Section 10.04.
(f) A Participant shall not be entitled to receive any greater
payment under Section 2.13 or 2.15 than the applicable Lender would have been
entitled to receive with respect to the participation sold to such Participant,
and shall be subject to the obligations of Section 2.17, unless the sale of the
participation to such Participant is made with the Borrower's prior written
consent. A Participant that would be a Foreign Lender if it were a Lender shall
not be entitled to the benefits of Section 2.15 unless the Borrower is notified
of the participation sold to such Participant and such Participant agrees, for
the benefit of the Borrower, to comply with Section 2.15(e) and Section 2.17 as
though it were a Lender.
(g) Any Lender may at any time pledge or assign a security interest
in all or any portion of its rights under this Agreement to secure obligations
of such Lender, including any such pledge or assignment to a Federal Reserve
Bank, and this Section shall not apply to any such pledge or assignment of a
security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such assignee for such Lender as a party hereto.
(h) Anything in this Section 10.04 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan held by it
hereunder to the Borrower or any of its Affiliates or Subsidiaries without the
prior consent of each Lender.
SECTION 10.05. Survival. All covenants, agreements, representations
and warranties made by the Credit Parties herein and in the other Loan
Documents, and in the certificates or other instruments delivered in connection
with or pursuant to this Agreement and the other Loan Documents, shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making of any Loans and issuance of any Letters of Credit,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that the Administrative Agent, the LC Issuing Lender or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect so long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement or the other Loan Documents is outstanding and unpaid or any Letter of
Credit is outstanding and so long as the Commitments have not expired or
terminated. The provisions of Sections 2.13, 2.14, 2.15, 2.17, 3.03 and 10.03
and Article IX shall survive and remain in full force and effect regardless of
the consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Letters
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of Credit and the Commitments or the termination of this Agreement or any other
Loan Document or any provision hereof or thereof.
SECTION 10.06. Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement and
any separate letter agreements with respect to fees payable to the
Administrative Agent constitute the entire contract among the parties relating
to the subject matter hereof and supersede any and all previous agreements and
understandings, oral or written, relating to the subject matter hereof. Except
as provided in Section 5.01, this Agreement shall become effective when it shall
have been executed by the Administrative Agent and when the Administrative Agent
shall have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Delivery of an executed counterpart of a signature page
of this Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 10.07. Severability. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 10.08. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of the Borrower against any of and all the
obligations of the Borrower now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section 10.08 are in addition to any other
rights and remedies (including other rights of setoff) which such Lender may
have.
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of
Process.
(a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York.
(b) Each party hereto hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of the Supreme
Court of the State of New
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York sitting in New York County and of the United States District Court of the
Southern District of New York, and any appellate court from any thereof, in any
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents, or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
New York State court (or, to the extent permitted by law, in such Federal
court). Each of the parties hereto agrees that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Administrative Agent,
the LC Issuing Lender or any Lender may otherwise have to bring any action or
proceeding relating to this Agreement against any Credit Party or its properties
in the courts of any jurisdiction.
(c) Each party hereto hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any court referred to in paragraph (b) of this Section 10.09. Each
of the parties hereto hereby irrevocably waives, to the fullest extent permitted
by law, the defense of an inconvenient forum to the maintenance of such action
or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10.
SECTION 10.11. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
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SECTION 10.12. Confidentiality. Each Lender and the Administrative
Agent agrees (on behalf of itself and each of its Related Parties) to use
reasonable precautions to keep confidential, in accordance with their customary
procedures for handling confidential information of the same nature and in
accordance with safe and sound banking practices, any non-public information
supplied to it by the Borrower pursuant to this Agreement that is identified by
the Borrower as being confidential at the time the same is delivered to the
Lenders or the Administrative Agent, provided that nothing herein shall limit
the disclosure of any such information (i) after such information shall have
become public (other than through a violation of this Section 10.12), (ii) to
the extent required by statute, rule, regulation or judicial process, (iii) to
counsel for any of the Lenders or the Administrative Agent, (iv) to bank
examiners (or any other regulatory authority having jurisdiction over any Lender
or the Administrative Agent), or to auditors or accountants, (v) to the
Administrative Agent or any other Lender, (vi) in connection with any litigation
to which any one or more of the Lenders or the Administrative Agent is a party,
or in connection with the enforcement of rights or remedies hereunder or under
any other Loan Document, (vii) to a Related Party of such Lender or (viii) to
any assignee or participant (or prospective assignee or participant) so long as
such assignee or participant (or prospective assignee or participant) first
executes and delivers to such Lender an acknowledgement to the effect that it is
bound by the provisions of this Section 10.12; provided, further, that in no
event shall any Lender or the Administrative Agent be obligated or required to
return any materials furnished by the Borrower.
Credit Agreement
- 100 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
RHEOX, INC.
by / s / William R. Bronner
Name: William R. Bronner
Title: Vice President
SUBSIDIARY GUARANTORS
RHEOX INTERNATIONAL, INC.
by / s / William R. Bronner
Name: William R. Bronner
Title: Vice President
ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK,
as Administrative Agent
by / s / Robert T. Sacks
Name: Robert T. Sacks
Title: Vice President
LENDERS
THE CHASE MANHATTAN BANK
by / s / Robert T. Sacks
Name: Robert T. Sacks
Title: Vice President
Credit Agreement
- 101 -
BANKERS TRUST COMPANY
by / s / Mary Zadroga
Name: Mary Zadroga
Title: Vice President
LASALLE NATIONAL BANK
by / s / Mark E. McCarthy
Name: Mark E. McCarthy
Title: Senior Vice President
THE NIPPON CREDIT BANK, LTD.
by / s / David C. Carrington
Name: David C. Carrington
Title: Vice President & Manager
VAN KAMPEN AMERICAN CAPITAL
by / s / Brian Good
Name: Brian Good
Title : Vice President
GIRO CREDIT BANK
by / s / T. Daileader
Name: T. Daileader
Title: Assistant Vice President
Credit Agreement
Schedule 1.01
[Ancillary Agreements]
Schedule 1.01
Schedule 2.01
Term Loan Revolving Credit
Lender Commitment Commitment
------ ---------- ----------------
The Chase Manhattan Bank ................ $ 61,250,000.00 $ 8,750,000.00
Bankers Trust Company ................... 18,750,000.00 6,250,000.00
LaSalle National Bank ................... 11,250,000.00 3,750,000.00
The Nippon Credit Bank, Ltd. ............ 11,250,000.00 3,750,000.00
Van Kampen American Capital ............. 15,000,000.00 --
Giro Credit Bank ........................ 7,500,000.00 2,500,000.00
--------------- --------------
Schedule 2.01
Schedule 4.06
[Disclosed Matters]
Schedule 4.06
Schedule 4.13
[Material Agreements and Liens]
Schedule 4.13
Schedule 4.14
[Subsidiaries]
Schedule 4.14
Schedule 7.01
[Existing Indebtedness]
Schedule 7.01
Schedule 7.02
[Existing Liens]
Schedule 7.02
Schedule 7.07
[Existing Restrictions]
EXHIBIT 10.38
NL INDUSTRIES, INC.
RETIREMENT SAVINGS PLAN
As Amended and Restated effective April 1, 1996
NL INDUSTRIES, INC.
RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
Article
PREAMBLE Paragraph
ARTICLE I - Purpose
ARTICLE II - Definitions
Affiliated Company...................................................2.1
Authorized Leave of Absence..........................................2.2
Basic Contributions..................................................2.3
Basic After-Tax Contributions........................................2.4
Basic Pre-Tax Contributions..........................................2.5
Beneficiary..........................................................2.6
Board................................................................2.7
Break in Service.....................................................2.8
Code.................................................................2.9
Committee...........................................................2.10
Common Stock........................................................2.11
Company.............................................................2.12
Compensation........................................................2.13
Contributing Participant............................................2.14
Disability..........................................................2.15
Employee............................................................2.16
Employer............................................................2.17
Employer Contributions..............................................2.18
ERISA...............................................................2.19
Highly Compensated Employee.........................................2.20
Hour of Service.....................................................2.21
Investment Funds....................................................2.22
Long-Term Disability Plan...........................................2.23
Month of Service....................................................2.24
Participant.........................................................2.25
Plan................................................................2.26
Plan Year...........................................................2.27
Predecessor Plan....................................................2.28
i
Prior Plan..........................................................2.29
Profitability Level.................................................2.30
Qualified Election..................................................2.31
Regulations.........................................................2.32
Retirement..........................................................2.33
Spouse..............................................................2.34
Supplemental Contributions..........................................2.35
Supplemental After-Tax Contributions................................2.36
Supplemental Pre-Tax Contributions..................................2.37
Trust...............................................................2.38
Trustee.............................................................2.39
Trust Fund..........................................................2.40
Valuation Date......................................................2.41
Vesting Service.....................................................2.42
ARTICLE III - Eligibility for Participation
Eligibility..........................................................3.1
Method of Becoming a Participant.....................................3.2
Method of Becoming a Contributing Participant........................3.3
Termination of Participation in the Plan.............................3.4
Intra-Company Transfers..............................................3.5
ARTICLE IV - Participant Contributions
Amount of Basic After-Tax Contributions..............................4.1
Amount of Basic Pre-Tax Contributions................................4.2
Supplemental Contributions...........................................4.3
Separate Accounting..................................................4.4
Special Provisions Related to Basic and Supplemental Pre-Tax
Contributions..................................................4.5
Change in Amount of Contributions....................................4.6
Suspension of Basic or Supplemental Contributions....................4.7
Remittance of Contributions to Trustee...............................4.8
Cessation of Contributions Made by a Contributing
Participant....................................................4.9
Participant Rollover Contributions, Direct Rollovers, and
Trust to Trust Transfers......................................4.10
ARTICLE V - Employer Contributions
Employer Contributions...............................................5.1
Average Contributions Test...........................................5.2
ii
Remittance of Employer Contributions to Trustee......................5.3
Allocation of Employer Contributions and Forfeitures.................5.4
Investment and Administrative Expenses...............................5.5
Multiple Use.........................................................5.6
Qualified Non-Elective Contributions.................................5.7
ARTICLE VI - Investment of Contributions
Investment Funds.....................................................6.1
Temporary Investments................................................6.2
Change in Investment Election for Future Contributions...............6.3
Inter-Fund Transfers.................................................6.4
Suspension of Investments and Investment Transfers into the
NL Stock Fund or the Dresser/Tremont Stock Fund................6.5
Proxy Material for Those Participants For Whom an Investment Has
Been Made in the NL Stock Fund or the Dresser Tremont
Stock Fund.....................................................6.6
Exercise of Tender Rights............................................6.7
Best Interest of Participants........................................6.8
Assumption of Investment Risk by Participants........................6.9
Section 404(c) of ERISA.............................................6.10
ARTICLE VII - Trust Fund Accounts and Allocation of Earnings
Participant's Account................................................7.1
Valuation of Investment Funds........................................7.2
Valuation of Accounts................................................7.3
Statement of Participant's Account...................................7.4
ARTICLE VIII - Vesting
Vesting With Respect to Predecessor Plan Contributions, Participant
Contributions and Pre-Tax Contributions Made After
December 31, 1973..............................................8.1
Vesting With Respect to Employer Contributions.......................8.2
Years of Vesting Service.............................................8.3
Forfeitures Upon Distribution Prior to Full Vesting and
Repayment......................................................8.4
Full Vesting.........................................................8.5
Other Provisions Affecting Vesting...................................8.6
ARTICLE IX - Distribution of Benefits Other Than Withdrawals
iii
Normal Form of Payment...............................................9.1
Alternative Forms of Payment.........................................9.2
Notice of Right to Elect Not to Receive Benefits in Form of
Qualified Joint and Survivor Annuity...........................9.3
Distributions Upon Death.............................................9.4
Commencement of Certain Distributions................................9.5
Special Distributions................................................9.6
Minimum Distribution Requirements....................................9.7
ARTICLE X - Withdrawals
Withdrawals of Contributions........................................10.1
Suspensions.........................................................10.2
Withdrawal of Basic and Supplemental Pre-Tax
Contributions.................................................10.3
Restrictions on Withdrawal of Employer Contributions................10.4
Special Rules Affecting Withdrawals.................................10.5
Hardship Withdrawals................................................10.6
ARTICLE XI - Named Fiduciary and Administration
Pension and Employee Benefits Committee.............................11.1
Authority of the Committee..........................................11.2
Delegation of Authority.............................................11.3
Administrator.......................................................11.4
Appeals Procedure...................................................11.5
Reliance on Reports and Certificates................................11.6
Member's Own Participation..........................................11.7
Exemption from Bond.................................................11.8
Persons Serving in Dual Fiduciary Roles.............................11.9
Indemnification....................................................11.10
Liability of Fiduciaries...........................................11.11
Liability of Named Fiduciaries.....................................11.12
ARTICLE XII - The Trust Fund
The Trust...........................................................12.1
Irrevocability of Company Contributions.............................12.2
Exclusive Benefit...................................................12.3
ARTICLE XIII - Amendment and Termination of Plan
Right to Amend or Terminate.........................................13.1
iv
Mandatory Amendments................................................13.2
Distribution of Accounts upon Plan Termination......................13.3
ARTICLE XIV - Limitations on Contributions
Priority of this Article............................................14.1
Limitation to Annual Additions......................................14.2
Adjustments of Annual Additions.....................................14.3
Participant Covered Under Defined Benefit Plan......................14.4
ARTICLE XV - Top-Heavy Provisions
Applicability of Top-Heavy Provisions...............................15.1
Definitions.........................................................15.2
Determination of Top-Heavy Status...................................15.3
Minimum Vesting.....................................................15.4
Minimum Contribution................................................15.5
Maximum Benefit and Contribution Limitations........................15.6
Coordination of Plans...............................................15.7
ARTICLE XVI - General Provisions
Employment Relationships............................................16.1
Benefits Provided Solely From Trust.................................16.2
Non-Alienation of Benefits..........................................16.3
Merger, Consolidation or Transfer of Assets or Liabilities..........16.4
Payments to Minors and Incompetents.................................16.5
Employee's Records..................................................16.6
Missing Persons.....................................................16.7
Severability of Provisions..........................................16.8
Receipt and Release.................................................16.9
Fiduciary Capacities...............................................16.10
Titles and Headings................................................16.11
Gender and Number..................................................16.12
Governing Law......................................................16.13
Counterparts.......................................................16.14
v
PREAMBLE
1. Formation of the Plan. The Plan is a successor plan to the former
"Savings Plan for Employees of NL Industries, Inc.", which is referred to herein
as the "Predecessor Plan." In connection with the Plan of Restructuring of NL
Industries, Inc. which was approved by shareholders on December 22, 1988, the
Predecessor Plan was renamed the Savings Plan for Employees of Baroid
Corporation and adopted and assumed by Baroid Corporation. Pending the
implementation of the Plan, eligible employees of NL Industries, Inc. and
subsidiaries formerly eligible to participate in the Predecessor Plan continued
to participate in the Predecessor Plan. The Plan was established as of January
1, 1989 to permit eligible employees of NL Industries, Inc. and participating
subsidiaries to continue their participation in a tax-qualified savings plan.
The Plan includes amendments which reflect the restructuring and other changes
which were communicated to eligible employees in November of 1988. Accordingly,
the Plan governs the rights and obligations of the Company and Plan participants
for all periods on and after January 1, 1989, except with respect to
participants' accounts held in Investment Funds of the Predecessor Plan, pending
their transfer to the Plan. All participants who were participants under the
Predecessor Plan automatically become participants under the new Plan. Account
balances under the Predecessor Plan were transferred to the Plan as soon as
practicable after the implementation of the Plan.
2. Change of Investment Structure. Effective as of July 1, 1990, the Plan
was amended and restated to restructure the investments available, and to make
related and other amendments.
3. Baroid Stock Fund. Baroid Corporation restructured in 1990, as a result
of which holders of the Common Stock of Baroid Corporation under the Plan became
holders of shares of both Baroid Corporation and Tremont Corporation. Baroid
Corporation was later acquired by or merged with Dresser Industries, Inc.
Therefore, the Baroid Stock Fund was renamed the Dresser/Tremont Stock Fund to
reflect the names of the companies whose shares are held in that fund.
4. IRS Required changes. As part of their review of the amended and
restated Plan in 1991, the Internal Revenue Service required several wording
changes that had no operational effect, but also required substantial changes
the forfeitures provisions of Section 8.4.
5. TRA 86 Update. To meet the requirements of the Tax Reform Act of 1986
and subsequent legislation and regulations, the Plan was amended and restated in
December, 1994.
6. Additional Defined Contribution Feature. Effective April 1, 1996, the
defined benefit plan was frozen and the Savings Plan amended to provide for an
additional Company Contribution, to be called a "pension feature contribution";
this contribution is a profit sharing contribution not subject to the minimum
funding standards of Section 412 of the Internal Revenue Code. The Plan was
renamed the NL Industries, Inc. Retirement Savings Plan to reflect inclusion of
the new benefit
vi
formula. Other minor changes, including deleting certain obsolete portions of
the historical plan document, are made at the same time.
vii
ARTICLE I
PURPOSE
1.1 The purpose of the NL Industries, Inc., Retirement Savings Plan is to
provide eligible employees with a convenient way to save on a regular and
long-term basis by providing such employees with a beneficial interest in the
profits of the business, all as set forth herein and in the Trust Agreement
adopted in connection with the Plan. The Plan and its related Trust are intended
to qualify as a plan and trust which meet the requirements of Sections 401(a),
401(k) and 501(a), respectively, of the Internal Revenue Code of 1986, as now in
effect or hereafter amended, and all other applicable provisions of law
including, without limitation, the Employee Retirement Income Security Act of
1974, as now in effect or hereafter amended.
I-1
ARTICLE II
DEFINITIONS
As used in the Plan, the following terms shall have the following
meanings:
2.1 "Affiliated Company" means any business entity which (i) is included
within a controlled group of corporations within which the Company also is
included, (ii) is under common control with the Company, or (iii) is included
within an affiliated service group within which the Company is also a member,
all as determined under Sections 414(b), (c) and (m) of the Code, respectively;
provided, however, that for purposes of determining the annual contribution
limitations set forth in Article XIV, such determination shall be made in
accordance with Section 415(h) of the Code.
2.2 "Authorized Leave of Absence" means any absence from employment:
(a) Authorized by the Committee for education purposes or by reason
of family obligations, sickness, short term disability, accident or
emergency (including any leave of absence to which the Employee is
eligible under the Family and Medical Leave Act of 1993); or
(b) On account of a period of military service required by law or
under leave granted by the Committee, provided the Employee returns to
employment with the Company or an Affiliated Company within 90 days after
his separation from active duty or within such longer period during which
his right to reemployment is legally protected.
In granting leaves of absence, the Committee shall accord like treatment
to all Participants in similar circumstances.
2.3 "Basic Contributions" means the aggregate of a Contributing
Participant's Basic After-Tax Contributions and Basic Pre-Tax Contributions as
defined in Paragraphs 2.4 and 2.5, respectively.
2.4 "Basic After-Tax Contributions" means that part of a Contributing
Participant's Compensation which he contributes to the Trust Fund on an
after-tax basis, as provided in Paragraph 4.1 hereof.
2.5 "Basic Pre-Tax Contributions" means that part of a Contributing
Participant's Compensation which he elects to reduce in accordance with
Paragraph 4.2 hereof and have contributed to the Trust Fund on his behalf by his
Employer on a pre-tax basis, in compliance with the provisions of Section 401(k)
of the Code.
II-1
2.6 "Beneficiary" means the Spouse of the Participant if surviving;
provided, however, that if there is no surviving Spouse or if the surviving
Spouse cannot be located, the person or persons designated by the Participant in
the form of a Qualified Election, as such term is defined in Paragraph 2.31, to
receive any death benefit payable hereunder. A Participant may also designate
any person or persons as his Beneficiary in the form of a written designation to
receive any death benefit payable hereunder, provided he obtains the notarized
written consent of his Spouse. A Participant may revoke or change his
Beneficiary designation only with the consent of the Spouse by filing a revised
designation with the Committee. The last such designation received by the
Committee shall be controlling; provided, however, that no designation, change
or revocation thereof, shall be effective unless received by the Committee prior
to the Participant's death, and in no event shall it be effective as of a date
prior to such receipt. In the absence of an effective designation or if no named
beneficiary shall survive the Participant, the Beneficiary shall be the
Participant's Spouse, or, if there is no Spouse, then the following persons (if
then living) in the following order of priority: (i) children, in equal shares,
(ii) parents, in equal shares, (iii) the persons designated as beneficiary under
the group life insurance plan of the Employer, and (iv) the Participant's
estate. If the Committee is in doubt as to the right of any person to receive
such amount, the Committee may direct the Trustee to retain such amount, without
liability for any interest thereon, until the rights thereto are determined, or
the Committee may direct the Trustee to pay such amount into any court of
appropriate jurisdiction and such payment shall be a complete discharge of the
liability of the Plan and the Trust therefor.
2.7 "Board" means the Board of Directors of the Company as constituted
from time to time, or the duly appointed delegate of such Board of Directors.
2.8 "Break in Service" means any Plan Year during which an Employee fails
to receive credit for at least three (3) Months of Service or 501 Hours of
Service, except that a Break in Service shall not be deemed to occur on account
of any Authorized Leave of Absence. Solely for purposes of determining whether a
Break in Service has occurred in any Plan Year, an Employee who is absent from
work on account of a "maternity or paternity absence" shall be credited with the
number of Hours of Service which would have been completed but for such absence,
or, if the Committee is unable to determine such Hours of Service, eight Hours
of Service for each day of such absence; provided, however, that no more than
501 hours shall be credited hereunder on account of any such absence, and
further provided that the Employee furnishes to the Committee such timely
information as may be required by the Committee to properly administer this
provision. Hours of Service for a "maternity or paternity absence" shall be
credited entirely in the Plan Year in which the absence begins if necessary to
prevent the occurrence of a Break in Service in such year, or, in any other
case, in the immediately following Plan Year. A "maternity or paternity absence"
shall mean any absence from work by reason of the Employee's pregnancy, the
birth of the Employee's child, the placement of a child with the Employee in
connection with the adoption of such child by the Employee, or for purposes of
caring for any such child for the period immediately following such birth or
placement.
II-2
2.9 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended, and regulations and other authority issued thereunder. All
citations to sections of the Code are to such sections as they may from time to
time be amended or renumbered.
2.10 "Committee" means the Pension and Employee Benefits Committee of NL
Industries, Inc. as established in accordance with Article XI hereof.
2.11 "Common Stock" means the presently authorized common stock, par value
$.125 per share, of NL Industries, Inc., a New Jersey corporation, as adjusted
for stock splits, stock dividends, reclassifications and similar changes
affecting such shares, or other common stock with voting power and dividend
rights no less favorable than the voting power and dividend rights of the
presently authorized common stock of NL Industries, Inc.
Solely with respect to common stock of Baroid Corporation which was
allocated to the accounts of Employees of the Company or its Affiliated
Companies as a result of the restructuring of NL Industries, Inc. into NL
Industries, Inc. and Baroid Corporation and which Participants to whose accounts
such stock was allocated elected to retain in lieu of exchanging it for common
stock of the Company, Common Stock also means the presently authorized common
stock, par value $.10 per share, of Baroid Corporation, a Delaware corporation,
or any successor corporation, as adjusted for stock splits, stock dividends,
reclassifications and similar changes affecting such shares, or other common
stock with voting power and dividend rights no less favorable than the voting
power and dividend rights of the presently authorized common stock of Baroid
Corporation.
Solely with respect to common stock of Tremont Corporation which was
allocated to the accounts of Employees of the Company or its Affiliated
Companies as a result of the restructuring of Baroid Corporation into Tremont
Corporation and Baroid Corporation, Common Stock also means the presently
authorized common stock, par value $.10 per share, of Tremont Corporation, a
Delaware corporation, or of any successor corporation, as adjusted for stock
splits, stock dividends, reclassifications and similar changes affecting such
shares, or other common stock with voting power and dividend rights no less
favorable than the voting power and dividend rights of the presently authorized
common stock of Tremont Corporation.
2.12 "Company" means NL Industries, Inc. and any person, firm or
corporation which hereafter may succeed to the interests of said company by
merger, consolidation or otherwise and which, by appropriate action, shall adopt
the Plan.
2.13 "Compensation" means the first $150,000 (as adjusted, as may be
determined by the Commissioner of Internal Revenue, at such time and in such
manner as is prescribed in Section 401(a)(17)(B) of the Code) of all
remuneration paid to an Employee by his Employer during a Plan Year which is
received during the period that such Employee is eligible to become a
Participant in the Plan under the provisions of Paragraph 3.1, and which is
subject to withholding for federal income tax purposes, or would have been paid
and been subject to withholding if the Employee (i) had not made any Basic
Pre-Tax Contributions as defined in Paragraph 4.2 or Supplemental
II-3
Pre-Tax Contributions as defined in Paragraph 4.3 hereof, (ii) had not elected
to have his salary reduced to fund contributions to a plan maintained by his
Employer pursuant to Section 125 of the Code, or (iii) was employed in the
United States. Compensation shall not include relocation allowances or
relocation bonuses, hiring or sign-on bonuses, the imputed value of group life
insurance, tuition refunds, foreign service premiums and other similar foreign
service adjustments, and any income attributable to stock options, stock
appreciation rights, performance award rights (other than performance award
rights which are in the nature of an annual bonus award) or other similar cash
or non-cash fringe benefits and prerequisites (other than executive incentive
awards made in cash or stock). To the extent that the remuneration of any
Employee is paid in a foreign currency, such amount shall be converted to United
States Dollars at a rate to be determined by the Committee and uniformly
applicable to all Employees paid in such currency at such time. With respect to
Plan Years commencing after December 31, 1993, Compensation in excess of
$150,000 (as adjusted, as may be determined by the Commissioner of Internal
Revenue, at such time and in such manner as is prescribed in Section
401(a)(17)(B) of the Code) (the "applicable compensation limitation") shall be
disregarded.
For purposes of this definition of "Compensation," and for purposes of the
corresponding limitations on compensation in Section 14.2 the following
provisions shall apply:
(a) The cost-of-living adjustment in effect for a calendar year
applies to any period, not exceeding 12 months, over which compensation is
determined ("determination period") beginning in such calendar year. If a
determination period consists of fewer than 12 months, the applicable
compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the
denominator of which is 12;
(b) If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current plan
year, the compensation for that prior determination period is subject to
the applicable compensation limit in effect for that prior determination
period, and for this purpose, for determination periods beginning before
the first day of the first plan year beginning on or after January 1,
1994, the applicable compensation limit is $150,000.
2.14 "Contributing Participant" means any Participant who elects to make
Basic Contributions to the Trust Fund in accordance with Article IV hereof.
2.15 "Disability" means, with respect to any Participant, the inability of
such Participant to perform the normal duties of his employment for which he is
qualified by training or experience, and which qualifies such Participant for a
benefit under the Long Term Disability Plan and/or the Social Security Act. The
Committee may secure qualified medical advice and may require the Participant to
submit to a physical examination in determining Disability hereunder.
2.16 "Employee" means any person employed by the Employer except:
II-4
(a) any person, other than a person whose conditions of employment
currently are covered by a collective bargaining agreement, whose
compensation is computed on an hourly, daily, piecework or other
comparable basis, or any person who is a "leased employee" as defined in
Section 414(n) of the Code, unless such person or leased employee is
included within a class of employees which is designated by the Board as
eligible to participate in the Plan and is not otherwise excluded from
participation under subparagraphs (c) or (d) below;
(b) any person whose conditions of employment currently are covered
by a collective bargaining agreement to which the Employer is a party,
unless the Employer and the bargaining agent have come to agreement as to
the inclusion of such person under the Plan;
(c) any person who is or becomes a participant under any other
profit sharing, savings or similar type defined contribution plan
(excluding a tax credit employee stock ownership plan) maintained by an
Employer or any other nonparticipating Affiliated Company; and
(d) any person employed by an Affiliated Company which is not
organized under the laws of the United States, or any State, or the
District of Columbia, unless such person is a citizen of the United States
or has been designated as an Employee, either individually or by
employment classification, by the Committee in accordance with guidelines
established by the Committee.
Provided however, any person described in (a) through (b) of the immediately
preceding sentence shall be deemed to be an Employee for purposes of Section
2.22.
2.17 "Employer" means the Company, Rheox, Inc., and Kronos, Inc., and any
other Affiliated Company which is designated by the Board as an Employer under
the Plan and whose designation as such has become effective and continues in
effect. The Board may revoke the designation of an Affiliated Company as an
Employer at any time, but the provisions of the Plan shall otherwise continue to
govern the rights and obligations of Participants of that Employer and their
Beneficiaries after such revocation. When used in reference to Employer
Contributions for a Participant, the term "Employer" shall refer to the Employer
employing such Participant. When the term "Employer" is used in reference to the
collective obligations of all Employers adopting the Plan, the obligations of
each such Employer shall be proportionate to the Compensation of its
Participants to the Plan. Each Employer appoints the Company and the Committee
as its agents to act for it in all matters relating to the Plan and Trust, and
agrees to furnish to the Committee such information which may be necessary for
the proper administration of the Plan.
2.18 "Employer Contributions" means the amount which the Employer shall
contribute to the Trust Fund as provided in Article V hereof, including both
Employer Matching Contributions and Employer Pension Feature Contributions.
II-5
2.19 "ERISA" means the Employee Retirement Income Security Act of 1974, as
now in effect or hereafter amended, and regulations and other authority issued
thereunder. All citations to Sections of ERISA are to such sections as they may
from time to time be amended or renumbered.
2.20 "Highly Compensated Employee" or "Highly Compensated Participant"
means an Employee or Participant who, during the relevant period is treated as a
highly compensated employee under Section 414(q) of the Code.
2.21 "Hour of Service" means:
(a) each hour for which an Employee is paid or entitled to payment
for the performance of duties for the Employer or an Affiliated Company
during the Plan Year;
(b) each hour for which an Employee is paid or entitled to payment
by the Employer or an Affiliated Company during the Plan Year on account
of a period of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff, jury duty, or
an Authorized Leave of Absence; provided, however, that an Hour of Service
shall not include any hour during which no duties are performed and for
which payment is made solely for the purpose of complying with applicable
worker's compensation, unemployment compensation or disability insurance
laws; and
(c) each hour for which back pay, irrespective of mitigation of
damage, has been either awarded or agreed to by the Employer or an
Affiliated Company (these hours shall be credited to the Employee for the
computation period or periods to which the award or agreement pertains
rather than the computation period in which the award agreement, or
payment was made).
Hours of Service credited for reasons other than the performance of duties
shall be computed and credited to computation periods in accordance with
paragraphs (b) and (c) of Section 2530.200b-2 of the Department of Labor
Regulations. Hours of Service shall be credited for any person considered a
"leased employee" as defined in Section 414(n) of the Code, regardless of
whether such person is an Employee; provided, however, that no such "leased
employee" shall participate in the Plan except as provided in subparagraph (a)
of Paragraph 2.17.
2.22 "Investment Funds" means the funds in which the Trust Fund is
invested by the Trustee in accordance with the provisions of Article VI hereof.
2.23 "Long Term Disability Plan" means the long term disability plan of
the Company, as amended from time to time, which covers enrolled Employees.
II-6
2.24 "Month of Service" means each calendar month during which an Employee
or "leased employee" is entitled to credit for at least one Hour of Service. For
purposes of the Plan, credit for one Month of Service shall be the equivalent of
having been credited with 190 Hours of Service during the relevant calendar
month. Months of Service shall include each calendar month of service with
Baroid Corporation after the approval of the Plan of Restructuring provided such
service would have been credited as a Month of Service if Baroid Corporation had
been an Affiliated Company during such period. Months of Service also shall
include service accumulated with certain predecessor employers if, and to the
extent, authorized by the Board. The Committee shall credit Months of Service
under the preceding two sentences in accordance with nondiscriminatory rules of
uniform application.
2.25 "Participant" means an Employee who satisfies the eligibility
requirements of Article III hereof and who maintains an account balance in the
Trust Fund, regardless of whether such Employee is a Contributing Participant.
2.26 "Plan" means the NL Industries, Inc. Retirement Savings Plan, as may
be subsequently amended or restated from time to time.
2.27 "Plan Year" means each calendar year.
2.28 "Predecessor Plan" means the Savings Plan for Employees of Baroid
Corporation as in effect on December 31, 1988 and as thereafter amended to
incorporate changes (i) approved by the Board with respect to NL Industries,
Inc. participants or (ii) otherwise required to be made effective prior to such
date to comply with the amendments to applicable law.
2.29 "Prior Plan" means the Savings Plan for Employees of NL Industries,
Inc. effective as of July 1, 1990, as amended, restated and continued under the
form of the Plan, without a gap or lapse in coverage, time or effect of a
qualified plan under applicable provisions of the Code.
2.30 "Profitability Level" means the level and measurement of
profitability which are approved by the Board with respect to the relevant Plan
Year.
2.31 "Qualified Election" shall mean an election made by a Participant in
writing and consented to by the Participant's Spouse in writing. The Spouse's
consent must name a specific beneficiary or class of beneficiaries which may not
be changed without spousal consent, unless the spouse expressly consents to the
designation by the participant without further consent; and must acknowledge the
effect of such election and must be witnessed by a member of the Committee, a
local employee relations manager or a notary public. Notwithstanding the
preceding sentence, consent of the Spouse shall not be required if the
Participant establishes to the satisfaction of the Committee that there is no
Spouse or that the Spouse cannot be located. Except as otherwise provided in
Paragraph 2.6, a Participant may revoke a prior election without the Spouse's
consent at any time before the commencement of benefits. The number of elections
and revocations shall not be limited.
II-7
2.32 "Regulations" means the applicable regulations issued under the Code,
ERISA or other applicable law by the IRS, the Labor Department, or any other
governmental authority or any temporary regulations or rules promulgated by such
authorities pending the issuance of such regulations.
2.33 "Retirement" means, in the case of a Participant eligible for a then
current pension under the provisions of any formal retirement plan of the
Company, the termination of employment by the Participant due to actual
retirement in accordance with the provisions of such plan, and in the case of
any other Participant not covered by a formal retirement plan of the Company,
such Participant's termination of employment in accordance with rules of uniform
application maintained by the Company.
2.34 "Spouse" means the person to whom the Participant was legally
married, as determined by the Committee, for at least 31 days immediately
preceding the earlier of either (a) the date on which the Participant terminates
employment under the Plan due to Retirement (or is deemed to have so terminated
his employment) or (b) the Participant's death; provided, however, that a former
Spouse will be treated as a Spouse to the extent provided under a qualified
domestic relations order as described in Paragraph 16.2.
2.35 "Supplemental Contributions" means the aggregate of a Contributing
Participant's Supplemental After-Tax and Supplemental Pre-Tax Contributions, as
defined in Paragraphs 2.37 and 2.38, respectively.
2.36 "Supplemental After-Tax Contributions" means that part of a
Contributing Participant's Compensation in excess of his Basic Contributions,
and/or and contributions made by a Contributing Participant by means of personal
check, which he contributes to the Trust Fund on an after-tax basis as provided
in Paragraph 4.3 hereof.
2.37 "Supplemental Pre-Tax Contributions" means that part of a
Contributing Participant's Compensation which he elects to reduce in accordance
with Paragraph 4.3 hereof and have contributed to the Trust Fund on his behalf
by his Employer on a pre-tax basis, in compliance with the provisions of Section
401(k) of the Code.
2.38 "Trust" means the trust established pursuant to and forming part of
the Plan for the investment, reinvestment and administration of contributions
under the Plan.
2.39 "Trustee" means the bank, trust company or national banking
association having trust powers designated as Trustee of the Trust under an
agreement between the Company and such bank, trust company or national banking
association.
2.40 "Trust Fund" means the trust fund described in Article XII hereof.
II-8
2.41 "Valuation Date" means the date or dates as may be determined by the
Committee to apply with respect to amounts invested in any Investment Fund.
2.42 "Vesting Service" means service described in Paragraph 8.3 hereof.
II-9
ARTICLE III
ELIGIBILITY FOR PARTICIPATION
3.1 Eligibility:
(a) General Rules: Effective April 1, 1996, each Employee who was a
Contributing Participant in the Prior Plan on the date immediately prior
to the date such Prior Plan was amended, restated and continued under the
form of the Plan shall continue as a Contributing Participant under the
provisions of the Plan. Each other Employee shall become a Participant and
also eligible to participate in the Plan as a Contributing Participant on
the later of (a) April 1, 1996, and (b) the first day of the pay period
coincident with or next following the date on which he shall have
performed at least 1000 Hours of Service or six Months of Service,
provided he shall have performed such service within a single "eligibility
computation period." An Employee's "eligibility computation period" shall
be the 12-month period commencing with his date of employment or, if the
Employee fails to satisfy the requirements of this subparagraph (a) during
such period, any Plan Year following his date of employment.
(b) Rollovers By Non-Participants: Notwithstanding subparagraph (a)
immediately above or any other provision of the Plan to the contrary, an
Employee who would otherwise be eligible to participate in the Plan but
for his failure to satisfy the service requirement under subparagraph (a)
may make, with the consent of the Committee, a Rollover Contribution (as
defined in subparagraph 4.10(b)), a Direct Rollover to the Trust Fund (as
described in subparagraph 4.10(c)) or a direct transfer to the Trust Fund
(as described in subparagraph 4.10(d)) in accordance with the procedures
set forth in subparagraph 4.10(a). In the event the Committee permits an
Employee to make such a Rollover Contribution, Direct Rollover, or direct
transfer to the Trust Fund, the Committee shall cause the Trustee to
establish a separate account for such Employee in accordance with
procedures set forth in Article VII hereof and shall invest the assets
involved in the manner set forth in Paragraph 6.1 in accordance with
instructions submitted in writing to the Committee by the Employee. In the
event the Employee terminates employment with the Employer prior to
becoming a Participant under the Plan, such separate account shall be
distributed to him in the form of a lump sum payment in the manner and at
the time prescribed in subparagraph 9.1(a).
(c) Non-Resident Aliens: Notwithstanding any other provision of the
Plan to the contrary, an Employee who qualifies as such under subparagraph
2.17(d) or any other nonresident alien or expatriate shall not be eligible
to make Basic Pre-Tax Contributions as defined in Paragraph 2.5, unless
otherwise determined by the Committee in its sole discretion.
III-1
(d) Independent Contractors: Notwithstanding any other provision of
the Plan to the contrary, but subject to the provisions of this paragraph,
(i) any individual who was considered by the Employer to be an independent
contractor, but who is later reclassified as a common-law Employee
(excluding any Leased Employee described in clause (ii) below) of the
Employer with respect to any portion of the period in which such
individual was paid by the Employer as an independent contractor, or (ii)
any Leased Employee, shall be excluded from participation in the Plan with
respect to the period in which any individual described in clause (i) was
considered to be an independent contractor, or the period in which any
individual described in clause (ii) is a Leased Employee. If any
individual who is described in clause (i) or in clause (ii) must be
covered with respect to a Plan Year (or portion thereof) in order to
ensure that the Plan is operated in compliance with Sections 401(a) and
410(b) of the Code, starting with the class of reclassified independent
contractors, only such number of individuals within the class which
includes the individual (beginning with the individuals with the lowest
Considered Compensation determined on an annualized basis) as is necessary
to ensure compliance with the Code shall be covered in the Plan only for
the Plan Year (or portion thereof) that is necessary to ensure that the
requirements of the Code are met.
3.2 Method of Becoming a Participant: An Employee who is eligible to
become a Participant in the Plan under the provisions of Paragraph 3.1 shall
automatically become a Participant and shall be provided opportunity to:
(a) stipulate the Investment Fund(s) to which the Employer
Contributions should be allocated as set forth in Paragraph 6.1; and
(b) name a Beneficiary.
3.3 Method of Becoming a Contributing Participant: An Employee who is
eligible to become a Contributing Participant in the Plan under the provisions
of Paragraph 3.1 shall do so by completing and delivering to the Committee at
least 15 days (or any shorter period authorized by the Committee) before the
date of desired participation, a written statement (or other form of direction
authorized by the Committee):
(a) enrolling as a Contributing Participant;
(b) electing the initial rate of his Basic and Supplemental
Contributions under Article IV;
(c) stipulating the Investment Fund(s) to which his contributions
and the Employer Contributions should be allocated as set forth in
Paragraph 6.1;
(d) providing such other information as the Committee may require;
and
III-2
(e) agreeing to be bound by all the terms and conditions of the
Plan.
Each Participant who does not become a Contributing Participant when first
eligible to do so may become a Contributing Participant as of the first day of
any pay period thereafter by complying with the provisions of this Paragraph
3.2.
3.4 Termination of Participation in the Plan: Participation in the Plan
shall cease in the case of any Participant whose entire account balance is
distributed. Any person whose participation is terminated pursuant to the
preceding sentence may resume participation in the Plan as of the first day of
the pay period coincident with or next following the date he again becomes an
Employee, provided he satisfies the requirements of Paragraph 3.2. Participation
in the Plan shall continue in the case of any Participant who, upon termination
of employment for any reason (including Disability or Retirement), or in the
case of any Beneficiary who, upon the death of the Participant, elects to
receive a distribution in a form that would maintain an account balance in any
one or more of the Investment Funds after termination of employment. Such person
shall remain a Participant or, in the case of a Beneficiary, be deemed a
Participant herein, but not a Contributing Participant, until such time as the
distribution in full has been made to him. Any person whose participation is
continued under this Paragraph 3.3 shall continue to participate in Investment
Fund performance but shall be prohibited from making any further contributions
to the Trust Fund unless he is reemployed, in which event again he shall be
eligible to become an active Participant, and, at his election a Contributing
Participant herein.
3.5 Intra-Company Transfers: Termination of employment shall not be deemed
to occur by reason of:
(a) transfer in employment from one Employer to another Employer;
(b) transfer in employment from an Employer to any Affiliated
Company not participating in the Plan or to a class of employees
(including "leased employees" as defined in Section 414(n) of the Code)
which is ineligible to participate in the Plan; or
(c) transfer in employment from any Affiliated Company not
participating in the Plan or from a class of employees (including "leased
employees" as defined in Section 414(n) of the Code) which is ineligible
to participate in the Plan to an Employer or class of eligible Employees
hereunder.
Except as provided in Paragraph 10.1, for purposes of subparagraph (b), a
Participant shall remain a Participant for purposes of investment election,
withdrawals, and distribution rights, under the Plan, but he shall not be
eligible to be a Contributing Participant or to receive Employer Contributions
for the period of time during which he is employed by an Affiliated Company
which is not participating in the Plan or during which he is part of a class of
employees which is ineligible to participate in the Plan. For purposes of
subparagraph (c), employment with an Affiliated Company which is not
participating in the Plan or as an employee ineligible to participate in the
Plan
III-3
shall count as Hours of Service and Months of Service toward satisfying the
requirement of Paragraph 3.1.
III-4
ARTICLE IV
PARTICIPANT CONTRIBUTIONS
4.1 Amount of Basic After-Tax Contributions: Subject to the provisions of
Paragraph 5.2(c)(i) and Article XIV, any Employee who is, or is eligible to
become, a Contributing Participant may make through payroll deductions, Basic
After-Tax Contributions, for any Plan Year, equal to any percentage of his
Compensation, in increments of 0.5%, from 1% up to and including 8% (or such
other maximum amount as may be established by the Committee) less the percentage
of Compensation elected as Basic Pre-Tax Contributions pursuant to Paragraph
4.2, if any.
4.2 Amount of Basic Pre-Tax Contributions:
(a) Contribution Limits: Subject to the provisions of Paragraph 4.5
and Article XIV, any Employee who is, or is eligible to become, a
Contributing Participant may elect, in accordance with procedures adopted
by the Company, to reduce his Compensation by an amount equal to any
percentage, in increments of 0.5%, from 1% up to and including 8%, or such
other maximum amount as may be established by the Committee; provided,
however, that the maximum amount elected as Basic Pre-Tax Contributions in
no event shall exceed the difference between (i) 8% (or such other maximum
amount as may be established by the Committee) and (ii) the percentage of
Compensation elected as Basic After-Tax Contributions pursuant to
Paragraph 4.1, if any. Subject to subparagraph 4.5(b), the amount of any
such reduction shall be contributed to the Plan as Basic Pre-Tax
Contributions on behalf of such Contributing Participant by his Employer.
Notwithstanding the foregoing, Basic Pre-Tax Contributions in any calendar
year shall not exceed the limitation on elective deferrals under Section
402(g)(1) of the Code adjusted for increases in the cost of living in
accordance with Section 402(g)(5) of the Code.
(b) Refund of Excess Contributions: In the event that the aggregate
amount of Basic Pre-Tax Contributions for a Participant exceeds the
limitation in the previous sentence, the amount of such excess, increased
by any income and decreased by any losses attributable thereto (but,
effective January 1, 1992, before the gap period between the end of the
calendar year and the date of distribution), shall be refunded to the
Participant no later than the April 15th of the calendar year following
the calendar year for which the Basic Pre-Tax Contributions were made. If
a Participant also participates, in any calendar year, in any other plans
subject to the limitations set forth in Section 402(g) of the Code and has
made excess deferrals under this Plan when combined with the other plans
subject to such limits, to the extent the Participant, in writing
submitted to the Committee no later than the March 1 of the calendar year
following the calendar year for which the Basic Pre-Tax Contributions were
made, designates any Basic Pre-Tax Contributions under this Plan as excess
deferrals, the amount of such designated excess, increased by any income
and decreased by any losses attributable thereto, shall be refunded to the
Participant no later than the April 15 of the calendar year following the
calendar year for which the Basic Pre-Tax Contributions were
IV-1
made. Alternatively, a Participant may request refund of excess deferrals
before the end of the Plan Year.
4.3 Supplemental Contributions: Subject to the provisions of Article XIV,
a Participant who is an Employee and whose Basic Contributions are at least 8%
may elect to make Supplemental After-Tax or Supplemental Pre-Tax Contributions
through payroll deductions. A Participant who is an Employee and whose Basic
Contributions are less than 8% may elect to make Supplemental After-Tax
Contributions by personal check. Supplemental Pre-Tax Contributions shall be
made in accordance with procedures adopted by the Company. Supplemental
Contributions are not matched by the Company. The amount of a Contributing
Participant's Supplemental Contributions may be made by payroll deductions in
increments of 0.5% from 1% to 4% of Compensation, or by personal check in
multiples of $100, or in such other percentages or amounts as may be established
by the Committee.
If Basic Contributions are reduced below 8%, a Participant's Supplemental
Contributions by payroll deduction will be suspended. Such Supplemental
Contributions may resume once Basic Contributions equal at least 8%. The
provisions of Section 4.2(b) apply to Supplemental Pre-Tax Contributions, also.
4.4 Separate Accounting: The Committee and the Trustee shall be
responsible for maintaining separate records of the Basic After-Tax and Pre-Tax
Contributions, Supplemental After-Tax and Pre-Tax Contributions and Rollover
Contributions (including Direct Rollovers and direct transfers) made by or on
behalf of the Participant and paid over to the Trustee. All amounts contributed
by or on behalf of the Participant to the Trust Fund with respect to any pay
period shall be allocated to the Participant's account as soon as practicable
after the end of the pay period in respect of which the payroll deductions,
salary reductions or cash payments are effectuated.
4.5 Special Provisions Related to Basic and Supplemental Pre-Tax
Contributions:
(a) Vesting and Withdrawal Limitation: Basic and Supplemental
Pre-Tax Contributions, including increments earned thereon, shall be fully
vested at all times and may not be withdrawn by or distributed to a
Participant, except as permitted by an election made pursuant to Section
9.6, until the earliest to occur of his Retirement, death, Disability,
separation from service, attainment of age 59 1/2 or hardship.
(b) (i) ADP Test: Notwithstanding any other provision of this
Article IV, the actual deferral percentage for the Plan Year for
Highly Compensated Employees shall not exceed the greater of the
following actual deferral percentage tests: (a) the actual deferral
percentage for such Plan Year of those eligible Employees who are
not Highly Compensated Employees multiplied by 1.25; or (b) the
actual deferral percentage for the Plan Year of those eligible
Employees who are not Highly Compensated Employees multiplied by
2.0, provided that the actual deferral percentage for Highly
Compensated Employees does not exceed the actual deferral
IV-2
percentage for such other eligible Employees by more than 2
percentage points. For purposes of this Article IV, the "actual
deferral percentage" for a Plan Year means, for each specified group
of employees, the average of the ratios (calculated separately for
each Employee in such group) of (a) the amount of the Participant's
Basic and Supplemental Pre-Tax Contributions for the Plan Year, to
(b) the amount of the Participant's Compensation (as defined in
Section 414(s) of the Code) for the Plan Year. An eligible
Employee's actual deferral percentage shall be zero if no Basic
Pre-Tax Contribution or Supplemental Pre-Tax Contribution is made on
his behalf for such Plan Year.
(ii) Recharacterization and Refund (Leveling Method): The
Committee shall determine as of the end of the Plan Year, and at
such time or times in its discretion, whether one of the actual
deferral percentage tests specified in subparagraph 4.5(b)(i) is
satisfied for such Plan Year. This determination shall be made after
first determining the treatment of excess deferrals within the
meaning of Section 402(g) of the Code under Paragraph 4.2. In the
event that neither of such actual deferral percentage tests is
satisfied, the Committee shall, to the extent permissible under the
Code and the Regulations, and to the extent any such
recharacterization would not cause a violation of subparagraph
5.2(a) or, together with Basic After-Tax Contributions actually
made, exceed the limitations on Basic After-Tax Contributions stated
in Paragraph 4.1 determined prior to application of subparagraph
5.2(a), if the Participant so elects, recharacterize such excess
contributions as Basic or Supplemental After-Tax Contributions, in
the manner described in subparagraph 4.5(b)(iv) or, to the extent
such recharacterization is not possible or the Participant does not
so elect, refund the excess contributions in the manner described in
subparagraph 4.5(b)(v). For purposes of this Article IV, "excess
contributions" means, with respect to any Plan Year, the excess of
the aggregate amount of Basic and Supplemental Pre-Tax Contributions
(and any earnings and losses allocable thereto but, effective
January 1, 1992, before the gap period between the end of the
calendar year and the date of distribution) made on behalf of Highly
Compensated Participants for such Plan Year, over the maximum amount
of such contributions that could be made to such Participants
without violating the requirements of subparagraph 4.5(b)(i),
determined by reducing Basic and Supplemental Pre-Tax Contributions
made on behalf of Highly Compensated Participants in order of the
actual deferral percentages beginning with the highest of such
percentages. The reduction shall be determined by the leveling
method, under which the actual deferral ratio of the Highly
Compensated Employee with the highest actual deferral ratio is
reduced to the extent required to (i) enable the Plan to satisfy the
ADP test, or (ii) cause such Highly Compensated Employee's actual
deferral ratio to equal the ratio of the Highly Compensated Employee
with the next highest actual deferral ratio. This leveling process
shall be repeated until the Plan satisfies the ADP test. Provided,
however, that for years after 1996, if a different leveling method
is mandated by the Code, such different leveling method shall be
used instead.
IV-3
(iii) Forfeiture of Matching Contributions: If any Basic
Pre-Tax Contributions are to be refunded as an excess contribution,
the corresponding matching contributions that were contributed under
Section 5.1 (and any earnings and losses attributed thereto but,
effective January 1, 1992, before the gap period between the end of
the calendar year and the date of distribution) will be forfeited.
(iv) Tax Treatment of Recharacterized Deferrals: To the extent
provided in subparagraph 4.5(b)(ii), in accordance with the Code and
the Regulations, if a Highly Compensated Participant so elects in
writing no later than the 15th day of the second month immediately
following the end of the Plan Year for which such excess
contributions were made, the Committee shall recharacterize excess
contributions of such Participant for a Plan Year as Basic or
Supplemental After-Tax Contributions in order to satisfy the
requirements of subparagraph 4.5(b)(i), in which event the amount of
excess contributions so recharacterized shall, to the extent
permitted by the Code and the Regulations, be treated as having been
refunded to the Participant and then contributed by the Participant
as Basic or Supplemental After-Tax Contributions, as appropriate.
Earnings related to any recharacterized amount shall not be treated
as a recharacterized amount.
(v) Timing of Refunds: If a Highly Compensated Participant
does not elect recharacterization under subparagraph 4.5(b)(iv), or,
if required in order to comply with the provisions of subparagraph
4.5(b)(i), and the Code, the Committee shall refund excess
contributions for a Plan Year. The distribution of such excess
contributions shall be made to Highly Compensated Participants to
the extent practicable before the 15th day of the third month
immediately following the Plan Year for which such excess
contributions were made, but in no event later than the earlier of
(a) the end of the Plan Year following such Plan Year or (b) in the
case of the termination of the Plan in accordance with Article XIII,
no later than the end of the twelve-month period immediately
following the date of such termination. Any such distribution shall
be made to each Highly Compensated Participant on the basis of the
respective portions of such amounts attributable to each such Highly
Compensated Participant.
(vi) Effect of Prior Distribution of Excess Deferrals:
Notwithstanding the foregoing provisions of this subparagraph
4.5(b), the amount of excess contributions to be recharacterized or
distributed pursuant to subparagraph 4.5(b)(iii) with respect to a
Participant for a Plan Year shall be reduced by any excess deferrals
previously distributed to such Participant for such Plan Year.
(vii) Continued Impact of Excess Contributions:
Notwithstanding the foregoing provisions of this Paragraph 4.5,
excess contributions that are recharacterized shall then be taken
into account for purposes of Paragraph 5.2, shall continue to be
subject to Paragraph 8.1 and Paragraph 10.3, and shall continue to
IV-4
count toward the limits in Paragraph 14.2. Excess contributions that
are refunded shall continue to count toward the limits in Paragraph
14.2.
(viii)Family Aggregation Rules: Only to the extent that family
aggregation rules are mandated by the Code, if an eligible Highly
Compensated Employee is subject to the family aggregation rules of
Section 414(q)(6) of the Code because such employee is either a
five-percent owner or one of the ten most Highly Compensated
Employees, the combined actual deferral ratio for the family group
(which is treated as one Highly Compensated Employee) shall be
determined by combining the Basic and Supplemental Pre-Tax
Contributions, Compensation and amounts treated as Basic and
Supplemental Pre-Tax Contributions of all the eligible family
members.
The Basic and Supplemental Pre-Tax Contributions, Compensation
and amounts treated as Basic and Supplemental Pre-Tax Contributions
of all family members shall be disregarded for the purpose of
determining the actual deferral percentage for the group of eligible
Employees who are not Highly Compensated Employees.
If an Employee is required to be aggregated as a member of
more than one family group in a plan, all eligible Employees who are
members of those family groups that include that Employee shall be
aggregated as one family group.
(ix) Family Correction: The determination and correction of
excess contributions of a Highly Compensated Employee whose actual
deferral ratio is determined under subparagraph 4.5(b)(viii) shall
be accomplished as follows: the actual deferral ratio shall be
reduced as required under subparagraph 4.5(b)(ii) and the excess
contributions for the family unit shall be allocated among the
family members in proportion to the Basic and Supplemental Pre-Tax
Contributions of each family member that are combined to determine
the actual deferral ratio.
4.6 Change in Amount of Contributions: A Contributing Participant may
change the rate of his Basic or Supplemental Contributions for any calendar
month by filing the appropriate Plan form with the local administrator at least
15 days prior to the first day of any such calendar month for which the change
in payroll deductions is intended to be effective. All elections of Basic and
Supplemental Contribution rates made under the Plan shall remain in effect,
notwithstanding any change in Compensation, until changed as permitted in this
Paragraph 4.6 or Paragraph 4.5.
4.7 Suspension of Basic or Supplemental Contributions: A Contributing
Participant may suspend his Basic or Supplemental Contributions to the Plan by
filing the appropriate Plan form with the local administrator at least 15 days
prior to the first day of the pay period for which such suspension is intended
to be effective. Suspension of Basic After-Tax Contributions shall not prevent a
Contributing Participant from continuing or increasing his Basic Pre-Tax
Contributions
IV-5
and suspension of Basic Pre-Tax Contributions shall not prevent a Contributing
Participant from continuing or increasing his Basic After-Tax Contributions.
4.8 Remittance of Contributions to Trustee: Basic Contributions and
Supplemental Contributions shall be remitted to the Trustee as soon as
practicable after the end of the month in which the payroll deductions, personal
checks, salary reductions or cash payments are effectuated, but in no event
later than 90 days from the date such contributions are received by the Employer
(in the case of Basic and Supplemental After-Tax Contributions) or the date on
which such contributions would otherwise have been paid to the Employee in cash
(in the case of Basic and Supplemental Pre-Tax Contributions). The aggregate
amounts contributed hereunder, shall be employed by the Trustee to make
purchases for the Investment Fund or Funds in accordance with the respective
investment elections of each Contributing Participant for such pay period. All
such contributions shall be allocated to the accounts of each Participant
established in accordance with Article VII.
4.9 Cessation of Contributions Made by a Contributing Participant: All
Contributions of a Contributing Participant shall cease effective with the first
day of the pay period coincident with or next following the date of:
(a) the timely filing of a notice of voluntary suspension of Basic
Contributions as described in Paragraph 4.7;
(b) the election to make certain withdrawals pursuant to Article X;
(c) the involuntary suspension of Basic Contributions because of a
transfer in employment or employment classification as described in
subparagraph 3.4(b); or
(d) the termination of employment for any reason including
Retirement, death or Disability.
Notwithstanding the foregoing, subparagraph (b) shall not affect Basic
Pre-Tax Contributions, except as provided in Paragraph 10.2.
4.10 Participant Rollover Contributions:
(a) General: With the consent of the Committee, an Employee
described in subparagraphs 3.1(a) or (b) may contribute cash to the Trust
Fund other than as Basic or Supplemental Contributions provided such
contribution constitutes a Rollover Contribution (as defined in
subparagraph (b) of this Paragraph) or a Direct Rollover (as defined in
subsection (c) of this Paragraph) or a direct transfer (as defined in
subparagraph (d) of this Paragraph). All Rollover Contributions, Direct
Rollovers, and direct transfers to the Trust Fund shall be allocated to
the Employee's account as of the Valuation Date coincident with or
immediately preceding the date of the contribution. To the extent
prohibited under the Code, no Rollover Contribution, Direct Rollover or
direct transfer shall be allowed if the
IV-6
assets involved are is attributable directly or indirectly to a trust or
annuity forming part of a plan under which the Employee was a 5% owner at
the time the distribution from such trust or annuity was made. For
purposes of the preceding sentence, a 5% owner shall mean any individual
who was a 5% owner (within the meaning of Section 416(i)(1)(B) of the
Code) of the employer maintaining such other plan at any time during the
five plan years preceding the plan year in which the distribution is made.
If an Employee described in subparagraphs 3.1(a) or (b) is permitted to
make such a Rollover Contribution, Direct Rollover or direct transfer, the
Committee shall obtain such evidence, assurances or certifications as it
may deem necessary from such Employee to establish to its satisfaction
that the amounts to be contributed qualify as Rollover Contributions,
Direct Rollovers or direct transfers within the meaning of subparagraphs
(b) or (c) and will not affect the qualification of the Plan or the tax
exempt status of the Trust Fund under Sections 401(a) and 501(a) of the
Code, respectively, or substantially increase the administrative expenses
of the Plan. The amount so transferred must consist of cash distributed
from such other plan or any portion of the cash proceeds from the sale of
distributed property other than cash, to the extent permitted by Section
402(a)(6)(D) of the Code.
(b) Rollover Contributions: As used in this Paragraph 4.10, the term
"Rollover Contribution" shall mean the following:
(i) all or any portion of a "qualified total distribution" (as
said term is defined in Section 402(a)(5)(E)(i)(I) and (II) of the
Code inclusive of Section 402(a)(6) of the Code, and, after December
31, 1984, including a rollover distribution attributable to a trust
forming part of a plan under which the Employee was an employee
within the meaning of Section 401(c)(1) at the time contributions
were made on his behalf) which is contributed to the Trust Fund
within 60 days or receipt of the distribution from a trust described
in Section 401(a) of the Code and exempt from tax under Section
501(a) of the Code. A qualified total distribution shall not include
any amount considered to be contributed by the Employee to the
qualified trust described above;
(ii) an amount (described in Section 408(d)(3)(A)(ii) or
Section 409(b)(3)(C) of the Code) which is contributed to the Trust
Fund and represents all or any portion of the amount of the
Employee's distribution from an individual retirement account or
individual retirement annuity (defined in Sections 408(a) and 408(b)
of the Code, respectively) the value of which account or annuity is
attributable solely to a qualified total distribution received by
such Employee from a trust described in Section 401(a) of the Code
and exempt from tax under Section 501(a) of the Code, and which
amount is contributed to the Trust Fund within 60 days of the
distribution from the Employee's individual account or annuity.
(c) Direct Rollovers: Special Rules Regarding Eligible Rollover
Distributions:
IV-7
(i) This Section 4.10(c) applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a distributee's election
under this Section 4.10(c), a distributee may elect, at the time and
in the manner prescribed by the Committee, to have any portion
(provided that such portion is at least $500) of an eligible
rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a Direct Rollover. Only one Direct
Rollover shall be allowed for each eligible rollover distribution.
(ii) Definitions:
(a) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion (that
is at least $500) of the balance to the credit of the
distributee, except that an eligible rollover distribution
does not include: (1) any distribution that is one of a series
of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's designated beneficiary,
or for a specified period of ten years or more; (2) any
distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; (3) the portion of any
distribution that is not includable in gross income
(determined without regard to the exclusion of new unrealized
appreciation with respect to employer securities), and (4) any
other amounts that are treated as not being eligible rollover
distributions under Temporary Regulation Section 1.401(a)(31)
- IT or other guidance issued under Section 401(a)(31) of the
Code.
(b) Eligible retirement plan: An eligible retirement
plan is an individual retirement account described in Section
408(a) of the Code, an individual retirement annuity described
in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account
or individual retirement annuity.
(iii) Distributee: A distributee includes an Employee or
former Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse or
former spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are
distributees with regard to the interest of the spouse or former
spouse.
IV-8
(iv) Direct Rollover: A Direct Rollover is a payment by the
Plan to the eligible retirement plan specified by the distributee.
(d) Direct Transfers: Subject to subparagraph 4.10(e), in addition
to the Rollover Contribution described in subparagraphs (a) and (b), and
the Direct Rollover described in subparagraph (c), the Committee, in
accordance with a uniform and nondiscriminatory policy applicable to
Employees described in subparagraphs 3.1(a) and (b), may direct the
Trustee to accept a cash contribution transferred directly to the Trust
Fund from the trustee of another trust described in Section 401(a) of the
Code and exempt from tax under Section 501(a) of the Code on behalf of
such Employee who participated in that trust. Prior to the acceptance of
such a contribution the Committee shall obtain such evidence, assurances
or certifications as it may deem necessary to establish to its
satisfaction that the amount to be contributed will not affect the
qualification of the Plan or the tax-exempt status of the Trust Fund under
Sections 401(a) and 501(a) of the Code, respectively, or substantially
increase the administrative expenses of the Plan.
(e) Restrictions: Notwithstanding anything herein to the contrary,
the Committee, pursuant to uniform and nondiscriminatory guidelines
established by it, shall not permit any direct or indirect transfers from
another trust described in Section 401(a) of the Code and exempt from tax
under Section 501(a) of the Code, which provides for a life annuity form
of payment to the Employee, other than the trust under the Predecessor
Plan.
IV-9
ARTICLE V
EMPLOYER CONTRIBUTIONS
5.1 Employer Contributions:
(a) Employer Matching Contributions: For each plan year, and
generally during the first quarter of the Plan Year, the Board of
Directors in its sole discretion, shall establish three profitability
thresholds which are referred to herein as "Level A", "Level B" and "Level
C". The highest Profitability Level which is attained, as determined at or
after the end of the Plan Year, shall determine the Employer's matching
contribution obligations to the Plan.
Subject to the provisions of Article XIV, each Employer shall
contribute to the Trust Fund based upon the Profitability Level attained
in accordance with the following formula:
(i) Twenty-five cents for each one dollar of a Contributing
Participant's Basic Contributions which are based on the first 8% of
his Compensation, provided the Profitability Level is equal to or
above Level A but below Level B;
(ii) Fifty cents for each one dollar of a Contributing
Participant's Basic Contributions which is based on the first 8% of
his Compensation provided the Profitability Level is equal to or
above Level B but below Level C;
(iii) Seventy-five cents for each one dollar of a Contributing
Participant's Basic Contributions which is based on the first 8% of
his Compensation provided the Profitability Level is equal to or
above Level C.
In a "below A" year, no Employer Matching Contributions will be
contributed to the Plan or allocated to any Participant's account.
No Employer Matching Contributions shall be made with respect to a
Contributing Participant's Supplemental Contributions. No Employer
matching contributions shall be made with respect to a Contributing
Participant's Basic After-Tax Contributions to the extent that such Basic
After-Tax Contributions were withdrawn before the end of the calendar year
in which they were contributed.
(b) Employer Pension Feature Contributions: Effective April 1, 1996
for periods after March 31, 1996, the Employer Pension Feature
Contribution shall be that amount which, in combination with forfeitures,
provides for a percentage of Compensation profit sharing allocation as
calculated for each Participant who is an active employee during the
calendar year, by adding together two formulas, "A" and "B", where:
V-1
"A" is 3% of the Participant's Compensation for the calendar year, and
"B" is calculated in accordance with the following steps:
1) The prospective benefit that would have been earned (starting on
April 1, 1996) from the Retirement Programs of NL Industries, Inc.,
for Salaried Employees if that plan had not been frozen as of April
1, 1996, for service on and after April 1, 1996, was calculated as
of March 31, 1996, using data available on January 22, 1996. 1996
annual compensation was estimated and was projected to increase at
3% per year. Corporate profitability was assumed to be "B" level,
resulting in 2% accruals per year. Continuous employment until
retirement at age 65 was assumed. (For anyone already over age 65,
the April 1, 1996 age was used.) These assumptions and data will
remain fixed; they will not be adjusted in later years to reflect
actual corporate profitability rates, employment experiences, or
changes in other assumptions used to calculate the benefit under the
Retirement Programs. The result of this calculation is called the
"Old Plan Benefit."
2) The value of the Old Plan benefit was converted to a lump sum
payable at age 65 using a discount rate of 9% and the 1983 Group
Annuity Mortality Table (50% male, 50% female). (For any individual
not a participant in the Retirement Program as of March 31, 1996,
the Old Plan Benefit is zero.)
3) The account balance that will be provided by the 3% of
Compensation contribution in item A above was projected to the end
of the year prior to age 65, assuming accruals start January 1,
1996, with an assumed contribution date at the end of each calendar
year while the Participant is under age 65, and an assumed account
earnings rate of 9% per year. This total amount is called the "New
Plan Benefit."
4) The New Plan Benefit (calculated in Item 3 above) is subtracted
from two-thirds of the lump sum value of the Old Plan Benefit
(calculated in item 2 above). The difference is called the
"Transition Benefit."
5) If the Transition Benefit (calculated in item 4 above) is zero or
less, no additional contribution will be added to the amount in A
above for 1996 or any later year.
6) If the Transition Benefit (calculated in item 4 above) is more
than zero, the current value of the Transition Benefit is calculated
by discounting the value the Transition Benefit at age 65 to April
1, 1996, at 9% interest. This result is called the "Current Value of
the Transition Benefit."
7) The Current Value of the Transition Benefit was converted to an
increasing annuity payable annually for a number of years equal to
65 minus the Participant's age as of the most recent birthday on
April 1, 1996, assuming 3% annual
V-2
compensation increases and 9% annual asset growth. That annuity was
converted to a percentage of pay ("Transition Benefit Percentage")
by dividing the annual 1996 payment by estimated 1996 pay and
rounding to one decimal place.
8) Participants with a Transition Benefit Percentage of 1.0% or
greater will receive the transition benefit for 1996, 1997, and
later years, so long as they remain employed and eligible for a
benefit under the terms of the Plan governing eligibility to receive
an allocation.
9) Participants with a Transition Benefit Percentage of less than
1.0% will receive the Current Value of the Transition Benefit
(calculated in item 6 above) in 1996 if they remain employed and
eligible for a benefit for 1996 under the terms of the Plan
governing eligibility to receive an allocation, and will receive no
transition benefit for any year after 1996 even if they remain
employed for future years.
The purpose of the pension feature contribution is to help ameliorate the
effect of the freeze of the Retirement Programs by creating a new
contribution to the Retirement Savings Plan equal to not less than 2/3 of
the future benefit lost due to the freeze of the Retirement Programs.
Therefore, notwithstanding the preceding provisions of this subsection
5.1(b), any employee whose compensation during the period January 1, 1996
through March 31, 1996 exceeded $150,000 shall receive no pension feature
contribution for 1996.
The contributions calculated under this subsection 5.1(b) are intended to
meet the general test under Code Section 401(a)(4) both in 1996 and in
1997 and later years.
5.2 Average Contribution Test:
(a) ACP: Subject to Paragraph 5.7, the average contribution
percentage for the Plan Year for Highly Compensated Employees shall not
exceed the greater of the following average contribution percentage tests:
(i) the average contribution percentage for such Plan Year of those
eligible Employees who are not Highly Compensated Employees multiplied by
1.25; or (ii) the average contribution percentage for the Plan Year of
those eligible Employees who are not Highly Compensated Employees
multiplied by 2.0, provided that the average contribution percentage for
Highly Compensated Employees does not exceed the average contribution
percentage for such other eligible Employees by more than 2 percentage
points. The test in clause (ii) shall not be used if the parallel test was
used under Section 4.5(b)(i), to the extent such multiple use is
prohibited by the Code. For purposes of this Article V, the "average
contribution percentage" for a Plan Year means, for each specified group
of employees, the average of the ratios (calculated separately for each
Employee in such group) of (i) the sum of (A) Employer Matching
Contributions described in Section 5.1 for the Plan Year, (B) Basic and
Supplemental After-Tax Contributions for the Plan Year, and (C) if the
Committee so elects in accordance with and to the extent permitted by the
Regulations, Basic and Supplemental Pre-Tax Contributions, to (ii) the
amount of the
V-3
Participant's compensation (as defined in Section 414(s) of the Code) for
the Plan Year. In accordance with regulation 1.401(m)-1(b)(5) and the
related Example 3, for the purpose of passing the ACP test the Committee
may elect to treat as Matching Contributions some or all of the Basic and
Supplemental Pre-Tax Contributions of HCEs as well as of NHCEs. An
eligible Employee's average contribution percentage shall be zero if no
contributions are made on his behalf for such Plan Year.
(b) Refund (Leveling Method) or Forfeiture: The Committee shall
determine as of the end of the Plan Year, and at such time or times in its
discretion, whether one of the average contribution percentage tests
specified in subparagraph 5.2(a) is satisfied for such Plan Year. This
determination shall be made after first determining the treatment of
excess deferrals within the meaning of Section 402(g) of the Code under
Paragraph 4.2 and then determining the treatment of excess contributions
under subparagraph 4.5(b). In the event that neither of the average
contribution percentage tests is satisfied, the Committee shall refund or
forfeit the excess contributions in the manner described in subparagraph
5.2(d). For purposes of this Article V, "excess aggregate contributions"
means, with respect to any Plan Year and with respect to any Participant,
the excess of the aggregate amount (and any earnings and losses allocable
thereto before the gap period between the end of the calendar year and the
date of distribution) of (a) Employer Matching Contributions, (b) Basic
and Supplemental After-Tax Contributions and (c) the Basic and
Supplemental Pre-Tax Contributions (if the Regulations permit and the
Committee elects to take into account Basic and Supplemental Pre-Tax
Contributions when calculating the average contribution percentage) of
Highly Compensated Participants for such Plan Year, over the maximum
amount of such Employer Contributions, Basic and Supplemental After-Tax
Contributions and Basic and Supplemental Pre-Tax Contributions that could
be made to the account of Participants without violating the requirements
of subparagraph 5.2(a). The amount of each Highly Compensated
Participant's excess aggregate contributions shall be determined by
reducing the average contribution percentage of each Highly Compensated
Participant whose average compensation percentage is in excess of the
percentage otherwise permitted under subparagraph 5.2(a) to the maximum
amount permitted by that paragraph.
The reduction shall be determined by the leveling method, under
which the actual contribution ratio of the Highly Compensated Employee
with the highest actual contribution ratio is reduced to the extent
required to (i) enable the Plan to satisfy the ACP test, or (ii) cause
such Highly Compensated Employee's actual contribution ratio to equal the
ratio of the Highly Compensated Employee with the next highest actual
contribution ratio. This leveling process shall be repeated until the Plan
satisfies the ACP test. Provided, however, that for years after 1996, if a
different leveling method is mandated by the Code, such different leveling
method shall be used instead.
(c) Forfeiture of Non-vested Matching Contributions: Matching
contributions that were not forfeited under Section 4.5(b)(iii) may not be
forfeited except to the extent that they are not vested. Non-vested
matching contributions (and any earnings and losses
V-4
allocated thereto) may be forfeited, but such forfeited contributions are
still counted as annual additions under Sections 404 and 415 of the Code.
(d) Timing of Refund or Forfeiture: If the Committee is required to
refund or forfeit excess aggregate contributions for any Highly
Compensated Participant for a Plan Year in order to satisfy the
requirement of subparagraph 5.2(a), then the refund or forfeiture of such
excess aggregate contributions shall be made with respect to such Highly
Compensated Participants to the extent practicable before the 15th day of
the third month immediately following the Plan Year for which such excess
aggregate contributions were made, but in no event later than the end of
the Plan Year following such Plan Year, or, in the case of the termination
of the Plan in accordance with Article XIII, no later than the end of the
twelve-month period immediately following the date of such termination.
For each of such Participants, amounts so refunded or forfeited shall be
made in the following order of priority: (A) to the extent permitted by
law, by forfeiting nonvested Employer Matching Contributions, and earnings
thereon; (B) by distributing vested Employer Matching Contributions, and
earnings thereon, of Highly Compensated Participants; (C) by distributing
Supplemental or Basic After-Tax Contributions, and earnings thereon; and
(D) by distributing Supplemental or Basic Pre-Tax Contributions (to the
extent such amounts are included in the average contribution percentage)
and earnings thereon. All such distributions and forfeitures shall be made
to or be with respect to Highly Compensated Participants on the basis of
the respective portions of such amounts attributable to each such Highly
Compensated Participant. The amount of any forfeitures made pursuant to
this Paragraph 5.2 shall be used to reduce Employer Matching Contributions
in accordance with Paragraph 5.4.
(e) Family Aggregation Rules: Only to the extent that family
aggregation rules are mandated by the Code, if an eligible Highly
Compensated Employee is subject to the family aggregation rules or Section
414(q)(6) of the Code because such employee is either a five-percent owner
or one of the ten most Highly Compensated Employees, the combined actual
contribution ratio for the family group (which is treated as one Highly
Compensated Employee) shall be determined by combining the Basic and
Supplemental After-Tax Contributions and Employer Matching Contributions
of all the eligible family members.
The Basic and Supplemental After-Tax Contributions, Compensation and
amounts treated as Employer Matching Contributions of all family members
shall be disregarded for purposes of determining the actual contribution
percentage for the group of Highly Compensated Employees, and the group of
eligible Employees.
If an Employee is required to be aggregated as a member of more than
one family group in a plan, all eligible Employees who are members of
those family groups that include that Employee shall be aggregated as one
family group.
(f) The determination and correction of excess aggregate
contributions of a Highly Compensated Employee whose actual contribution
ratio is determined under the family aggregation rules of (e) shall be
accomplished as follows: the actual contribution ratio shall be reduced as
required under subparagraph 5.2(b) and the excess aggregate
V-5
contributions for the family unit shall be allocated among the family
members in proportion to the Basic and Supplemental After-Tax
Contributions and Employer Matching Contributions of each family member
that are combined to determine the actual contribution ratio.
5.3 Remittance of Employer Contributions to Trustee: Employer
Contributions, if any, shall be made solely in cash and shall be remitted to the
Trustee, as soon as practicable after the end of the year for which the
Company's Profitability Level was attained; provided, however, that Employer
Contributions to the NL Stock Fund, may be made in shares of Common Stock of NL
or in cash.
5.4 Allocation of Employer Contributions and Forfeitures:
(a) General: All Employer Contributions shall be used by the Trustee
to make purchases for the Investment Fund or Funds in accordance with the
respective investment elections of the Participant to whose account the
Employer Contributions are allocated. All Employer Contributions shall be
allocated to the accounts established in accordance with Article VII of
each Participant entitled to share in such contributions.
(b) December 31 Rule: Employer Pension Feature Contributions accrued
on behalf of a Participant shall be allocated to such Participant's
account whether or not such Participant remains employed on the last day
of the Plan Year. Notwithstanding any other provision of the Plan, no
Employer Matching Contributions shall be made for the benefit of, and no
Employer Matching Contributions or forfeitures shall be allocated, added
or otherwise credited to the account of, a Participant under the Plan who
was not an Employee of an Employer on the last day of the Plan Year;
provided, however, a Participant who terminated Service during any Plan
Year on his Retirement Date or by reason of his death or Disability shall
be treated as if he was an active Participant on the last day of such Plan
Year. In addition, any Participant who is, on the last day of the Plan
Year on a leave of absence to which such Employee is entitled under the
Family and Medical Leave Act of 1993 ("FMLA") shall be deemed to be in the
employ of the Employer on such last day unless final regulations issued
under the FMLA do not require such treatment for this purpose.
(c) Use of forfeitures: Amounts in the accounts of Participants
which are forfeited in accordance with Article VIII and Paragraph 16.6
shall be applied during the continuance of the Plan in the following
order: (i) to restore the accounts of reemployed participants pursuant to
subparagraph 8.4(b), (ii) to restore the accounts of Participants or
Beneficiaries who apply for forfeited benefits pursuant to Paragraph 16.6
and (iii) to reduce the amount of Employer Contributions otherwise payable
by their Employer. If upon complete discontinuance of contributions under
the Plan or termination of the Plan any such forfeitures have not been so
applied, such unapplied amount shall be allocated among all remaining
Employees who are Participants in accordance with Paragraph 13.2.
V-6
5.5 Investment and Administrative Expenses: All brokerage commissions,
taxes and other expenses related to the purchase and sale of securities shall be
paid out of the assets of the Trust Fund, as directed by the Committee. All
other expenses, including any taxes which may be imposed upon the Trust Fund or
upon the income therefrom, compensation of the Trustee, investment management
fees, fees for legal and accounting purposes and all other costs and expenses
incurred in administering the Plan, unless paid by the Employer, shall be paid
out of the Trust Fund, as directed by the Committee.
5.6 Multiple Use:
(a) Notwithstanding any other provision under this Plan, in the
event there is multiple use, as defined and determined in accordance with
Section 1.401(m)-2 of the Regulations, such multiple use shall be
corrected to the extent required by the Regulations by reducing the actual
contribution percentage, as defined in subparagraph 5.2(a), of Highly
Compensated Employees in the manner prescribed in subparagraph 5.6(b).
(b) The amount of the reduction to the actual contribution
percentage of Highly Compensated Employees shall be calculated in the
manner described in subparagraph 5.2(b) so that there is no multiple use.
The reduction shall be treated as an excess aggregate contribution.
5.7 Qualified Non-Elective Contributions: At the election of the Board of
the Plan Sponsor, in lieu of distributing excess contributions to Highly
Compensated Employees in order to satisfy the actual deferral percentage test or
the actual contribution percentage test, the Employer may make Qualified
Non-Elective Contributions on behalf of one or more non-Highly Compensated
Employees who are Participants in such amounts as are sufficient to satisfy the
actual deferral percentage test or the actual contribution percentage test.
V-7
ARTICLE VI
INVESTMENT OF CONTRIBUTIONS
6.1 Investment Funds: Each Participant at the time he becomes a
Participant under the Plan shall submit written instructions to the Committee
(unless the Committee establishes a different way to submit such instructions)
to invest any and all contributions made by him or on his behalf in whole
percentages in any one or a combination of Investment Funds (which conform to
any portfolio standards and guidelines established by the Trustee) as may be
determined from time to time by the Committee and made available on an equal
basis to all individuals with accounts in the Plan. The Investment Funds shall
include at least the following five, but may include additional funds at the
Committee's discretion:
(a) Money Market Fund: an income producing diversified fund
comprised of short-term money market instruments that seeks to maintain a
constant $1 per share value. Acceptable securities include, but are not
limited to, U.S. Government and U.S. Government Agency obligations,
commercial paper, time deposits, certificates of deposit, Eurodollar
deposits, repurchase agreements, banker's acceptances and guaranteed
investment contracts.
(b) Fixed Income Fund: a diversified fund that may invest in a
variety of short-, intermediate- or long-term fixed income instruments,
that may seek a mixture of capital gains and current income. Acceptable
securities include, but are not limited to, U.S. Government and U.S.
Government Agency obligations, corporate bonds and notes and mortgage- and
asset-backed securities and other money market instruments. The fund
assumes a higher degree of risk than a money market fund and its share
value may fluctuate considerably.
(c) Equity Fund: a diversified fund that invests primarily in equity
securities traded in public markets in the U.S. or in foreign markets,
that seeks growth in asset value and possibly current income. The fund's
investments can be comprised of common stock from a wide array of
companies and industries. The fund will typically assume a higher degree
of risk than a money market fund and a fixed income fund but may also
achieve a higher long term rate of return. The fund's share value can be
expected to fluctuate considerably.
(d) NL Stock Fund: A fund invested primarily in Common Stock. All
dividends declared and paid on Common Stock held in the NL Stock Fund,
shall be used, as soon as practicable, by the Trustee to purchase
additional Common Stock, the value of which shall be allocated to such
Participant's account.
VI-1
(e) The Dresser/Tremont Stock Fund: A fund which shall hold shares
of Common Stock which were received by the Trustee as a result of the Plan
of Restructuring of NL Industries, Inc., approved by the shareholders of
the Company at the special meeting held on December 22, 1988, and which
Participants elected to retain in the form of Baroid Corporation Common
Stock in lieu of exchanging it for Common Stock of the Company (the Baroid
Corporation common stock having later been acquired by Dresser Industries,
Inc.), and shares of Common Stock of Tremont Corporation which
Participants received due to the subsequent reorganization of Baroid
Corporation into Tremont Corporation and Baroid Corporation. No additional
contributions or transfers to the Dresser/Tremont Stock Fund will be
permitted. Dividends paid on the securities in the Dresser/Tremont Stock
Fund will be allocated to the respective Participant's accounts and
invested in accordance with the Participant's most recent instructions
directing the investment of new contributions to the Plan. No shares of
Dresser or Tremont Common Stock will be purchased on or after January 1,
1994.
6.2 Temporary Investments: After the allocation of assets of the Trust
Fund to any of the Investment Funds, but prior to investment or pending
reinvestment of monies in securities of a type consistent with the objectives of
any such Fund, the Trustee or Investment Manager may temporarily invest and
reinvest any such assets in securities with maturities of one year or less
issued or guaranteed by the Government of the United States of America or by any
agency or instrumentality thereof, or in the name of the Trustee in any savings
accounts or certificates of deposit in any banks, or may maintain cash balances
consistent with the liquidity needs of the Plan.
6.3 Change in Investment Election for Future Contributions: Any investment
election filed by a Participant for investment of current contributions shall
continue in effect until changed by the Participant. A Participant may change
his current investment election as to future contributions. Effective July 1,
1990, changes in investment elections may be made by telephoning the
representative of the Trustee at the number stated in the summary plan
description of the Plan, and following the instructions of that representative.
Written confirmation of the transaction will be sent to the Participant by the
Trustee and such written confirmation is binding unless the Participant
demonstrates an error in such written confirmation within the number of days
stated on the written confirmation.
6.4 Inter-Fund Transfers: Effective July 1, 1990, a Participant may
transfer all or any portion of his account balance in any Fund (in increments of
1%) to any other Fund upon submission to the investment manager appointed under
Section 11.2 the appropriate information in the form required by the investment
manager under uniform procedures.
Transfers may be made as often as daily. Instructions must be received one
business day in advance of the business day on which the transfer is to be
effected. A business day is a period of time during a calendar day when the New
York financial markets are open.
VI-2
Notwithstanding the preceding paragraph, only one transfer per month may
affect a Participant's accounts in the NL Stock Fund, and only one transfer is
permitted out of a Participant's Dresser/Tremont Stock Fund. No transfer into
the Dresser/Tremont Stock Fund will be permitted. Transfers under this paragraph
are permitted any business day of the quarter requested by the Participant with
one business day advance notice, and settlement will take place within five
business days. Any commissions charged will be paid by the forfeiture account of
the Plan or by the Employer.
6.5 Suspension of Investments and Investment Transfers into the NL Stock
Fund or the Dresser/Tremont Stock Fund: Notwithstanding any election by a
Participant, during any period of time when (a) a Registration Statement
covering the Plan is not in effect, (b) although in effect, information in the
Prospectus forming part of such Registration Statement does not meet the
requirements of the Securities Act of 1933, as amended, or is not available for
delivery, or (c) in the judgment of the Company, a proceeding by the Securities
and Exchange Commission for the issuance of a stop order suspending the
effectiveness of the Registration Statement is threatened or contemplated, no
future Basic, Supplemental, or Employer Contributions may be invested in, and no
such prior contributions, or income earned thereon, may be transferred for
investment in the NL Stock Fund or the Dresser/Tremont Stock Fund. In lieu
thereof, the Trustee shall invest such amounts in short term investments in
accordance with Paragraph 6.2. At such time as (a) a Registration Statement
covering the plan shall become effective, (b) the Prospectus forming part of
such Registration Statement shall have been amended to meet the requirements of
the Act or shall be available for delivery, or (c) no stop order proceedings
shall be threatened or contemplated, such amount shall be invested as previously
directed, until such prior direction is changed in accordance with Paragraph
6.3.
6.6 Proxy Material for Those Participants for Whom an Investment Has Been
Made in the NL Stock Fund or the Dresser/Tremont Stock Fund: Before each annual
or special shareholders' meeting of the applicable company, the Trustee shall
furnish to each Participant with an account in the NL Stock Fund or the
Dresser/Tremont Stock Fund, a copy of the proxy solicitation material, together
with a form requesting confidential instructions to the Trustee on how such
Common Stock (including fractional shares, to 1/10th of a share) is to be voted.
Such proxy solicitation material will be furnished to participants in a timely
manner so as to comply with applicable federal and/or state laws. Upon timely
receipt of such instructions, the Trustee shall vote such Common Stock as
instructed. The instructions received by the Trustee from Participants shall be
held by the Trustee in strict confidence and shall not be divulged or released
to any person including officers or employees of the Company or any Affiliated
Company. The Trustee shall not make recommendations to Participants on whether
to vote or how to vote. If voting instructions for Common Stock for a particular
shareholders meeting are not timely received from Participants, the Trustee
shall not vote such Common Stock, except that effective January 1, 1994, if
timely instructions are not received from Participants, or if the Trustee
determines that the instructions received violate ERISA, the trustee shall vote
such Common Stock for which valid instructions are not received in the same
proportion as are voted the shares for which valid instructions are received.
VI-3
6.7 Exercise of Tender Rights: Each Participant shall have the right from
time to time with respect to the shares of Common Stock allocated to his account
in the NL Stock Fund or the Dresser/Tremont Stock Fund to instruct the Trustee
in writing as to the manner in which to respond to any tender or exchange offers
which shall be pending or which may be made in the future for all such shares of
Common Stock or any portion thereof. A Participant's instructions shall remain
in force until superseded in writing by the Participant. The Trustee shall
tender or exchange such shares of Common Stock as and to the extent so
instructed. If the Trustee shall not receive instructions from a Participant
regarding tender or exchange offers for Common Stock, the Trustee shall have no
discretion in such matter and shall take no action in response thereto. Unless
and until shares of Common Stock are tendered or exchanged, the individual
instructions received by the Trustee from Participants shall be held by the
Trustee in strict confidence and shall not be divulged or released to any
person, including officers or employees of the Company or any Affiliated
Company; provided, however, that the Trustee shall advise the Company, at any
time upon request, of the total number of shares of Common Stock which it has
been instructed to tender or exchange and the total number of such shares not
subject to instructions to tender or exchange. The Trustee shall notify each
Participant of each tender or exchange offer and utilize its best efforts to
timely distribute or cause to be distributed to such Participant all information
distributed to shareholders of the Company in connection with any such tender or
exchange offer.
6.8 Best Interests of Participants: In the event that the Trustee or a
court of competent jurisdiction determines that the Trustee shall have the
discretion or power to sell, convey or transfer any shares of Common Stock held
in the NL Stock Fund or the Dresser Tremont Stock Fund of the Trust Fund in
response to a tender or exchange offer, notwithstanding the provisions of
Section 6.7, the Trustee in exercising such discretion or power shall be obliged
to consider not only any increased value in the accounts of the Participants in
the NL Stock Fund or the Dresser Tremont Stock Fund of the Trust Fund as a
result of a tender or exchange of the shares of Common Stock in the accounts of
such Participants, but also the impact of any change in the management or
control of the Company on the status of the Participants as employees of the
Company in the long run, not over a short period, such as whether such
Participants will be retained or dismissed as employees of the Company, whether
such Participants will receive greater or fewer benefits than they receive as
employees of the Company at present, including coverage under pension, savings
or thrift, or employee stock ownership plans similar to the Company's plans,
whether such plans are as well funded as the Company's plans, whether the
Participants will receiver greater or lower levels of compensation and whether
the Participants will continue to be covered by a savings or thrift plan, such
as the Plan. To the maximum extent permitted by law, the Trustee shall be
obliged to treat the instructions of Participants who have given such
instructions as indicative of whether tendering shares of Common Stock would be
in the best interests of other Participants.
6.9 Assumption of Investment Risk by Participants: Upon the withdrawal or
distribution of benefits under the Plan, a Participant or Beneficiary may be
entitled to receive shares of Common Stock or cash as provided for under
Articles IX and X. The Employer does not guarantee that the current market value
of Common Stock or any other investment will be equal to the purchase price
thereof or that the total amount withdrawn or distributed in cash will be equal
to or greater than the
VI-4
amount of the Participant's Basic or Supplemental Contributions. Each
Participant assumes all risks in connection with any decrease in the market
price of any common stocks or other investments or Investment Funds held on his
behalf in accordance with the provisions of the Plan.
If a Participant or Employee submits invalid instructions directing the
investment of his account, his account shall continue to be invested in
accordance with the most recent valid instructions received by the Committee or
in accordance with Section 6.3. If no valid instructions have ever been
received, such Participant or Employee shall be deemed to have elected to invest
his account in the Money Market Fund, or if none is offered, the Investment Fund
that the Committee determines to be closest to a money market fund in expected
risk.
6.10 Section 404(c) of ERISA: Except as may otherwise be prescribed by the
Committee, categories of assets, election procedures and other rules relating to
investment elections shall comply with the requirements of Section 404(c) of
ERISA.
VI-5
ARTICLE VII
TRUST FUND ACCOUNTS AND ALLOCATION OF EARNINGS
7.1 Participant's Account: The Committee shall cause to be maintained in
an equitable manner a separate account for each Participant in which there shall
be kept a separate record of the share of such Participant in each Investment
Fund of the Trust Fund which is attributable to his Basic and Supplemental
After-Tax and Pre-Tax Contributions, Roll-over Contributions, if any, made
pursuant to Article IV hereof and the Employer Contributions made on his behalf.
7.2 Valuation of Investment Funds: The Committee shall cause the Trustee
to value separately the Investment Funds described in Article VI as of each
Valuation Date by determining the fair market value of the Trust Fund's assets
then held in each of the Investment Funds.
7.3 Valuation of Accounts: The difference between the value of each such
Investment Fund on any Valuation Date and its value as of the last preceding
Valuation Date together with interest, dividends and other sums received and
accrued but not yet invested, less expenses, shall be credited or debited, as
the case may be, to the account balances of the Participants in each such
Investment Fund.
7.4 Statement of Participant's Account: As soon as practicable after the
completion of a Plan Year, an individual statement of account shall be issued to
each Participant showing the value of his interest in each Fund.
VII-1
ARTICLE VIII
VESTING
8.1 Vesting With Respect to Predecessor Plan Contributions, Participant
Contributions and Pre-Tax Contributions Made After December 31, 1973: A
Participant shall at all times be fully vested in the current value of that
portion of his account which is attributed to Basic and Supplemental
Contributions, Rollover Contributions, Direct Rollovers, and direct transfers to
the Trust Fund (as described in subparagraph 4.10(c)).
8.2 Vesting With Respect to Employer Contributions: A Participant shall
have no vested interest with respect to the value of that portion of his account
which is attributed to Employer Contributions, unless he shall have been
credited with at least three years of Vesting Service (as defined in Paragraph
8.3). If a Participant has been credited with at least three years of Vesting
Service, he shall be vested in 50% of the value of all Employer Contributions.
If a Participant has been credited with at least four years of Vesting Service,
he shall be vested in 75% of the value of all Employer Contributions. A
Participant who has been credited with at least five years of Vesting Service
shall be vested in 100% of the value of all Employer Contributions.
8.3 Years of Vesting Service: Subject to the last sentence of subparagraph
10.1(c), an Employee shall be credited with one year of Vesting Service for each
Plan Year or part thereof following his commencement of employment with the
Employer or with an Affiliated Company during which he shall have been credited
with at least 1,000 Hours of Service or six Months of Service. For this purpose,
an Employee shall receive credit for all Hours of Service and Months of Service
with an Employer or an Affiliated Company, whether or not such Employee was
eligible to participate in the Plan during each such Plan Year. In addition, any
Employee may be credited with up to five years of employment with Valhi, Inc,
Tremont Corporation, Louisiana Pigment Company, L.P., or Baroid Corporation (but
only if such employment with Baroid Corporation preceded Baroid's acquisition by
or merger with Dresser Industries, Inc.) prior to such Employee's date of hire
by the Employer. Notwithstanding the fact that a Participant has incurred a
forfeiture under the rules described in Paragraph 8.4, years of Vesting Service
shall include years of Vesting Service prior to a one-year Break in Service
subject to the following rules:
(a) If a vested Participant has a one-year Break in Service, his
pre-break and post-break service shall be used for computing years of
Vesting Service upon his date of reemployment.
(b) After five consecutive one-year Breaks in Service, a
Participant's vested interest in the value of his Employer Contributions
attributable to pre-break service shall not be increased as a result of
post-break service.
8.4 Forfeitures Upon Distribution Prior to Full Vesting and Repayment:
Except as provided in Paragraphs 8.5 and 8.6, any termination of employment of a
Participant, prior to the time
VIII-1
his account attributable to the Employer Contributions made with respect to him
is 100% vested in accordance with Paragraphs 8.2 or 8.5, may result in a
forfeiture of the current value of the nonvested amounts subject to the
following provisions, effective January 1, 1992.
(a) General Rule: The value of his vested interest in his Basic and
Supplemental After-Tax Contributions, and in the Basic and Supplemental
Pre-Tax Contributions and Employer Contributions made on his behalf will
be paid to him in accordance with Paragraph 9.1. Notwithstanding any other
provisions of the Plan to the contrary, any nonvested amounts that were
held under the Plan (as in effect immediately prior to the Plan Year that
commenced on January 1, 1992), in Accounts maintained for Participants who
had incurred at least five (5) consecutive one year Breaks in Service on
or before January 1, 1992, shall be deemed to have been forfeited during
the first Plan Year that commenced immediately after December 31, 1991 and
shall be applied as herein provided.
(b) Cashouts Within Two Plan Years After Employment Terminates: The
Participant shall not be entitled to the value of the nonvested portion of
his account attributable to Employer Contributions which nonvested portion
shall be forfeited as of the date distribution of his vested account
balance is made or commenced (due to such person's cessation of
participation in the Plan) by the close of the second complete Plan Year
following the Plan Year in which his employment terminated, and applied in
accordance with Paragraph 5.4. Otherwise, with respect to the nonvested
portion of such account of a Participant who received a distribution of
all or a portion of the vested portion of such account other than by the
close of the second complete Plan Year following the Plan Year in which
his employment terminated, such forfeiture shall occur on the date on
which such Participant incurs five consecutive one-year Breaks in Service
following the date of termination of employment. Provided, however, that
if the Participant (1) received a distribution which includes the full
amount of his entire vested interest in his account attributable to
Employer Contributions as a result of his termination of participation in
the Plan, which distribution is $3,500 or less, or is more than $3,500 but
is consented to, (2) returns to active employment before incurring five
consecutive one-year Breaks in Service and (3) not later than the end of
the five-year period beginning with the Employee's resumption of
employment covered by the Plan, repays to the Trust Fund, in cash or
shares of Employer Stock (but only to the extent of the number of shares
received upon distribution), the entire value of his account balance at
the time of distribution to him, the amount repaid and the nonvested
portion of the Employer Contributions previously made on the Participant's
behalf shall be restored to such Participant's accounts in an amount equal
to the value of his accounts on the date of distribution and shall be
invested in accordance with the option in effect for such Participant at
the time of repayment. In addition, if such Participant (1) received a
distribution by the close of the second Plan Year following the Plan Year
in which his employment terminated, which distribution was less than the
full amount of his entire vested interest in his account attributable to
Employer Contributions, which interest is $3,500 or less, or is more than
$3,500 but is consented to, and (2) returns to active employment before
incurring five consecutive one-year Breaks in Service following the date
VIII-2
his employment terminated, the nonvested portion of the Employer
Contributions previously made on the Participant's behalf shall be
restored to such Participant's accounts in an amount equal to the value of
his accounts on the date the distribution commenced without any
requirement that he repay to the Trust Fund any amount of the distribution
attributable to Employer Contributions; provided, however, any future
distributions attributable to Employer Contribution shall be subject to
offset by the amount of the prior distribution that was not repaid
incident to restoration to the Participant's account pursuant to this
sentence. There shall be no adjustment for any gains or losses which may
be incurred between the date of distribution and the date of repayment.
(c) Deemed Cashouts: If the Participant did not have a vested
interest in any contributions credited to his account at the time of his
termination of participation in the Plan he shall be deemed to have
received distribution of a vested interest in any contributions credited
to his account equal to zero (although actually receiving no distribution
from his account as a result of his termination of participation in the
Plan), and his account will be restored if he resumes employment covered
under the Plan prior to incurring a period of five consecutive one-year
Breaks in Service following the date of the termination.
(d) Distribution Made or Begun More Than Two Plan Years After
Employment Terminates: With respect to a Participant whose vested interest
in his account attributable to Employer Contributions is less than 100%
and who receives a termination distribution from his account attributable
to Employer Contributions other than by the close of the second Plan Year
following the Plan Year in which his employment terminated, any amount
remaining in his account attributable to Employer Contributions shall
continue to be maintained as a separate account. At any relevant time,
such Participant's nonforfeitable portion of such separate account shall
be determined in accordance with the following formula:
X = P(AB + D) - D
For purposes of applying the formula: X is the nonforfeitable portion of
such separate account at the relevant time; P is the Participant's vested
interest in his account attributable to Employer Contributions at the
relevant time; AB is the balance of such separate account at the relevant
time; and D is the amount of the distribution. For all other purposes of
the Plan, a Participant's separate account shall be treated as an account
attributable to Employer Contributions. The forfeitable portion of such
terminated Participant's separate account shall be forfeited on the date
on which such Participant incurs five consecutive one-year Breaks in
Service following the date of termination of employment.
(e) Deferred Vested Distributions: With respect to a Participant who
terminates employment with the Employer with a vested interest in his
account attributable to Employer Contributions greater than 0% but less
than 100% and who is not otherwise subject to the forfeiture provisions of
paragraph (b) or paragraph (d) above, the forfeitable portion of such
VIII-3
terminated Participant's account attributable to Employer Contributions
shall be forfeited on the date on which such Participant incurs five
consecutive one-year Breaks in Service following the date of termination
of employment.
(f) Investment of Forfeitable Account Balances: A terminated
Participant shall be entitled to direct the investment of his Account up
until such time as investments are liquidated, if applicable, and
distribution of his entire vested interest is made in accordance with
Article IX. Thereafter, the forfeitable portion of such Account shall be
invested by the Committee.
8.5 Full Vesting: Notwithstanding the provisions of Paragraph 8.2, a
Participant shall be fully vested in all Employer Contributions if his
employment is terminated as a result of his Retirement, Disability or death. A
Participant shall also be fully vested upon attainment of his normal retirement
age regardless of whether he actually retires on such date, except that for
Participants first hired by an Employer on or after January 1, 1997, a
Participant shall be fully vested upon attainment of the later of (i) his normal
retirement age (regardless of whether he actually retires on such date) and (ii)
the completion of five years of Vesting Service. For purposes of the preceding
sentence, a Participant's normal retirement age shall be the earlier of age 65
or the age treated as his normal retirement age under the provisions of any
formal retirement plan the Company under which he may be covered.
8.6 Other Provisions Affecting Vesting: If the termination of
participation of any Participant is occasioned by a change in ownership of the
outstanding stock of an Affiliated Company by which such Participant is
employed, or if the termination of employment of any Participant is occasioned
by the sale or other transfer to an acquiring corporation of all or
substantially all of the assets used by the Company in a division, plant,
location, or other identifiable unit of the Company by which such Participant is
employed, and if such former Affiliated Company or acquiring corporation, either
prior to or within 60 days from the date of such change, evidences in writing
its intention to continue in effect for its employees a profit sharing, thrift
or savings plan for their benefit in accordance with the terms of the Plan, the
Committee upon approval by the Board shall direct the Trustee to transfer to
itself, or to such other trustee as such former Affiliated Company or acquiring
corporation shall designate in a trust agreement containing the same or
substantially similar terms and provisions as are contained in the agreement
establishing the Trust forming part of the Plan, such assets then held by the
Trustee for such Participant, without reduction for the nonvested amounts, if
any, of his account balance, as the Committee shall determine and certify to the
Trustee, constitute the appropriate share of the Trust Fund then held in respect
of such former Affiliated Company's or the acquiring corporation's employees,
who, prior to the change in ownership, participated under the Plan.
VIII-4
ARTICLE IX
DISTRIBUTION OF BENEFITS OTHER THAN WITHDRAWALS
9.1 Normal Form of Payment: Subject to Paragraphs 5.2, 8.6, 13.2, 17.2 and
17.3, distributions shall be made under the Plan only upon the occurrence of one
of the events described in Paragraph 10.3. In addition, to the extent required
by Section 401(k) of the Code and Regulations or other authority issued
thereunder by the appropriate governmental authority, the limits of the
immediately preceding sentence shall continue to apply even if Trust Funds
attributable to any Participant's account are transferred to another plan
pursuant to applicable provisions of Paragraph 4.12(c) or 17.3. Neither the
Committee, Trustee nor any Employer shall have any duty to ensure compliance
with the requirements of the immediately preceding sentence after the initial
transfer therein described.
Unless a Participant otherwise elects, in the case of a Participant whose
employment is terminated for any reason, including Retirement, the Committee
shall value his account balance as of the Valuation Date coincident with or next
following the date on which such termination of employment occurs (or would be
deemed to have occurred).
(a) If a Participant's termination of employment is for any reason
other than death, all vested amounts then credited to his account shall be
distributed in one lump-sum payment; provided, however, that no such
lump-sum payment shall be made without the written consent of the
Participant where the portion of the payment attributable to (i) Employer
Contributions, (ii) Basic and Supplemental Contributions, and (iii)
Rollover Contributions, exceeds $3,500. Such written consent shall be
obtained by the Committee within the 90 day period commencing before the
date the lump-sum payment is to be made to the Participant. If such a
Participant does not provide the Committee with the written consent
described above, the Participant shall be deemed to have elected a
deferred distribution and all amounts credited to his account at that time
shall remain in the Investment Funds, subject to his right to make
inter-fund transfers pursuant to Paragraph 6.4, until such Participant
either (i) dies (ii) attains age 65 or (iii) consents in writing to an
earlier date for distribution; provided, however, if any Participant or
Beneficiary elects a deferred lump-sum payment described in Paragraphs
9.2(b), such amounts credited to the Participant's account shall remain in
said Investment Funds, subject to inter-fund transfers pursuant to
Paragraph 6.4, until the Valuation Date designated by the Participant or
the Beneficiary for distribution of benefits, with payment to occur as
soon as practicable thereafter. If such Participant dies or attains age
65, without having made a timely election to defer distribution under
Paragraph 9.2, all amounts credited to his account at that time shall be
distributed pursuant to this subparagraph no later than the 60th day after
the close of the Plan Year in which such Participant dies or attains age
65. Such Participant's account balance shall be valued for distribution
purposes as of the Valuation Date either (i) designated by the Participant
for distribution of benefits under this subparagraph or Paragraph 9.2, or
(ii) coincident with or next following his date of death, as applicable.
Any such distributions
IX-1
shall be made as soon as practicable after the applicable Valuation Date.
All amounts distributable as a lump-sum under this Paragraph 9.1 from
Investment Funds other than the NL Stock Fund and the Dresser/Tremont
Stock Fund shall be paid in cash. Amounts distributable from the NL Stock
Fund and the Dresser/Tremont Stock Fund shall be paid either entirely in
cash, or entirely in whole shares of Common Stock and in cash to the
extent of any fractional shares (to 1/10th of a share) as the Participant
shall elect. Absent such an election, amounts distributable from the NL
Stock Fund and the Dresser/Tremont Stock Fund shall be paid in whole
shares of Common Stock (and fractional shares to 1/10th of a share paid in
cash).
(b) If the value of a Participant's vested benefit attributable to
any Employer Contributions, Basic and Supplemental Contributions, and
Rollover Contributions, is less than $3,500, the Committee in its sole
discretion may distribute such benefit in a cash lump-sum, regardless of
any election to the contrary.
9.2 Alternative Forms of Payment: Each Participant whose vested account
balance exceeds $3,500 shall be given, not less than 30 days nor more than 90
days before the first day of the first period for which an amount is to be paid
as a partial or complete distribution, a general description of the distribution
options. After receiving the notice, a Participant or his Beneficiary may file
with the Committee an election to have his distribution paid to the Participant
or his Beneficiary, as the case may be, in one or more of the forms described
below in lieu of the immediate lump-sum payment provided in Paragraph 9.1(a);
provided, however, that in the case of termination of employment for any reason
other than death, Disability or Retirement, the Participant may not elect the
annuity form of distribution described in subparagraph (a) of this Paragraph
9.2. Any such election may be revoked, by the Participant or the Beneficiary, as
the case may be, at any time prior to the commencement of benefits or, if
sooner, the purchase of any annuity contract pursuant to subparagraph (a) of
this Paragraph 9.2. Similarly, a Participant whose Beneficiary is other than his
Spouse may designate, at the time he designates such Beneficiary, that the
distribution to such Beneficiary be paid in one or more of such forms in lieu of
the form prescribed in subparagraph 9.1(a). If the designation permitted in the
previous sentence is not made irrevocably by a Participant with respect to
actions of his Beneficiary or if the Participant's Spouse is his Beneficiary,
and such Participant dies prior to his Retirement, then his Beneficiary may file
with the Committee the same election not more than 60 days subsequent to the
date of the Participant's death.
The alternate forms of distribution are:
(a) Annuity: A nontransferable annuity contract, provided, however,
that: (i) if a Participant's termination of employment is due to
Retirement and if such Participant has a Spouse at the time of such
distribution then, unless the Participant files a written election not to
receive his benefits in this form in the manner prescribed in Paragraph
9.3, such annuity shall be paid on a fixed annuity basis with 50% of the
annuity continued after the Participant's death to his Spouse. Such
annuity shall be in the form of a "qualified joint and survivor annuity",
as that term is defined in Section 417(b) of the Code, and shall be
IX-2
actuarially equivalent to the single life annuity which would be payable
for the life of the Participant.
All payments under an annuity contract distributed hereunder must be
payable not less frequently than annually and must be of approximately
equal amounts, except that the earlier payments may exceed the later
payments and no contingent annuitant option may be elected which would
allocate to the Participant less than 50% of the actuarial value of the
benefits payable under such contract. This limitation shall not preclude
the election of an annuity for the life of the Participant under which
payments in equal or lesser amounts are thereafter made to his surviving
Spouse;
(b) Lump Sum: A lump sum payment payable in the manner prescribed in
subparagraph 9.1(a) valued as of the Valuation Date designated as the date
for distribution of benefits by the Participant or the Beneficiary but no
later than the April 1st of the calendar year following the calendar year
in which the Participant attains age 70 1/2; provided, however, if a
Participant was born prior to July 1, 1917, and is not a 5% owner subject
to the rule set forth in subparagraph 9.5(a), any benefit payable to such
Participant shall commence no later than the April 1st of the calendar
year following the later of (i) the calendar year in which the Participant
attains age 70 1/2 or (ii) the calendar year in which the Participant
retires. The Committee may accelerate the lump-sum payment in the event of
hardship; or
(c) Installments: Approximately equal annual installments paid in
cash over a fixed period of years subject to minimum payment requirements
under the Regulations as prescribed by the Committee. Such period of years
for the payment of installments may commence as of any Valuation Date
after the Participant's termination of employment, as elected by the
Participant or the Beneficiary, but no later than the April 1st of the
calendar year following the calendar year in which the Participant attains
age 70 1/2; provided, however, if a Participant attained age 70 1/2 prior
to January 1, 1988, except as otherwise provided in subparagraph 9.4(a),
any benefit payable to such Participant shall commence no later than the
April 1st of the calendar year following the later of (i) the calendar
year in which the Participant attains age 70 1/2 or (ii) the calendar year
in which the Participant retires. Such installments shall be paid over the
period of years elected by the Participant or the Beneficiary provided
that such period shall not exceed the lesser of (i) 15 years, or (ii) the
life expectancy of the Participant, the Beneficiary or the joint life
expectancy of the Participant and the Beneficiary as determined by the
Committee in accordance with the Code. In the event of hardship, the
Committee may accelerate the payment of one or more installments or reduce
the installment payment period.
Any Participant or Beneficiary electing an alternate form of distribution
described in subparagraphs (b) or (c) shall continue to participate in
Investment Fund performance with respect to all undistributed portions of his
account balance. In no event shall any payment pursuant to subparagraphs (b) or
(c) be permitted after the Participant's attainment of age 65 unless the method
IX-3
of payment, on an actuarial basis, will provide the Participant with more than
50% of the present value of the total payments to be made to the Participant and
the Beneficiary.
9.3 Notice of Right to Elect Not to Receive Benefits in Form of Qualified
Joint and Survivor Annuity: Each Participant who elects to have his distribution
paid in the form of an annuity contract set forth in Paragraph 9.2(a) and who
would otherwise receive the qualified joint and survivor annuity set forth in
subparagraph 9.2(a)(i) shall have a period of 90 days ending on the annuity
starting date to make a Qualified Election not to take such form of annuity
under the Plan, and to elect any other permissible form of annuity or other
optional form of benefit provided under Paragraph 9.2. A Participant may revoke
his election to take an optional form of benefit at any time during the election
period. The Committee shall provide to the Participant within a reasonable
period prior to the commencement of benefits a written explanation of: (i) the
terms and conditions of qualified joint and survivor annuity; (ii) the
Participant's right to make, and the effect of, a Qualified Election to waive
such form of benefit; (iii) the rights of the Participant's Spouse; and (iv) the
right to make, and the effect of, a revocation of a previous Qualified Election
to waive the qualified joint and survivor annuity. The election of an optional
form of benefit which includes the payment of an annuity shall not be given
effect if the Participant or any other person who would receive benefits from
such annuity dies before the purchase of an annuity contract.
9.4 Distributions Upon Death:
(a) Except in the case of a Participant whose benefits are paid in
the form of an annuity, as described in subparagraph 9.2(a), in the event
of the death of a Participant prior to complete payment under any
allowable form of distribution, the balance of his account under the Trust
Fund shall be distributed to his Beneficiary in accordance with Paragraphs
9.1(a) and 9.2; provided, however, that such balance will continue to be
distributed at least as rapidly as under the method of distribution in
effect on the Participant's death.
(b) In the event of the death of a Participant prior to commencement
of the distribution of his benefit, the Participant's entire benefit shall
be distributed to the Beneficiary no later than five years after the
Participant's death; provided, however, that any such distribution may be
made in installments pursuant to subparagraph 9.2(c) if such distribution
is commenced not later than one year after such Participant's death or, if
such Beneficiary is the Participant's surviving Spouse, not later than the
date on which such Participant would have attained age 70 1/2 (or any such
later date prescribed in the Regulations.) If the surviving Spouse dies
before payments begin, subsequent distributions shall be made as if the
Spouse had been the Participant.
(c) For purposes of this Paragraph 9.4, any amount paid to a child
of the Participant shall be treated as if it had been paid to the
surviving Spouse if such amount becomes payable to the surviving Spouse
upon the child's attaining the age of majority or such other event
prescribed in the Regulations.
IX-4
9.5 Commencement of Certain Distributions:
(a) If a Participant who is a 5% owner attained age 70 1/2 before
January 1, 1988, any benefit payable to such Participant shall commence no
later than the April 1st of the calendar year following the later of (i)
the calendar year in which the Participant attains age 70 1/2 or (ii) the
earlier of (A) the calendar year within which the Participant becomes a 5%
owner or (B) the calendar year in which the Participant retires. For
purposes of this Subsection (a), a 5% owner shall mean a 5% owner of such
Participant's Employer as defined in Section 416 (i) of the Code at any
time during the Plan Year in which such owner attains age 66 1/2 or any
subsequent Plan Year.
(b) Unless a Participant or Beneficiary elects otherwise in
accordance with this Article IX, the payment of the value of a
Participant's vested interest under the Plan shall begin not later than
the 60th day after the latest of the close of the Plan Year in which: (i)
the Participant attains age 65; (ii) the Participant terminates employment
with the Employer or other Affiliated Company; or (iii) the tenth
anniversary of the year in which the Participant commenced participation
in the Plan occurs.
9.6 Special Distributions:
(a) In addition to the distributions available under Sections 9.1
and 9.2, a Participant or his Beneficiary may elect, on or after the date
of occurrence of an event specified in Paragraph 9.5(b), to receive, as
soon as practicable after the filing of an election with the Committee, a
distribution in one lump-sum payment of all amounts credited to his
account in Investment Funds B,C,E and G or, effective July 1, 1990, in all
Investment Funds.
(b) A Participant or his Beneficiary may make an election under
Paragraph 9.5(a) if one of the following events shall have occurred on or
after January 1, 1985: (i) the Plan is terminated without the
establishment of or maintenance of another defined contribution plan
(other than a plan defined in Section 4975(e)7 of the Code); (ii) there is
a disposition by the Company of substantially all of the assets (within
the meaning of Section 409(d)(2) of the Code) used by the Company in a
trade or business, and the Participant continues employment with the
corporation acquiring the assets; or (iii) there is a disposition by the
Company of the Company's interest in a subsidiary (within the meaning of
Section 409(d)(3) of the Code), and the Participant continues employment
with the subsidiary.
9.7 Minimum Distribution Requirements: All distributions under Article IX
shall be determined and made in accordance with Section 401(a)(9) of the Code,
including the minimum distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the proposed Income Tax Regulations or any successor or final
regulation issued with respect thereto.
IX-5
9.8 Waiver of 30 Day Notice: If a distribution is one to which Sections
401(a)(11) and 417 of the Internal Revenue Code do not apply, such distribution
may commence less than 30 days after the notice required under Section
1.411(a)-11(c) of the Income Tax Regulations is given, provided that:
(1) the plan administrator clearly informs the participant that the
participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution option), and
(2) the participant, after receiving the notice, affirmatively
elects a distribution.
IX-6
ARTICLE X
WITHDRAWALS
10.1 Withdrawals of Contributions:
(a) General: Subject to the limitations set forth in Paragraph 10.3
with respect to Basic and Supplemental Pre-Tax Contributions, a
Participant may make withdrawals from his account balance in the various
Investment Funds at any time prior to his termination of employment,
without the consent of the Committee, as hereinafter set forth. The
provisions of this Article X shall apply to deferred vested Participants
who are not current employees on the same basis that such provisions apply
to currently employed Participants.
(b) Procedure: All requests for withdrawals shall be initiated by
submission of the appropriate Plan form to the local administrator at
least 5 days before the 15th of the month or the end of the month that is
the Valuation Date with respect to the proposed withdrawal, unless the
Committee resolves that requests for withdrawals may be initiated by
telephoning the representative of the Trustee at the number stated in the
summary plan description of the Plan and following the instructions of
that representative. Written confirmation of the transaction will be sent
to the Contributing Participant by the Trustee and such written
confirmation is binding unless the Contributing Participant demonstrates
an error in such written confirmation within the number of days stated on
the written confirmation. The value of a Participant's accounts will be
valued on the Valuation Date next following the date on which the request
is approved. Distribution shall be made in a lump-sum cash payment within
15 days or as soon as practicable. All such withdrawals shall be taken
proportionately from each of the Participant's Investment Funds, except
that if the Committee determines in its sole discretion that such
proportionate withdrawal would violate any Securities and Exchange
Commission ("SEC") rule concerning the sale of stock by an officer or
member of the board of directors of any company of which the stock is held
in the Plan, the withdrawal shall be taken proportionately from each of
the affected Participant's Investment Funds other than the NL Stock Fund
or the Dresser/Tremont Stock Fund or any other company stock fund in which
transactions would violate any SEC rule.
(c) Limitations: A Participant is not allowed to take more than two
withdrawals in any calendar year, nor any withdraw an amount of less than
one hundred dollars ($100).
(d) Source of funds: All withdrawals shall be made in the following
sequence and for purposes of this Paragraph where reference is made to
Basic and Supplemental Pre-Tax Contributions or Basic and Supplemental
After-Tax Contributions, such terms shall mean the lesser of the actual
amount of such unwithdrawn contributions or the current market value
thereof as of the applicable Valuation Date:
X-1
(i) all of his Basic and Supplemental After-Tax Contributions
made prior to 1987;
(ii) all or part of his post-1986 Supplemental After-Tax
Contributions, and all or part of the increments earned on all
Supplemental After-Tax Contributions;
(iii) all or part of his post-1986 Basic After-Tax
Contributions, and all or part of the increments earned on all Basic
After-Tax Contributions;
(iv) all or part of that portion of his account balance
attributable to Employer Contributions which are fully vested,
including increments earned thereon, subject to the provisions of
Paragraph 10.4. For purposes of determining his vested percentage at
the time of such withdrawal, a Participant who has completed at
least 1,000 Hours of Service or six Months of Service at the time of
the withdrawal shall be deemed to have completed one year of Vesting
Service;
(v) all or part of Employer Contributions made prior to
January 1, 1974 to the Predecessor Plan, including increments earned
thereon, Rollover Contributions, Direct Rollovers and direct
transfers from another qualified trust as described in subparagraphs
4.10(b), (c) and (d) including increments earned thereon;
(vi) all or part of his Basic and Supplemental Pre-Tax
Contributions, provided he has satisfied the requirements of
Paragraphs 10.3 or 10.6.
10.2 Suspensions: A Participant who makes a withdrawal shall be suspended
from making any further Basic After-Tax or Supplemental Contributions for a
period of three months, effective as of the Valuation Date upon which the
withdrawal is based. A Participant who makes a withdrawal pursuant to Paragraph
10.6 shall be suspended from making any further Basic Pre-Tax, Basic After-Tax
or Supplemental Contributions for a period of three months, effective as of the
Valuation Date upon which the withdrawal is based.
10.3 Withdrawal of Basic and Supplemental Pre-Tax Contributions:
Notwithstanding the provisions of Paragraph 10.1, Basic and Supplemental Pre-Tax
Contributions, including the increments earned thereon, may not be withdrawn by,
or otherwise distributed to, a Participant until the earliest to occur of the
Participant's Retirement, Disability, death, separation from service, attainment
of age 59 1/2 or hardship (as determined by the Committee in accordance with
Paragraph 10.6). Notwithstanding the foregoing, in the case of a withdrawal on
account of hardship, no post-1988 earnings on Basic or Supplemental Pre-Tax
Contributions may be withdrawn by, or otherwise distributed to, a Participant
except to the extent permitted by Regulations.
10.4 Restrictions on Withdrawal of Employer Contributions: Notwithstanding
the provisions of Paragraphs 10.1, 10.2 and 10.6, no Participant shall be
permitted to make a withdrawal under subparagraph 10.1(c) until the amounts to
be withdrawn have been held in the Trust Fund for a period of 24 full months.
Such period shall be measured from the day such amounts are actually deposited
in the Trust Fund until the day of withdrawal; provided, however, that
Participants with
X-2
not less than 60 months of participation in the Plan (including, for this
purpose, participation in the Prior Plan) may make withdrawals subject to
Paragraph 10.2 under subparagraph 10.1(c) without regard to the restriction
imposed by this Paragraph 10.4.
10.5 Special Rules Affecting Withdrawals: Except as provided in Paragraph
10.6, no withdrawal other than as provided in subparagraph (d) of Paragraph 10.1
may be made by a Participant while a suspension for a prior withdrawal is in
effect. If a Participant was suspended from making Basic Contributions as a
result of a withdrawal described under Paragraph 10.1, and thereafter resumes
making Basic Contributions, such Basic Contributions shall be, for a period of
time equal to the period of suspension, at a rate of contribution not greater
than the rate contributed as Basic Contributions at the time the suspension
began.
10.6 Hardship Withdrawals:
(a) General rules: After all withdrawals permissible under
Paragraphs 10.1 and 10.4, a Participant, in the case of immediate and
heavy financial need, may apply to the Committee to withdraw all or any
portion of his vested account balance under the Plan. If the Committee
determines in accordance with nondiscriminatory and objective guidelines
promulgated by the Committee (which shall be consistent with the
Regulations subject to differences in rules and regulations applicable to
different classifications of contributions and increments, and uniformly
applicable to all Participants), in accordance with any guidelines or
Regulations issued by the Secretary of the Treasury, and with the facts of
the particular case, that an immediate and heavy financial need exists,
the Committee may direct the Trustee to distribute such portion of the
Participant's account balance at such time and subject to such conditions
as the Committee in its sole discretion shall determine is necessary to
satisfy such immediate and heavy financial need and which may not
reasonably be obtained by other resources of the Participant including
resources of the Participant's spouse, children or dependents reasonably
available to the Participant. The Committee may require any Participant
who applies for a withdrawal pursuant to this Paragraph 10.6 to provide it
with such financial information as may be required to make such
determination.
(b) Hardship amounts and purposes: Subject to the Committee's
guidelines, such withdrawals may be made in the event of an immediate and
heavy financial need arising from (i) medical expenses described in
Section 213(d) of the Code previously incurred (or, effective January 1,
1992, previously incurred or necessary to be incurred) by the Participant,
his spouse, or dependents, (ii) the purchase (excluding mortgage payments)
of the Participant's primary residence, whether such residence is a
previously existing structure or a proposed structure under contract to be
newly constructed (iii) payment of tuition or, effective January 1, 1992,
related educational fees, for the next semester or quarter or, effective
January 1, 1992, year, of post-secondary education of the Participant, his
spouse, or dependents, (iv) the need to prevent the eviction of the
Participant from his principal residence or foreclosure on the mortgage of
the Participant's principal residence, or (v) any other event specifically
identified in regulations or other guidance from the Internal Revenue
Service as a hardship for which a qualified pension benefit plan may
permit a hardship withdrawal under Section 401(k) of the Code and related
regulations. Effective January 1, 1992, the withdrawal may include an
additional amount necessary to pay any federal, state, or local income
taxes or penalties (including additional taxes under Section 72(t) of the
Code) that are reasonably expected to result from the withdrawal.
X-3
ARTICLE XI
NAMED FIDUCIARY AND ADMINISTRATION
11.1 Pension and Employee Benefits Committee: The Committee shall be the
Pension and Benefits Committee of NL Industries, which is a committee appointed
by the Board. The charter and bylaws of the Committee shall govern wherever such
investments are in direct conflict with the provisions of this Article XI. If,
however, the Pension and Employee Benefits Committee should cease to exist then,
the Board shall appoint at least three persons as members of the Committee who
shall be subject to removal by the Board at any time. A member of the Committee
may resign by giving the Board not less than 30 days written notice unless the
Board accepts a lesser period of notice.
Names of the current members of the Committee are available from the
Secretary of the Committee. The Committee shall be the Plan's "named fiduciary"
as that term is defined in ERISA and shall, except as provided in Paragraph
11.2, provide for the funding, maintenance and administration of the Plan. Any
act which the Plan authorizes or requires the Committee to do may be done at a
meeting of the Committee by a majority of the members then voting. The members
of the Committee shall serve without compensation for their services as such,
but all expenses of the Committee in the performance of their duties under the
Plan (including compensation for legal counsel, accountants, consultants and
agents) shall be paid proportionately by each Employer or, at the Committee's
direction, out of the Trust Fund.
11.2 Authority of the Committee:
(a) The Committee shall have the following powers of the Company
with respect to the Plan:
(i) to appoint, remove or replace any Trustee;
(ii) to appoint, remove or replace any one or more investment
advisors or investment managers under the Plan;
(iii) to appoint, remove or replace any other fiduciary or
named fiduciary of the Plan;
(iv) to amend the Plan and the Trust as may be necessary or
appropriate to facilitate their administration or operation or to
ensure the continued qualification of the Plan and the tax-exempt
status of the Trust under Sections 401(a) and 501(a) of the Code,
respectively, provided such amendment does not increase materially
the cost to the Company funding or administering the Plan; and
(v) to secure and maintain the qualification of the Plan under
applicable law.
(b) The Board shall retain power and, except as provided in
subparagraph (a)(iv) above, the Committee shall not have the power:
(i) to amend, suspend or terminate the Plan, any contributions
thereunder or the Trust, in whole or in part, at any time and for
any reason;
(ii) to provide the proper funding of the Plan; and
(iii) to monitor periodically the performance of the Committee
and to determine, in connection with such monitoring, whether to
continue any delegation to or responsibility of the Committee with
respect to the Plan.
11.3 Delegation of Authority: The Committee shall appoint a Secretary, who
need be neither a Participant nor a member of the Committee. The Secretary, or
such other person as the Committee may designate, duly shall record all acts and
determinations of the Committee and maintain all record books or documents
necessary for the administration of the Plan. The Committee may establish
procedures for allocating fiduciary responsibilities among the members of the
Committee and may designate any one or more persons to exercise any of its
powers, including any of its powers as administrator, or to execute or deliver
any instrument or make any payment on its behalf; provided, however, that no
person other than a member of the Committee, the Trustee or an investment
manager shall have any authority or control, whether or not discretionary,
respecting the management or disposition of the Plan's assets.
11.4 Administrator: The Committee shall serve as "administrator" of the
Plan as that term is defined in ERISA. The Committee, as administrator, shall
have the authority and responsibility to:
(a) control the operation and administration of the Plan in
accordance with the terms of the instruments and resolutions governing the
Plan and any related Trust;
(b) determine benefit eligibility and to certify such eligibility to
any other fiduciaries;
(c) establish procedures and adopt rules and regulations of uniform
application as it deems necessary or appropriate for the effective
administration of the Plan;
(d) hire persons and organizations to provide legal, accounting,
investment advisory and other services necessary or beneficial to the
Plan;
(e) issue directions to the Trustee to pay any fees, taxes, charges
or other costs incidental to the operation and management of the Plan by
the administrator pursuant to this Paragraph 11.4;
(f) issue directions to the Trustee as to the amount of Plan assets
to be held in cash to assure proper liquidity;
(g) prepare and file all reports and returns required to be filed by
the Plan with any agency of government;
(h) comply with all disclosure requirements imposed by state or
federal law;
(i) maintain all records of the Plan other than those required to be
maintained by the Trustee or by any fiduciary of the Plan; and
(j) perform all other acts required by law to be performed by the
administrator of the Plan.
The Committee shall have all powers necessary to carry out the provisions
of the Plan and shall have the absolute, unilateral, and exclusive right and
power to interpret, construe and construct the terms and provisions of the Plan,
including, without limitation, correcting any error or defect, supplying any
omission or reconciling any inconsistency, and making all determinations that
may impact a claim for benefits, including factual determinations. Subject to
Paragraph 11.5, the Committee's decisions, interpretations, determinations and
actions in respect thereof shall be conclusive and binding upon each Employer,
Participant, Beneficiary and all other persons and entities.
11.5 Appeals Procedure: The Committee, as administrator, shall act as
claims fiduciary except to the extent that the Committee has delegated the
function to someone else. All claims for benefits under the Plan must be made in
writing and shall be directed to the attention of the claims fiduciary. Upon
receipt of the claim, the claims fiduciary shall notify the claimant in a timely
fashion of the time periods within which any notice of denial of claim, request
for review of claim, or decision on review of denial of claim must be given in
accordance with subparagraphs (a) through (c) below.
(a) If the claims fiduciary determines that any individual who has
claimed a right to receive benefits under the Plan is not entitled to
receive all or any part of the benefits claimed, it shall inform the
claimant in writing of its determination and of the reasons therefor in
layman's terms, with specific reference to pertinent Plan provisions and
any additional material necessary for the claimant to perfect his claim.
The notice of denial shall also include a summary description or a copy of
the text of the review procedures set forth below. Such notice shall be
made within a reasonable period of time but not later than 90 days after
receipt of the claim, unless special circumstances require
an extension of time for processing. If such an extension of time is
required, the claims fiduciary shall furnish written notice of the
extension to the claimant prior to the termination of the initial 90 day
period. In no event shall such extension exceed a period of 90 days from
the end of such initial period. The extension notice shall indicate the
special circumstances requiring an extension of time and the date by which
the claims fiduciary expects to render a final decision. If notice of the
denial of claim is not furnished within the time limits specified above,
the claim shall be deemed denied and the claimant shall be permitted to
proceed to the review process described in subparagraphs (b) and (c)
below.
(b) Within 60 days of the receipt by the claimant of the written
notice of denial of the claim, the claimant may file a written request
with the claims fiduciary to conduct a full and fair review of the denial
of the claimant's claim for benefit. In connection with the claimant's
appeal, the claimant may review pertinent documents and may submit issues
and comments in writing.
(c) The claims fiduciary shall promptly advise the claimant of its
decision on the claimant's request for review. Such decision shall be
written in a manner calculated to be understood by the claimant, shall
include specific reasons for the decision, and shall contain specific
references to pertinent Plan provisions upon which the decision is based.
The decision on review shall be made no later than 60 days following
receipt of the claimant's request for review. If special circumstances
require an extension of time for processing, a decision shall be rendered
not later than 120 days following receipt of the request for review.
Written notice of any such extension shall be furnished to the claimant
prior to the commencement of the extension.
11.6 Reliance on Reports and Certificates: The Committee shall be entitled
to rely conclusively upon all tables, valuations, certificates, opinions and
reports furnished by any Trustee, accountant, controller, counsel or other
person who is employed or engaged for such purposes.
11.7 Member's Own Participation: No member of the Committee may act, vote
or otherwise influence a decision of the Committee specifically relating to his
own participation under the Plan.
11.8 Exemption from Bond: No member of the Committee shall be required to
give bond for the performance of his duties hereunder, unless required by law
which cannot be waived.
11.9 Persons Serving in Dual Fiduciary Roles: Any person, group of
persons, corporations, firm or other entity, may serve in more than one
fiduciary capacity with respect to the Plan, excluding the ability to serve both
as Trustee and as a member of the Committee.
11.10 Indemnification: Each member of the Committee and any Employee,
director or officer of an Employer, who is considered to have served in a
fiduciary capacity with respect to the Plan, shall be indemnified by the Company
against expenses (including the amount of any liability imposed in the form of a
money judgment, civil penalty, excise tax, as well as amounts paid in
settlement) reasonably incurred by him in connection with any action, suit or
proceeding to which he may be a party or with which he shall be threatened by
reason of his being considered to have served in a fiduciary capacity, to the
fullest extent permitted by the By-Laws of the Company and by law. No such
individual shall be liable with respect to a breach of fiduciary duty if such a
breach occurred before he became a fiduciary or after he ceased to be a
fiduciary.
11.11 Liability of Fiduciaries: No person, including any Trustee, who
shall at any time be considered to be or to have been a fiduciary, as such term
is defined under ERISA, shall be liable for the breach of fiduciary
responsibility of any other person who is at any time considered to be or to
have been a fiduciary, except as provided in Section 405(a) of ERISA.
11.12 Liability of Named Fiduciaries: No fiduciary who at any time is
considered to be or to have been a "named fiduciary," as that term is defined in
ERISA, shall be liable for an act or omission of any person, designated by such
fiduciary to carry out fiduciary responsibilities, or to whom such named
fiduciary has allocated the performance of his own fiduciary responsibilities,
except as provided in Section 405(c)(2) of ERISA.
XI-1
ARTICLE XII
THE TRUST FUND
12.1 The Trust: All assets of the Plan, including earnings thereon, shall
comprise the Trust Fund. Except as provided in Paragraph 12.2, no part of the
principal or income of the Trust Fund shall be used for, or diverted to,
purposes other than the exclusive benefit of the Participants and their
Beneficiaries. No person shall have any interest in or right to any part of the
earnings of the Trust Fund, except as and to the extent provided in the Plan and
under federal law. The Trustee shall invest, reinvest, manage, control and make
disbursements from the Trust Fund in accordance with the provisions of the Plan
and the Trust, subject, however, to the power of the Committee to appoint an
investment manager pursuant to subparagraph 11.2(a)(ii).
12.2 Irrevocability of Company Contributions: All contributions by the
Company or any Employer shall be irrevocable when made, and the Company shall
have no right, title or interest of any kind in the Trust Fund; provided,
however, that if the Plan and Trust shall not initially, or after any amendment,
be determined by the Internal Revenue Service to be qualified under applicable
provisions of the Code, or if a contribution made by any Employer shall be
disallowed as a deduction under applicable provisions of the Code, or if a
contribution of any Employer is made by mistake of fact, then upon the
Employer's written request such affected Employer contributions shall be
returned to the Company or to the appropriate Employer within 30 days of such
request; provided, however, that no contributions may be returned more than one
year after the date of the determination of disqualification, disallowance of
the deduction of mistaken payment, respectively.
12.3 Exclusive Benefit: Subject to the provisions of Paragraph 12.2, it
shall be impossible at any time for any part of the Trust Fund to revert to the
Company or to any Employer, or to be used for or diverted to any purpose other
than the exclusive benefit of Participants, former Participants and their
Beneficiaries, or for defraying expenses of administering the Plan and Trust
Fund. No person shall have any interest in or right to any part of the Trust
Fund, except as, and to the extent, provided in the Plan and under federal or
state law.
XII-1
ARTICLE XIII
AMENDMENT AND TERMINATION OF PLAN
13.1 Right to Amend or Terminate: The Board shall have the right, at any
time and from time to time, to amend in whole or in part of any of the
provisions of the Plan or to terminate the Plan, provided that no such amendment
may affect the rights, duties or responsibilities of the Trustee without its
consent. Any amendment or termination of the Plan, other than an amendment
described in subparagraph 11.2(a)(iv), shall become effective upon delivery to
the Committee and the Trustee of a written instrument executed by the Company
pursuant to written resolutions of the Board, as of the effective date specified
therein. To the extent that the Board delegates authority to the Committee to
amend the Plan, the written instrument shall be executed by the Committee
pursuant to written resolution of the Committee. The written instrument may be a
certified copy of the applicable resolutions. Amendments of the Plan described
in subparagraph 11.2(a)(iv) shall become effective as of the effective date of a
written instrument executed by the Committee. Any amendment of the Plan
requiring the Trustee's consent shall become effective as of such specified date
immediately upon such consent. Except as may be necessary to maintain the
qualification of the Plan pursuant to Sections 401(a) and 501(a) of the Code and
subject to the provisions of Paragraph 12.2, no such amendment or termination of
the Plan shall authorize or permit any part of the Trust Fund to be used for or
directed to purposes other than the exclusive benefit of Participants and their
Beneficiaries, or, except as may be required by governmental authority, to
affect adversely either the benefits of Participants already retired, or the
Trust Fund securing such benefit.
13.2 Mandatory Amendments: The Contributions of each Employer to the Plan
are intended to be:
(a) deductible under the applicable provisions of the Code;
(b) except as otherwise prescribed by applicable law, exempt from
the Federal Social Security Act;
(c) except as otherwise prescribed by applicable law, exempt from
withholding under the Code; and
(d) excludible from any Participant's regular rate of pay, as that
term is defined under the Fair Labor Standards Act of 1938, as amended.
The Company shall make such amendments to the Plan as may be necessary to
carry out this intention, and all such amendments may be made retroactively.
13.3 Distribution of Accounts Upon Plan Termination: In the event of and
upon the Company's termination or partial termination of the Plan or complete
discontinuance of contributions other than by reason of being merged into, or
consolidated with, the plan of another Affiliated Company, whether or not the
Trust also terminates concurrently therewith, the interest in the portion of
each Participant's account balance attributable to Employer Contributions
theretofore made on behalf of such Participant shall become fully vested.
Subject to the provisions of Article XIV, any unallocated forfeitures shall be
reallocated to the accounts of Employees who are Participants on the date of
such termination or complete discontinuance in the proportion that the account
balances of each such individual Participant bears to the account balances of
all persons who are Participants on such date, provided that such reallocation
does not discriminate in favor of Employees who are officers, shareholders, or
highly compensated. Unless the Board directs otherwise, such a complete
discontinuance of contributions or a termination of the Plan shall not, except
as otherwise permitted under Paragraph 9.5, accelerate any payments or
distributions to or for the benefit of the Participants or their Beneficiaries
or estates, but the Trust Fund shall continue to be held for distribution and
application in the manner to be prescribed by the Board.
XIII-1
ARTICLE XIV
LIMITATIONS ON CONTRIBUTIONS
14.1 Priority of this Article: The provisions of this Article XIV shall
govern notwithstanding any other provisions of the Plan.
14.2 Limitation to Annual Additions: Annual Additions to a Participant's
account in respect of any Plan Year may not exceed the lesser of:
(a) $30,000, or, if greater, one-fourth of the defined benefit
dollar limitation set forth in Section 415(b)(1)(A) of the Code as in
effect for such Plan Year; or
(b) 25 percent of the Participant's compensation as defined in
Section 415(c)(3) of the Code for such Plan Year, but in no event more
than the first $150,000 of compensation, as adjusted for cost of living to
the extent permitted by the Code and the Regulations.
For this purpose, the term "Annual Additions" shall mean the sum of the
following amounts which, without regard to this Article XIV, would have been
credited to the Participant's Account for any Plan Year under the Plan and under
any other defined contribution plans of the Employer or an Affiliate: (i)
Employer Contributions; (ii) Basic Pre-Tax Contributions; (iii) Basic After-Tax
Contributions; (iv) Supplemental Contributions; (v) forfeitures, if applicable;
and, with respect to any plan maintained by the Employer or an Affiliate; (vi)
contributions allocated to any individual medical account defined in Section
415(l)(1) of the Code; and (vii) in the case of a Participant who is a "key
employee," as defined in Section 416(i) of the Code, the amount allocated to a
separate account established for postretirement medical or life insurance
benefits or such Participant described in Section 419A(d)(1) of the Code.
Without limiting the scope of the immediately preceding sentence, for the
purpose of clarity, in addition to other amounts set forth in regulations or
other guidance issued under Section 415 of the Code by the appropriate
governmental authority, amounts paid to the Trust pursuant to the terms and
provisions of the Plan to pay brokerage commissions on purchases and sales of
Employer Stock shall not be treated as annual additions. The term Annual
Additions shall not include any Rollover Contributions made pursuant to
Paragraph 4.10. Solely for the purposes of subparagraph 14.4(a), Annual
Additions shall include a participant's contributions under a qualified
cost-of-living arrangement described in Section 415(k)(2) of the Code.
Contributions shall continue to be treated as Annual Additions notwithstanding
that such contributions are excess deferrals, excess contributions, or excess
aggregate contributions or notwithstanding that such excess deferrals and excess
contributions have been corrected through distribution or recharacterization.
14.3 Adjustments of Annual Additions: In the event that the amounts which
would otherwise be allocated to a Participant's account must be reduced by
reason of the limitations of Paragraph 14.2, such reduction shall be made in the
following order of priority, but only to the extent necessary:
(1) The amount of the Participant's Supplemental After-Tax
Contributions, exclusive of any earnings of the Trust Fund attributable
thereto, shall be refunded to the Participant; then
(2) The amount of the Participant's Basic After-Tax Contributions,
exclusive of any earnings of the Trust Fund attributable thereto, shall be
refunded to the Participant; then
(3) To the extent permitted by the Code and the Regulations, the
amount of Basic and Supplemental Pre-Tax Contributions, exclusive of any
earnings of the Trust Fund attributable thereto, shall be refunded to the
Participant or, to the extent required by law shall be held unallocated in
a suspense account and shall be applied, as directed by the Committee in
accordance with the law and regulations, as a credit to reduce the
contributions of the Employer for the next Plan Year and in the event of
termination of the Plan shall be returned to the Employer; and then
(4) Employer Pension Feature Contributions allocable to such
Participant in respect of such Plan Year shall be reduced and the amount
of such reduction shall be utilized to reduce Employer Pension Feature
Contributions which would otherwise be made to the Plan.
(5) Employer Matching Contributions allocable to such Participant in
respect of such Plan Year shall be reduced and the amount of such
reduction shall be utilized to reduce Employer Matching Contributions
which would otherwise be made to the Plan.
14.4 Participant Covered Under Defined Benefit Plan:
(a) Subject to subparagraphs 14.4(c) and 14.4(d), in the event that,
in any Plan Year and with respect to any Participant, the sum of the
"Defined Contribution Fraction" (as defined in subparagraph 14.4(b)) and
the "Defined Benefit Fraction" (as defined in subparagraph 14.4(b)) would
otherwise exceed 1.0, then the benefit payable under the defined benefit
plan or plans shall be reduced in accordance with the provisions of that
plan or those plans, but only to the extent necessary to ensure that such
limitation is not exceeded. If this reduction does not ensure that the
limitation set forth in this Paragraph 14.4 is not exceeded, then the
Annual Addition to any defined contribution plan, other than the Plan,
shall be reduced in accordance with the provisions of that plan but only
to the extent necessary to ensure that such limitation is not exceeded.
(b) For purposes of Paragraph 14.4, the following terms shall have
the following meanings:
(1) "Defined Contribution Fraction" shall mean, as to any
Participant for any Plan Year, a fraction, (A) the numerator of
which is the sum of Annual Additions, for the Plan Year and all
prior Plan Years, as of the close of the Plan Year and (B) the
denominator of which is the sum of the lesser of the following
amounts, determined for such Plan Year and for each prior Year of
Service (i) the product of 1.25 multiplied by the dollar limitation
in effect for such year under subparagraph 14.2(a) or (ii) the
product of 1.4 multiplied by the amount which may be taken into
account under subparagraph 14.2(b) with respect to the Participant
for such year; provided, however, that for years ending prior to
January 1, 1976, the numerator of such fraction shall in no event be
deemed to exceed the denominator of such fraction; and, further
provided, that the Committee, in determining the Defined
Contribution Fraction may elect to use the special transitional
rules permitted by Section 415 of the Code and the Regulations
thereunder; and
(2) "Defined Benefit Fraction" shall mean, as to any
Participant for any Plan Year, a fraction, (A) the numerator of
which is the projected annual benefit (determined as of the close of
the Plan Year and in accordance with the Regulations) of the
Participant under any defined benefit plan (as defined in Sections
414(j) and 415(k) of the Code) maintained by the Company or any of
its Affiliates and (B) the denominator is the lesser of (i) the
product of 1.25 multiplied by the dollar limitation in effect under
Section 415(b)(1)(A) of the Code for such Plan Year or (ii) the
product of 1.4 multiplied by an amount equal to 100 percent of the
Participant's average compensation for his high 3 years within the
meaning of Section 415(b)(3) of the Code for such Plan Year.
(c) In the case of a Participant with respect to whom the sum of the
Defined Contribution Fraction and the Defined Benefit Fraction exceeds 1.0
with respect to the last Plan Year beginning before January 1, 1983, an
amount, determined in accordance with the Regulations, may be subtracted
from the numerator of the Defined Contribution Fraction (not exceeding
such numerator) so that the sum of such Participant's Defined Contribution
Fraction and his Defined Benefit Fraction computed under paragraph (a) of
this Paragraph 14.4 does not exceed 1.0 for the last Plan Year beginning
before January 1, 1983.
(d) Notwithstanding the foregoing provisions of this Paragraph 14.4,
in determining the maximum Annual Addition for any Plan Year beginning
before January 1, 1987, the Annual Addition shall not be recomputed to
treat all Basic After-Tax Contributions and Supplemental After-Tax
Contributions as an Annual Addition.
XIV-1
ARTICLE XV
TOP-HEAVY PROVISIONS
15.1 Applicability of Top-Heavy Provisions: If the Plan is or becomes a
Top-Heavy Plan in any Plan Year, the provisions of this Article XV will
supersede any conflicting provisions in the Plan during each Plan Year in which
the Plan is a Top-Heavy Plan. In the event that any provision of this Article XV
is no longer necessary for the Plan to meet the requirements of Section 401(a)
or other applicable sections of the Code, such provision shall immediately
become null and void and shall no longer apply without the necessity of further
amendment of the Plan.
15.2 Definitions: As used in this Article XV, the following terms shall
have the meanings set forth below:
(a) "Determination Date" shall mean, with respect to any Plan Year,
the last day of the preceding Plan Year.
(b) "Key Employee" shall have the meaning set forth in Section
416(i) of the Code. For purposes of determining Key Employees pursuant to
this subparagraph, "compensation" shall have the meaning prescribed in
Section 414(s) of the Code or, to the extent required by the Code and the
Regulations, Section 1.415-2(d) of the Regulations.
(c) "Non-Key Employee" shall mean a "Non-Key Employee" as defined in
Section 416(i)(2) of the Code and the Regulations promulgated thereunder.
(d) "Top-Heavy Plan" shall mean a "top-heavy plan" as defined in
Section 416(g) of the Code.
(e) "Aggregation Group" shall mean the group composed of each
qualified retirement plan of the Company or an Affiliate in which a Key
Employee is a participant and each other qualified retirement plan of the
Company or an Affiliate which enables a plan of the Company or an
Affiliate in which a Key Employee is a participant to satisfy Sections
401(a)(4) or 410 of the Code. In addition, the Company may choose to treat
any other qualified retirement plan as a member of the Aggregation Group
if such Aggregation Group will continue to satisfy Sections 401(a)(4) and
410 of the Code with such plan being taken into account.
15.3 Determination of Top-Heavy Status: The Plan shall be a Top-Heavy Plan
for any Plan Year if it is determined to be a Top-Heavy Plan as of the
Determination Date applicable to such year. For purposes of determining whether
the Plan is a Top-Heavy Plan, all qualified retirement plans maintained by the
Company or an Affiliated Company shall be aggregated to the extent that such
aggregation is required under the applicable provisions of Section 416 of the
Code. All other qualified retirement plans maintained by the Company or an
Affiliated Company shall be aggregated only if elected by the Company and only
to the extent permitted by Section 416 of the Code. In determining whether the
Plan is a Top-Heavy Plan, the provisions of Section 416 of the Code shall be
applied.
15.4 Minimum Vesting: For any Plan Year in which the Plan is a Top-Heavy
Plan, each Participant who is credited with at least one Hour of Service on or
after the date the Plan becomes a Top-Heavy Plan shall have his vested interest
in his account attributable to Employer Contributions determined as follows:
Years of Vesting Service Vested Interest
less than 2 0%
2 but less than 3 20%
3 but less than 4 50%
4 but less than 5 75%
5 or more 100%
If in any subsequent Plan Year, the Plan ceases to be a Top-Heavy Plan,
the above vesting schedule shall continue to apply.
15.5 Minimum Contribution: The aggregate Employer Contributions allocable
to the account of each Employee (other than a Key Employee) who has satisfied
the eligibility requirements of Paragraph 3.1, whether or not a Contributing
Participant in the Plan, and who is in Service at the end of the Plan Year shall
not be less than the lesser of (i) 3% of such Employee's compensation (as
defined in Section 414(s) of the Code or to the extent required by the Code or
the Regulations, Section 1.415-2(d) of the Regulations) or (ii) the largest
percentage of Employer Contributions, as a percentage of Compensation, allocated
to the accounts of any Key Employee for such Plan Year. For purposes of
determining the percentage under clause (ii), all defined contribution plans
required to be included in an Aggregation Group shall be treated as a single
plan. Clause (ii) shall not be applicable if the Plan is required to be included
in an Aggregation Group which enables a defined benefit plan also required to be
included in said Aggregation Group to satisfy Sections 401(a)(4) or 410 of the
Code. Any required minimum contribution shall be made even though the
Participant would not be eligible otherwise to receive a contribution, or would
have received a lesser contribution in such Plan Year as a result of the
Participant's failure to make Basic Contributions to the Plan. For the purpose
of clarity and without limiting the scope of the preceding provisions of this
paragraph, with respect to Plan Years beginning after December 31, 1988, any
elective deferral (described in Section 402(g)(3) of the Code) under the Plan or
any other defined contribution plan that is aggregated with the Plan under the
provisions stated above on behalf of any Participant who is not a Key Employee
shall not be treated as Employer Contributions for purposes of this paragraph,
but will be treated as an Employer Contribution for purposes of determining the
percentage at which Employer Contributions are made for the Key Employee with
the highest percentage.
15.6 Maximum Benefit and Contribution Limitations: If for any Limitation
Year the Plan is a Top-heavy Plan, then for purposes of applying the overall
limitations on benefits and contributions under Paragraph 14.4(a) of the Plan,
"1.0" shall be substituted for "1.25" in each applicable place in subparagraphs
14.4(b)(1) and 14.4(b)(2) of the Plan unless the Plan would not be a Top-Heavy
Plan if 90% were substituted for 60% in each applicable place in Section 416(g)
of the Code and 4% were substituted for 3% in each applicable place in Paragraph
15.6 of the Plan.
15.7 Coordination of Plans: If, with respect to a Non-Key Employee who
benefits in a Plan Year under both a defined contribution plan and a defined
benefit plan which are determined to be Top-Heavy Plans maintained by the
Employer, a top-heavy minimum benefit is not provided for such Plan year under
both plans, then such determination for such Plan Year shall be made in
conformity with the comparability analysis described in Q&A M-12 of Section
1.416-1 of the Regulations.
Such analysis shall be modified, where a factor of 1.25 is utilized for
such Plan Year in connection with the satisfaction of the limitations set forth
in Section 415(e) of the Code, in accordance with the last sentence of Q&A M-14
of Section 1.416-1 of the Regulations.
XV-1
ARTICLE XVI
GENERAL PROVISIONS
16.1 Employment Relationships. Nothing contained herein shall be deemed to
give any Employee the right to be retained in the service of any Employer or to
interfere with the right of an Employer to discharge any Employee at any time.
16.2 Benefits Provided Solely From Trust: All benefits payable under the
Plan shall be paid or provided for solely from the Trust; no Employer assumes
any liability or responsibility therefor.
16.3 Non-Alienation of Benefits. Except as otherwise may be required by
law or pursuant to the terms of a "qualified domestic relations order," no
amount payable under the Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, charge or seizure.
Except with respect to any indebtedness owing to the Trust by a Participant or a
Beneficiary, no amount payable under the Plan shall be liable in any manner for
or subject to the debts, contracts, liabilities, engagements or torts of any
Employee or Beneficiary. For purposes of the Plan, a "qualified domestic
relations order" means any judgment, decree, or order (including approval of a
property settlement agreement) which has been determined by the Committee, in
accordance with procedures established by it, to constitute a "qualified
domestic relations order" ("QDRO") within the meaning of Section 414(p) of the
Code. The Committee shall comply with the terms and provisions of any order
which requires distribution to an alternate payee prior to the affected
Participant's "earliest retirement age," as such term is defined in Section
206(d)(3)(E)(ii) of the Act and Section 414(p)(4)(B) of the Code, if the order
would have been determined to be valid QDRO if the order had required
distribution at or after the Participant's "earliest retirement date." If the
Committee receives notice that a domestic relations order that is intended to be
a QDRO is being prepared and will be provided to the Committee within 30 days or
such other short time as the Committee deems reasonable, the Committee may put a
temporary hold on the distribution of benefits under the Plan to the affected
Participant, pending (a) the determination of whether such order is a QDRO, and
(b) the rights of the alternate payee under such order.
16.4 Merger, Consolidation or Transfer of Assets or Liabilities. In the
event of any merger or consolidation with, or transfer of assets of the Plan to
another plan, each Participant in the Plan shall receive a benefit in the
surviving plan (if such plan were then terminated) at least equal to the benefit
which he would have been entitled to receive immediately prior to the
transaction if the Plan had then terminated.
16.5 Payments to Minors and Incompetents. If a Participant or Beneficiary
entitled to receive any benefits hereunder is deemed by the Committee or is
adjudged to be legally incapable of giving valid receipt and discharge for such
benefits or is a minor, such benefit shall be paid to such person or persons as
the Committee may designate or to a duly appointed guardian.
16.6 Employee's Records. Each of the Employers and the Committee
respectively shall keep such records, and shall give the other reasonable access
to such information as is necessary or desirable to effectuate the purposes of
the Plan and the Trust including, without limiting the foregoing, records and
information with respect to the employment date, date of participation in the
Plan and Compensation of Employees, elections by Participants and their
Beneficiaries and consents granted and determinations made under the Plan and
the Trust. Neither the Employers nor the Committee shall be required to
duplicate any records kept by the other.
16.7 Missing Persons. Each Participant and Beneficiary shall keep the
Committee advised of his current address. If amounts become distributable under
the Plan and the Committee is unable, after reasonable efforts, to locate the
Participant or Beneficiary to whom distribution is payable for a period of two
years from the time such distribution first becomes payable, all such amounts
shall be forfeited and applied in accordance with Paragraph 5.4. If the
Participant or his Beneficiary thereafter applies for the Participant's
distributable account, the amount forfeited shall be paid to him pursuant to
Article IX.
16.8 Severability of Provisions. If any provision of the Plan is held
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other provisions, and the Plan shall be construed and enforced as if such
provision had not been included.
16.9 Receipt and Release. As a condition precedent to the payment to any
Participant or to his legal representative or Beneficiary, such Participant,
legal representative or Beneficiary may be required to execute a receipt
therefor and a release in such form as shall be determined by the Committee.
16.10 Fiduciary Capacities. Any person or group of persons may serve in
more than one fiduciary capacity with respect to the Plan.
16.11 Titles and Headings. The titles to Articles and headings of
Paragraphs of the Plan are for convenience of reference. In case of conflict,
the text of the Plan, rather than such titles and headings, shall control.
16.12 Gender and Number. Wherever used herein, the masculine gender shall
include the feminine gender and the singular shall include the plural, unless
the context indicates otherwise.
16.13 Governing Law. To the extent that New Jersey law has not been
preempted by federal law, the provisions of the Plan shall be governed by and
construed in accordance with the laws of the State of New Jersey.
16.14 Counterparts: If this Agreement is executed, it may be executed in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
XVI-1
EXHIBIT 10.40
INTERCORPORATE SERVICES AGREEMENT
This INTERCORPORATE SERVICES AGREEMENT (the "Agreement"), effective as of
January 1, 1996, amends and supersedes that certain Intercorporate Services
Agreement effective as of January 1, 1995 by and between VALHI, INC., a Delaware
corporation ("Valhi"), and NL INDUSTRIES, INC., a New Jersey corporation ("NL").
Recitals
Employees and agents of Valhi and affiliates of Valhi perform
management, financial and administrative functions for NL without direct
compensation from NL.
NL does not separately maintain the full internal capability to
perform all necessary management, financial and administrative functions that NL
requires.
Valhi desires to have the services of certain personnel of NL and NL
is willing to provide such services under the terms of this Agreement.
The cost of maintaining the additional personnel necessary to
perform the functions provided for by this Agreement would exceed the amount
charged to such party that is contained in the net fee set forth in Section 4 of
this Agreement and that the terms of this Agreement are no less favorable to
each party than could otherwise be obtained from a third party for comparable
services.
Each party desires to continue receiving the management, financial
and administrative services presently provided by the other party and its
affiliates and each party is willing to continue to provide such services under
the terms of this Agreement.
Agreement
For and in consideration of the mutual premises, representations and
covenants herein contained, the parties hereto mutually agree as follows:
Section Valhi Services to be Provided. Valhi agrees to make available to
NL, upon request, the following services (the "Valhi Services") to be rendered
by the internal staff of Valhi and affiliates of Valhi:
Consultation and assistance in the development and
implementation of NL's corporate business strategies, plans and
objectives;
Consultation and assistance in management and conduct of
corporate affairs and corporate governance consistent with the charter and
bylaws of NL;
Consultation and assistance in maintenance of financial
records and controls, including preparation and review of periodic
financial statements and reports to be filed with public and regulatory
entities and those required to be prepared for financial institutions or
pursuant to indentures and credit agreements;
Consultation and assistance in cash management and in
arranging financing necessary to implement the business plans of NL;
Consultation and assistance in tax management and
administration, including, without limitation, preparation and filing of
tax returns, tax reporting, examinations by government authorities and tax
planning; and
Such other services as may be requested by NL from time to
time.
Section NL Services to be Provided. NL agrees to make available to Valhi,
upon request, the following services (the "NL Services," and collectively with
the Valhi Services, the "Services") to be rendered by the internal staff of NL:
The services of Joseph S. Compofelice to act as Executive Vice
President of Valhi, which Valhi and NL agree shall involve substantially
such time as has been allocated in the past and is currently being
devoted;
The services of NL's internal audit personnel in providing
consultation and assistance in performing internal audit projects as
requested from time to time; and
Such other services as may be requested by Valhi from time to
time.
Section Miscellaneous Services. It is the intent of the parties hereto
that each party to this Agreement provide (a "Providing Party") only such
Services as are requested by the other party (a "Receiving Party") in connection
with routine management, financial and administrative functions related to the
ongoing operations of the Receiving Party and not with respect to special
projects, including corporate investments, acquisitions and divestitures. The
parties hereto contemplate that the Services rendered by a Providing Party in
connection with the conduct of each Receiving Party's business will be on a
scale compared to that existing on the effective date of this Agreement,
adjusted for internal corporate growth or contraction, but not for major
corporate acquisitions or divestitures, and that adjustments may be required to
the terms of this Agreement in the event of such major corporate acquisitions,
divestitures or special projects. Each Receiving Party will continue to bear all
other costs required for outside services including, but not limited to, the
outside services of attorneys, auditors, trustees, consultants, transfer agents
and registrars, and it is expressly understood that each Providing Party assumes
no liability for any expenses or services other than those stated in this
Agreement to be provided by such party. In addition to the amounts charged to a
Receiving Party for Services provided pursuant to this Agreement, such Receiving
Party will pay the Providing Party the amount of out-of-pocket costs incurred by
the Providing Party in rendering such Services.
Section Net Fee for Services. Valhi agrees to pay to NL a net fee of
$2,500 quarterly, commencing as of January 1, 1996, pursuant to this Agreement,
which net fee includes reimbursements of $36,000 for certain NL Services
provided in 1995. In addition to the net fee:
Valhi shall pay to NL an additional amount equal to the sum
of:
-2-
the product of (x) $600, (y) the number of days devoted by
NL's internal auditors to providing NL Services described in
Subsection 2(b) and (z) the number of internal auditors providing
such NL Services; and
all related out-of-pocket expenses;
Valhi shall pay to NL additional amounts plus all related
out-of-pocket costs, all as agreed to by the parties, for all NL Services
provided under Subsection 2(c); and
NL shall credit or pay to Valhi additional amounts plus all
related out-of-pocket costs, all as agreed to by the parties, for all
Valhi Services provided under Subsection 1(f).
Section Original Term. Subject to the provisions of Section 6 hereof, the
original term of this Agreement shall be from January 1, 1996 to December 31,
1996.
Section Extensions. This Agreement shall be extended on a
quarter-to-quarter basis after the expiration of its original term unless
written notification is given by Valhi or NL thirty (30) days in advance of the
first day of each successive quarter or unless it is superseded by a subsequent
written agreement of the parties hereto.
Section Limitation of Liability. In providing Services hereunder, each
Providing Party shall have a duty to act, and to cause its agents to act, in a
reasonably prudent manner, but no Providing Party nor any officer, director,
employee or agent of such party nor or its affiliates shall be liable to a
Receiving Party for any error of judgment or mistake of law or for any loss
incurred by the Receiving Party in connection with the matter to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Providing Party.
Section Indemnification. Each Receiving Party shall indemnify and hold
harmless the Providing Party, its affiliates and their respective officers,
directors and employees from and against any and all losses, liabilities,
claims, damages, costs and expenses (including attorneys' fees and other
expenses of litigation) to which such Providing Party may become subject arising
out of the Services provided by such Providing Party to the Receiving Party
hereunder, provided that such indemnity shall not protect any person against any
liability to which such person would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on the part of such person.
Section Further Assurances. Each of the parties will make, execute,
acknowledge and deliver such other instruments and documents, and take all such
other actions, as the other party may reasonably request and as may reasonably
be required in order to effectuate the purposes of this Agreement and to carry
out the terms hereof.
Section Notices. All communications hereunder shall be in writing and
shall be addressed, if intended for Valhi, to Three Lincoln Centre, 5430 LBJ
Freeway, Suite 1700, Dallas, Texas 75240, Attention: President, or such other
address as it shall have furnished to NL in
-3-
writing, and if intended for NL, to Two Greenspoint Plaza, 16825 Northchase
Drive, Suite 1200, Houston, Texas 77060, Attention: President, or such other
address as it shall have furnished to Valhi in writing.
Section Amendment and Modification. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated other than by agreement
in writing signed by the parties hereto.
Section Successor and Assigns. This Agreement shall be binding upon and
inure to the benefit of Valhi and NL and their respective successors and
assigns, except that neither party may assign its rights under this Agreement
without the prior written consent of the other party.
Section Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of Texas.
-4-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first above written.
VALHI, INC.
By: /s/ Steven L. Watson
Steven L. Watson
Vice President
NL INDUSTRIES, INC.
By: /s/ J. Landis Martin
J. Landis Martin
President and Chief Executive Officer
-5-
EXHIBIT 10.41
INTERCORPORATE SERVICES AGREEMENT
This INTERCORPORATE SERVICES AGREEMENT (the "Agreement"), effective as of
January 1, 1996, amends and supersedes that certain Intercorporate Services
Agreement effective as of January 1, 1995 by and between CONTRAN CORPORATION, a
Delaware corporation ("Contran"), and NL INDUSTRIES, INC., a New Jersey
corporation.
("Recipient"),
Recitals
Harold C. Simmons, an employee of Contran and a director and the
Chairman of the Board of Recipient, performs certain advisory functions for
Recipient, which functions are unrelated to his function as a director and the
Chairman of the Board of Recipient, without direct compensation from Recipient.
Recipient does not separately maintain the full internal capability
to perform all necessary advisory functions that Recipient requires.
The cost of engaging the advisory services of someone possessing Mr.
Simmons' expertise and the cost of maintaining the personnel necessary to
perform the functions provided for by this Agreement would exceed the fee set
forth in Section 3 of this Agreement and the terms of this Agreement are no less
favorable to Recipient than could otherwise be obtained from a third party for
comparable services.
Recipient desires to continue receiving the advisory services of
Harold C. Simmons and Contran is willing to continue to provide such services
under the terms of this Agreement.
Agreement
For and in consideration of the mutual premises, representations and
covenants herein contained, the parties hereto mutually agree as follows:
Section Services to be Provided. Contran agrees to make available to
Recipient, upon request, the following services (the "Services") to be rendered
by Harold C. Simmons:
Consultation and assistance in the development and
implementation of Recipient's corporate business strategies, plans and
objectives; and
Such other services as may be requested by Recipient from time
to time.
This Agreement does not apply to and the Services provided for herein do not
include any services that Harold C. Simmons may provide to Recipient in his role
as a director on Recipient's Board of Directors, as Chairman of such Board of
Directors or any other activity related to such Board of Directors.
Section Miscellaneous Services. It is the intent of the parties hereto that
Contran provide only the Services requested by Recipient in connection with
routine functions related to the ongoing operations of Recipient and not with
respect to special projects, including corporate investments, acquisitions and
divestitures. The parties hereto contemplate that the Services rendered in
connection with the conduct of Recipient's business will be on a scale compared
to that existing on the effective date of this Agreement, adjusted for internal
corporate growth or contraction, but not for major corporate acquisitions or
divestitures, and that adjustments may be required to the terms of this
Agreement in the event of such major corporate acquisitions, divestitures or
special projects. Recipient will continue to bear all other costs required for
outside services including, but not limited to, the outside services of
attorneys, auditors, trustees, consultants, transfer agents and registrars, and
it is expressly understood that Contran assumes no liability for any expenses or
services other than those stated in Section 1. In addition to the fee paid to
Contran by Recipient for the Services provided pursuant to this Agreement,
Recipient will pay to Contran the amount of out-of-pocket costs incurred by
Contran in rendering such Services.
Section Fee for Services. Recipient agrees to pay to Contran $100,000.00
quarterly, commencing as of January 1, 1996, pursuant to this Agreement.
Section Original Term. Subject to the provisions of Section 5 hereof, the
original term of this Agreement shall be from January 1, 1996 to December 31,
1996.
Section Extensions. This Agreement shall be extended on a
quarter-to-quarter basis after the expiration of its original term unless
written notification is given by Contran or Recipient thirty (30) days in
advance of the first day of each successive quarter or unless it is superseded
by a subsequent written agreement of the parties hereto.
Section Limitation of Liability. In providing its Services hereunder,
Contran shall have a duty to act, and to cause its agents to act, in a
reasonably prudent manner, but neither Contran nor any officer, director,
employee or agent of Contran or its affiliates shall be liable to Recipient for
any error of judgment or mistake of law or for any loss incurred by Recipient in
connection with the matter to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Contran.
Section Indemnification of Contran by Recipient. Recipient shall indemnify
and hold harmless Contran, its affiliates and their respective officers,
directors and employees from and against any and all losses, liabilities,
claims, damages, costs and expenses (including attorneys' fees and other
expenses of litigation) to which such party may become subject arising out of
the Services provided by Contran to Recipient hereunder, provided that such
indemnity shall not protect any person against any liability to which such
person would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence on the part of such person.
Section Further Assurances. Each of the parties will make, execute,
acknowledge and deliver such other instruments and documents, and take all such
other actions, as the other party may reasonably request and as may reasonably
be required in order to effectuate the purposes of this Agreement and to carry
out the terms hereof.
-2-
Section Notices. All communications hereunder shall be in writing and shall be
addressed, if intended for Contran, to Three Lincoln Centre, 5430 LBJ Freeway,
Suite 1700, Dallas, Texas 75240, Attention: President, or such other address as
it shall have furnished to Recipient in writing, and if intended for Recipient,
to Two Greenspoint Plaza, 16825 Northchase Drive, Suite 1200, Houston, Texas
77060, Attention: President or such other address as it shall have furnished to
Contran in writing.
Section Amendment and Modification. Neither this Agreement nor any term
hereof may be changed, waived, discharged or terminated other than by agreement
in writing signed by the parties hereto.
Section Successor and Assigns. This Agreement shall be binding upon and
inure to the benefit of Contran and Recipient and their respective successors
and assigns, except that neither party may assign its rights under this
Agreement without the prior written consent of the other party.
Section Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of Texas.
-3-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the date first above written.
CONTRAN CORPORATION
By: /s/ Steven L. Watson
Steven L. Watson
Vice President
NL INDUSTRIES, INC.
By: /s/ J. Landis Martin
J. Landis Martin
President and Chief Executive Officer
-4-
EXHIBIT 10.42
EXHIBIT C
INTERCORPORATE SERVICES AND REIMBURSEMENT AGREEMENT
INTERCORPORATE SERVICES AND REIMBURSEMENT AGREEMENT effective as of
January 1, 1996, by and between Tremont Corporation ("Tremont"), a Delaware
corporation, and NL Industries, Inc. ("NL"), a New Jersey corporation.
WHEREAS, Tremont desires that NL provide certain services to Tremont, and
NL is willing to provide such services to Tremont, as provided in this
Agreement.
NOW, THEREFORE, in consideration of the premises and promises set forth
herein, the parties to this Agreement agree as follows:
1. Services Provided. NL will make available to Tremont and its
subsidiaries the following services (the "Services"):
a. certain administration and management services with respect to
Tremont's insurance and risk management needs, including:
(i) management of claims (including insured
and self-insured workers compensation and
liability claims);
(ii) budgeting and related activities;
(iii)administration of Tremont's captive
insurance company;
(iv) coordination of property loss control
program; and
(v) administration of Tremont's insurance program, excluding
all employee benefit and welfare related programs.
b. certain administration and management services with respect to
Tremont's real properties and interests.
c. consultation and assistance in performing internal audit
projects, as requested.
d. certain executive secretarial and administrative services.
2. Fees for Services and Reimbursement of Expenses. Tremont shall pay to
NL an annual fee of $88,400 (the "Annual Fee") for the Services described in
paragraphs 1.a, 1.b , and 1.d above payable in quarterly installments of $22,100
during the term of this Agreement plus all out-of-pocket expenses incurred in
connection with the performance of such Services. In addition, Tremont will pay
to NL within thirty (30) days after receipt of an invoice (such invoices to
occur no more frequently than once per month)
1
an amount equal to the product of $600 multiplied by the number of days devoted
by NL's internal auditors to providing Services described in paragraph 1.c above
times the number of internal auditors providing such Services plus all
out-of-pocket expenses incurred in the performance of such Services; provided,
however, in the event that Tremont determines, in its sole discretion, that it
no longer desires certain of the Services or NL determines, in its sole
discretion, that it no longer desires to provide certain of the Services, then
Tremont or NL, as appropriate, shall provide the other party with a ninety (90)
day prior written notice of cancellation describing the Services to be
terminated or discontinued and Tremont and NL during such ninety-day period
shall agree to a pro-rata reduction of the fees due hereunder for such
terminated or discontinued Services.
3. Limitation of Liability. In providing Services hereunder, NL shall have
a duty to act, and to cause its agents to act, in a reasonably prudent manner,
but neither NL nor any officer, director, employee or agent of NL shall be
liable to Tremont or its subsidiaries for any error of judgment or mistake of
law or for any loss incurred by Tremont or its subsidiaries in connection with
the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of NL or from
NL's reckless disregard of obligations and duties under this Agreement.
4. Indemnification of NL by Tremont. Tremont shall indemnify and hold
harmless NL, its subsidiaries and their respective officers, directors and
employees from and against any and all losses, liabilities, claims, damages,
costs and expenses (including reasonable attorneys' fees and other expenses of
litigation) to which such party may become subject arising out of the provision
by NL to Tremont and its subsidiaries of any of the Services, provided that such
indemnity shall not protect any such party against any liability to which such
person would otherwise by subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of obligations and duties hereunder.
5. Further Assurance. Each of the parties will make, execute, acknowledge
and deliver such other instruments and documents, and take all such other
actions, as the other party may reasonably request and as may reasonably by
required in order to effectuate the purposes of this Agreement and to carry out
the terms hereof.
6. Notices. All communications hereunder shall be in writing and shall be
addressed to:
If to NL: NL Industries, Inc.
16825 Northchase Drive, Suite 1200
Houston, Texas 77060
Attention: General Counsel
If to Tremont: Tremont Corporation
1999 Broadway, Suite 4300
Denver, Colorado 80202
Attention: General Counsel
or such other address as the parties shall have specified in
writing.
7. Amendment and Modification. Neither this Agreement nor any item hereof
may be changed, waived, discharged or terminated other than by agreement in
writing signed by the parties hereto.
2
8. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties hereto,
provided that this Agreement may not be assigned by either of the parties hereto
without the prior written consent of the other party.
9. Miscellaneous. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument. This Agreement shall be governed in all respects, including
validity, interpretation and affect, by the laws of the State of Texas.
10. Term of Agreement. This Agreement shall be effective as of January 1,
1996, and shall remain in effect until December 31, 1996, subject to a renewal
by mutual written agreement for succeeding one-year terms commencing January 1,
1997. This Agreement may be terminated at any time by mutual consent of the
parties and by either party upon ninety (90) days prior written notice to the
other party. Upon such termination or upon the expiration of this Agreement, the
parties' rights and obligations hereunder shall cease and terminate except with
respect to rights and obligations arising on or prior to the date of expiration
or termination and the rights and obligations arising under paragraph 4 above.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the 24th day of July, 1996, which Agreement will be deemed to be effective as of
January 1, 1996.
NL INDUSTRIES, INC.
By: /s/ Dennis G. Newkirk
Dennis G. Newkirk
Vice President
TREMONT CORPORATION
By: /s/ Mark A. Wallace
Mark A. Wallace
Vice President
3
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of
incorporation % of Voting
NAME OF CORPORATION or organization Securities Held
Kronos, Inc. Delaware 100
Kronos (US) Inc. Delaware 100
Kronos International, Inc. Delaware 100
NL Industries (Deutschland) GmbH Germany 100
Kronos Titan-GmbH Germany 100
Unterstutzungskasse Titan GmbH Germany 100
Kronos Chemie-GmbH Germany 100
Kronos Europe S.A./N.V. Belgium 100
Kronos World Services S.A./N.V. Belgium 100
Kronos B.V. Holland 100
Kronos Canada, Inc. Canada 100
2927527 Canada Inc. Canada 100
2969157 Canada Inc. Canada 100
Societe Industrielle Du Titane, S.A. France 93
Kronos Norge A/S Norway 100
Kronos Titan A/S Norway 100
Titania A/S Norway 100
The Jossingfjord Manufacturing
Company A/S Norway 100
Kronos Limited United Kingdom 100
Kronos Louisiana, Inc. Delaware 100
Louisiana Pigment Company, L.P. Delaware 50*
Rheox, Inc. Delaware 100
Rheox International, Inc. Delaware 100
Bentone Sud, S.A. France 100
Rheox GmbH Germany 100
Bentone-Chemie GmbH Germany 100
Rheox Limited United Kingdom 100
Abbey Chemicals Limited United Kingdom 100
Rheox Europe S.A./N.V. Belgium 100
RK Export, Inc. Barbados 100**
Enenco, Inc. New York 50*
Other:
National Lead Company New Jersey 100
NL Industries (USA), Inc. Texas 100
NLO, Inc. Ohio 100
Salem Lead Company Massachusetts 100
Sayre & Fisher Land Company New Jersey 100
153506 Canada Inc. Canada 100
The 1230 Corporation California 100
United Lead Company New Jersey 100
* Unconsolidated joint venture accounted for by the equity method.
** Registrant indirectly owns 100% with 50% owned by Kronos and 50% owned
by Rheox.
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the:
(i) Registration Statement No. 2-98713 on Form S-8 and related
Prospectus with respect to the 1985 Long Term Performance Incentive
Plan of NL Industries, Inc.; and
(ii) Registration Statement No. 33-25913 on Form S-8 and related
Prospectus with respect to the Savings Plan for Employees of NL
Industries, Inc.; and
(iii) Registration Statement No. 33-29287 on Form S-8 and related
Prospectus with respect to the 1989 Long Term Performance Incentive
Plan of NL Industries, Inc.; and
(iv) Registration Statement No. 33-48145 on Form S-8 and related
Prospectus with respect to the NL Industries, Inc. 1992 Non-Employee
Directors Stock Option Plan.
of our report which is dated February 7, 1997 on our audits of the consolidated
financial statements and financial statement schedules of NL Industries, Inc. as
of December 31, 1995 and 1996, and for each of the three years in the period
ended December 31, 1996, which report is included in this Annual Report on Form
10-K.
COOPERS & LYBRAND L.L.P.
Houston, Texas
March 20, 1997
5
1,000
12-MOS
DEC-31-1996
JAN-01-1996
DEC-31-1996
114,115
0
126,995
3,813
232,510
500,246
956,897
490,851
1,221,358
290,345
737,100
0
0
8,355
(211,836)
1,221,358
986,074
986,074
738,438
738,438
0
30
75,039
25,613
(14,833)
10,817
0
0
0
10,817
0.21
0.21
