Exhibit 10.6
JOINT VENTURE AGREEMENT
DATED AS OF
OCTOBER 18, 1993
BETWEEN
TIOXIDE AMERICAS INC.
AND
KRONOS LOUISIANA, INC.
TABLE OF CONTENTS
PAGE
----
ARTICLE I
DEFINITIONS
1.01. Definitions......................................................................... 1
ARTICLE II
FORMATION AND PURPOSES OF THE JOINT VENTURE
2.01. Formation of the Joint Venture....................................................... 10
2.02. Name of the Joint Venture............................................................ 10
2.03. Purpose of the Joint Venture......................................................... 10
2.04. Place of Business of the Joint Venture............................................... 10
2.05. Duration of the Joint Venture........................................................ 10
2.06. Title to Joint Venture Property...................................................... 11
2.07. Filing of Certificates............................................................... 11
2.08. Registered Office; Registered Agent.................................................. 11
2.09. Reliance by Third Parties............................................................ 11
ARTICLE III
PARTNERS; CAPITAL CONTRIBUTIONS; DEFAULTS
3.01. Partners............................................................................. 11
3.02. Additional Capital Contributions..................................................... 12
3.03. Defaults............................................................................. 15
3.04. Adjustment of Percentage Interests................................................... 21
ARTICLE IV
TRANSFER RESTRICTIONS;
OFFER RIGHT; PUT OPTION; CALL OPTION
4.01. Transfer Restrictions................................................................ 25
4.02. Offer Right.......................................................................... 27
4.03. Put Option........................................................................... 31
4.04. Minority Call Option................................................................. 33
4.05. Conditions Relating to the Sale of an Interest....................................... 34
4.06. Exit Indemnification................................................................. 36
ARTICLE V
TAX MATTERS
5.01. Partnership for Tax Purposes......................................................... 37
5.02. Tax Matters.......................................................................... 37
ARTICLE VI
DISTRIBUTIONS; CAPITAL CALLS
6.01. Distributions........................................................................ 39
6.02. Amounts Withheld from Distributions.................................................. 40
6.03. Capital Calls........................................................................ 40
ARTICLE VII
THE SUPERVISORY COMMITTEE
7.01. The Supervisory Committee............................................................ 40
7.02. Quorum and Manner of Acting.......................................................... 41
7.03. Time and Place of Meetings........................................................... 46
7.04. Regular Meetings..................................................................... 46
7.05. Special Meetings..................................................................... 47
7.06. Action by Consent.................................................................... 47
7.07. Telephonic Meetings.................................................................. 47
7.08. Resignation.......................................................................... 47
7.09. Term; Vacancies; Alternates.......................................................... 48
ARTICLE VIII
MANAGEMENT OF OPERATIONS
8.01. General Managers..................................................................... 48
8.02. Business Plan........................................................................ 50
8.03. General Managers' Reports............................................................ 51
ARTICLE IX
EMPLOYEES
9.01. Principal Officers................................................................... 51
9.02. Nomination, Confirmation, Term of Office and Remuneration............................ 51
9.03. Subordinate Officers................................................................. 52
9.04. Removal.............................................................................. 52
9.05. Resignations......................................................................... 52
9.06. Powers and Duties.................................................................... 52
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PAGE
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9.07. Tioxide Observers.................................................................... 52
9.08. Transferred Employees................................................................ 52
9.09. Limitations on Hiring................................................................ 53
ARTICLE X
ACCOUNTING
10.01. Auditors and Financial Statements................................................... 54
10.02. Fiscal Year......................................................................... 54
ARTICLE XI
INDEMNIFICATION
11.01. Employee Indemnification............................................................ 54
11.02. Partner Indemnification............................................................. 56
ARTICLE XII
COVENANTS OF THE PARTNERS
12.01. Nature of Obligations Between Partners.............................................. 56
12.02. Confidentiality..................................................................... 56
12.03. Debt................................................................................ 58
12.04. Negative Pledge..................................................................... 59
12.05. Consolidations, Mergers and Sales of Assets......................................... 60
12.06. Restriction on Other Businesses..................................................... 60
ARTICLE XIII
TERMINATION AND LIQUIDATION
13.01. Term................................................................................ 60
13.02. Liquidating Event................................................................... 60
13.03. Resignation and Withdrawal.......................................................... 60
13.04. Bankruptcy.......................................................................... 61
13.05. Winding Up.......................................................................... 61
13.06. Discretion of the Liquidator........................................................ 61
13.07. Rights of Partners.................................................................. 62
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ARTICLE XIV
DISPUTE RESOLUTION
14.01. Arbitration........................................................................... 62
14.02. Injunctive Relief..................................................................... 63
ARTICLE XV
MISCELLANEOUS
15.01. Notices............................................................................. 64
15.02. Survival............................................................................ 65
15.03. Amendments; No Waivers.............................................................. 65
15.04. Expenses............................................................................ 66
15.05. Successors and Assigns.............................................................. 66
15.06. Headings............................................................................ 67
15.07. Governing Law; Entire Agreement..................................................... 67
15.08. Counterparts; Effectiveness......................................................... 67
15.09. Severability........................................................................ 67
15.10. Further Assurances.................................................................. 67
EXHIBITS AND SCHEDULES
Exhibit 1: Form of Assumption Agreement
Exhibit 2: Form of Selling Partner's First Notice
Exhibit 3: Form of Exiting Partner's Indemnity
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JOINT VENTURE AGREEMENT
AGREEMENT dated as of October 18, 1993 between TIOXIDE AMERICAS INC., a
Delaware corporation (the "TIOXIDE PARTNER"), and KRONOS LOUISIANA, INC., a
Delaware corporation (the "KRONOS PARTNER").
W I T N E S S E T H:
WHEREAS, the Kronos Partner conducts a business which manufactures
titanium dioxide pigment using a chloride process at its plant located in Lake
Charles, Louisiana (the "PLANT");
WHEREAS, the Tioxide Partner and the Kronos Partner have entered into a
Formation Agreement (as hereinafter defined) pursuant to which they have agreed
to form a joint venture, organized as a limited partnership under the laws of
Delaware; and
WHEREAS, the Joint Venture will own and operate the Plant for the benefit
of the Partners.
NOW, THEREFORE, the parties hereto agree to enter into an agreement of
limited partnership as follows:
ARTICLE I
DEFINITIONS
1.01. Definitions. (a) As used herein, the following terms have the
following meanings:
"AAA" means the American Arbitration Association.
"AFFILIATE" means, with respect to any Person at any time, any other
Person directly or indirectly through one or more intermediaries controlling,
controlled by, or under common control with, that Person at such time. For the
purposes of this definition, "control" (including, with correlative meanings,
"controlling", "controlled by" and "under common control with"), with respect to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through the ownership of voting securities, by contract or otherwise. The Joint
Venture shall not be deemed an Affiliate of either Partner.
"ASSUMPTION AGREEMENT" means each Assumption Agreement executed pursuant
to Section 3.04(f) between the Non-Defaulting Partner and the Defaulting
Partner, each such agreement to be substantially in the form of Exhibit 1
hereto.
"BANK DEFAULT" means with (i) with respect to the Tioxide Partner, a
Tioxide Bank Default, and (ii) with respect to the Kronos Partner, a Kronos Bank
Default.
"CLASS I DEFAULT" means (i) with respect to the Tioxide Partner, a Tioxide
Class I Default, and (ii) with respect to the Kronos Partner, a Kronos Class I
Default.
"CLOSING" means the Closing under the Formation Agreement.
"CLOSING DATE" means the date of the Closing.
"CODE" means the Internal Revenue Code of 1986, as amended, and any
reference to a section of the Code shall include any successor section or
provision of the Code.
"CONVERTIBLE LOAN" means a loan to the Joint Venture made by a Non-
Defaulting Partner pursuant to Section 3.03 to cure a Default, which loan shall
(A) accrue interest quarterly on the unpaid principal amount of such Convertible
Loan and on any previously accrued interest at a floating rate per annum equal
to the highest rate of interest then applicable to loans (whether Tranche A or
Tranche B Loans) outstanding during such quarter under the Credit Agreement, or,
in the event that no such loans are outstanding, the rate announced from time to
time by Citibank, N.A. as its base rate, (B) have a maturity of not less than
one year from the date of issue (the specific maturity date to be established by
the Non-Defaulting Partner); provided, however, that such maturity shall be
extended automatically for successive 180-day periods if such extension is
necessary to avoid a default under any Debt of the Joint Venture, (C) be
subordinated to all Obligations under the Credit Agreement and (D) solely as to
principal (and not accrued interest) be convertible into an increased Percentage
Interest in the Joint Venture in accordance with Section 3.04 (with all interest
thereon waived upon such conversion) upon 21 days' prior written notice by the
Non-Defaulting Partner to the Joint Venture and the Defaulting Partner. At the
option of the Joint Venture, subject to the Credit Agreement, the Joint Venture
may pay all or any portion of any interest payment in cash rather than permit it
to continue to accrue.
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"CREDIT AGREEMENT" means the Credit Agreement dated as of the date hereof
among the Joint Venture, the lenders listed therein and Citibank, N.A., as
Agent, as the same may be amended, modified, supplemented or refinanced from
time to time.
"DEBT" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with GAAP, (v) all Debt of others secured by a Lien on
any asset of such Person, whether or not such Debt is assumed by such Person and
(vi) all Debt of others guaranteed by such Person.
"DEFAULT" means (i) with respect to the Tioxide Partner, a Tioxide Class I
Default, a Tioxide Bank Default or a Tioxide Class II Default, and (ii) with
respect to the Kronos Partner, a Kronos Class I Default, a Kronos Bank Default
or a Kronos Class II Default.
"FAIR MARKET VALUE" means, as of any determination time, (i) with respect
to the Joint Venture as a whole, the cash price at which a willing seller under
no compulsion to sell would sell, and a willing buyer under no compulsion to
purchase would purchase, 100% of the Percentage Interests in the Joint Venture
(subject to all Debt, liabilities and other obligations of the Joint Venture
outstanding at such time), and (ii) with respect to the Percent age Interest of
either Partner in the Joint Venture, the product of (x) the Fair Market Value of
the Joint Venture at such time determined in accordance with clause (i) above
and (y) the Percentage Interest in the Joint Venture represented by the
Percentage Interest being valued. In the event that as of the date of any
determination of Fair Market Value, a Permitted Expansion has begun but there
has been no adjustment of the Percentage Interests pursuant to Section 3.04(c),
Fair Market Value shall include assets added by the Permitted Expansion only to
the extent that the Partners shall have agreed to value them according to
procedures established at the time of the initiation of the Permitted Expansion.
"FIXED OPERATING COSTS" has the meaning ascribed to such term in the
Offtake Agreements.
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"FORMATION AGREEMENT" means the Formation Agreement dated October 18, 1993
among the Kronos Partner, the Tioxide Partner and the Joint Venture.
"GAAP" means accounting principles generally
accepted in the United States.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules promulgated thereunder.
"HSR AUTHORITIES" means the Federal Trade Commission and the Anti trust
Division of the Department of Justice.
"HSR FILING DATE" means, with respect to (i) Defaulting Partner under
Section 3.03, (ii) the Selling Partner under Section 4.02, (iii) the Electing
Partner under Section 4.03 or (iv) the Minority Partner under Section 4.04, the
date such Partner files with the HSR Authorities an HSR Report with respect to
the transaction contemplated by such Section, which HSR Report complies in all
material respects with the requirements of the HSR Act.
"HSR REPORT" means a Notification and Report Form (or any successor form)
required under the HSR Act to be filed with the HSR Authorities to report an
acquisition of the Percentage Interest of either Partner in the Joint Venture.
"KRONOS" means Kronos, Inc., a Delaware corporation.
"KRONOS BANK DEFAULT" means a "Tranche B Single Tranche Event of Default"
as defined in the Credit Agreement.
"KRONOS CLASS I DEFAULT" means any failure by the Kronos Partner (i) to
pay within ten (10) days after the due date amounts aggregating in excess of
$100,000 in respect of the Tranche A Debt or the Tranche B Debt (including,
without limitation, any interest, deferred financing cost or principal payment)
required to be paid by the Kronos Partner pursuant to the Kronos Offtake
Agreement or any Assumption Agreement under which it is an obligor or (ii) to
pay within ten (10) days after the due date specified in an invoice or other
written notice from the Joint Venture received by the Kronos Partner prior to
such due date, any other amount in excess of $100,000 required to be paid by the
Kronos Partner pursuant to the Kronos Offtake Agreement (including, without
4
limitation, any payment in respect of Fixed Operating Costs or Variable Costs).
"KRONOS CLASS II DEFAULT" means (i) any Kronos Class I Default or (ii) any
material breach by the Kronos Partner of any of its obligations to the Joint
Venture under this Agreement or Section 7.02(a) of the Formation Agreement, in
each case, which breach involves or can be cured by the payment of money to the
Joint Venture and which breach remains uncured by the Kronos Partner 10 days
after the earlier of (A) agreement by the Partners with respect to the existence
and amount of such breach or (B) final and non-appealable judicial or
arbitrative determination of the existence and amount of such breach.
"KRONOS GROUP" means, at any time, Kronos and each Person that is a
Subsidiary of Kronos at such time.
"KRONOS GROUP MEMBER" means, at any time, any Person included in the
Kronos Group at such time.
"KRONOS OFFTAKE AGREEMENT" means the Offtake Agreement dated as of the
date hereof between the Kronos Partner and the Joint Venture.
"LICENSE AGREEMENTS" means the License Agreements attached as Exhibits A
through [X] to the Master Technology Exchange Agreement.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"MASTER TECHNOLOGY EXCHANGE AGREEMENT" means the Master Technology
Exchange Agreement dated as of the date hereof between Kronos and Tioxide.
"OFFTAKE AGREEMENTS" means, collectively, the Tioxide Offtake Agreement
and the Kronos Offtake Agreement.
"ORIGINAL CAPITAL CONTRIBUTION" means, with respect to either Partner, the
capital contribution it is required to make to the Joint Venture at the Closing
pursuant to Article II of the Formation Agreement.
"OUTPUT SHARE" has the meaning ascribed to such term in the Offtake
Agreements.
"PARTNER" means the Tioxide Partner or the Kronos Partner, as the context
may require, and "PARTNERS" means, collectively, the Tioxide Partner and the
Kronos Partner.
5
Unless otherwise specifically provided in this Agreement, each and every
reference in this Agreement to either Partner means such Partner in its
capacities as both a limited partner and a general partner in the Joint Venture.
"PERCENTAGE INTEREST" means, at any time with respect to either Partner,
the interest (both general and limited) of such Partner in the Joint Venture at
such time expressed as a percentage. The initial Percentage Interests of the
Partners are set forth in Section 3.01(a) and are subject to adjustment only as
provided in Sections 3.04(c) and 3.04(e) of this Agreement. The dollar amount of
a Partner's capital account in the Joint Venture shall not affect its Percentage
Interest.
"PERSON" means an individual, corporation, partnership, association, trust
or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"PROPERTY" means all real and personal property (whether tangible or
intangible) owned by the Joint Venture and any improvements thereto (including
any property contributed by the Partners).
"REGULATIONS" means the Income Tax Regulations promulgated under the Code,
as such regulations are in effect from time to time. Any reference to any
provision of the Regulations shall be interpreted to refer to any succes sor
provision of the Regulations.
"SEASONING PERIOD" means the three-year period beginning on the Closing
Date and ending on October 18, 1996.
"SUBSIDIARY" means, with respect to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person.
"TIO2" means titanium dioxide pigments.
"TIOXIDE" means Tioxide Group Limited, a corporation organized and
existing under the laws of England.
"TIOXIDE BANK DEFAULT" means a "Tranche A Single Tranche Event of Default"
as defined in the Credit Agreement.
6
"TIOXIDE CLASS I DEFAULT" means any failure by the Tioxide Partner (i) to
pay within ten (10) days after the due date amounts aggregating in excess of a
$100,000 in respect of the Tranche A Debt or the Tranche B Debt (including,
without limitation, any interest, deferred financing cost or principal payment)
required to be paid by the Tioxide Partner pursuant to the Tioxide Offtake
Agreement or any Assumption Agreement under which it is an obligor or (ii) to
pay within ten (10) days after the due date specified in an invoice or other
written notice from the Joint Venture received by the Tioxide Partner prior to
such due date, any other amount in excess of $100,000 required to be paid by the
Tioxide Partner pursuant to the Tioxide Offtake Agreement (including, without
limitation, any payment in respect of Fixed Operating Costs or Variable Costs).
"TIOXIDE CLASS II DEFAULT" means (i) any Tioxide Class I Default or (ii)
any material breach by the Tioxide Partner of any of its obligations to the
Joint Venture under this Agreement or Section 7.02(c) of the Formation
Agreement, in each case, which breach involves or can be cured by the payment of
money to the Joint Venture and which breach remains uncured by the Tioxide
Partner 10 days after the earlier of (A) agreement by the Partners with respect
to the existence and amount of such breach or (B) final and non-appealable
judicial or arbitrative determination of the existence and amount of such
breach.
"TIOXIDE GROUP" means, at any time, Tioxide, the Tioxide Partner and each
Person that is a Subsidiary of Tioxide at such time.
"TIOXIDE GROUP MEMBER" means, at any time, any Person included in the
Tioxide Group at such time.
"TIOXIDE OFFTAKE AGREEMENT" means the Offtake Agreement dated as of the
date hereof between the Tioxide Partner and the Joint Venture.
"TRANCHE A DEBT" means Debt of the Joint Venture outstanding as Tranche A
Loans under the Credit Agreement, provided, however, that, for the purposes of
Sections 3.03(c), 3.03(d), 3.03(e), 3.04(e), 3.04(f), 4.03 and 12.03 only all
amounts due with respect to Tranche A Debt shall be calculated as if all
payments in respect of such Tranche A Debt made by the Tioxide Partner or any of
its Affiliates under any guaranty of the Tioxide Partner's obligations were so
applied, without regard to whether so applied.
"TRANCHE B DEBT" means Debt of the Joint Venture outstanding as Tranche B
Loans under the Credit Agreement, provided, however, that, for the purposes of
Sections 3.03(c), 3.03(d), 3.03(e), 3.04(e), 3.04(f), 4.03 and 12.03 only all
amounts due with respect to Tranche B Debt shall be calculated as if all
payments in respect of such Tranche B Debt made by the Kronos Partner or any of
its Affiliates under any guaranty of the Kronos Partner's obligations were so
applied, without regard to whether so applied.
"TRANSACTION AGREEMENTS" means this Agreement, the Offtake Agree ments,
each Assumption Agreement, the Formation Agreement and the Transitional Services
Agreement.
7
"TRANSFERRED ASSETS" has the meaning set forth in the Formation Agreement.
"TRANSITIONAL SERVICES AGREEMENT" means the Transitional Services
Agreement dated as of the date hereof between Kronos and the Joint Venture.
"VALUATION FIRM" means an independent valuation firm of nationally
recognized standing which, unless otherwise agreed to by the Partners, shall not
have had any material business relationship with either Tioxide or Kronos or any
of their respective Affiliates during the two-year period preceding its
engagement.
"VARIABLE COSTS" has the meaning ascribed to such term in the Offtake
Agreements.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Answering Partner 14.01(b)
Arbitrated Price 4.02(f)
Assumed Amount 3.04(f)
Bank Default Call 3.03(e)
Bank Default Call Closing 3.03(e)
Bank Default Call Notice 3.03(e)
Bank Default Call Price 3.03(e)
Borrowing Base 12.03(a)
Borrowing Partner 12.03(b)
Business Plan 8.02(b)
Call Notice 4.04(a)
Capacity Test Date 3.04(b)
CEO Committee 7.02(e)
Contributed Transferred Assets 5.02(c)
Default Call 3.03(c)
Default Call Closing 3.03(c)
Default Call Notice 3.03(c)
Default Call Price 3.03(c)
Defaulting Partner 3.03(a)
Electing Partner 4.03
Exiting Partner 4.06
Expansion Plan 3.02(a)
Financial Statements 5.02(c)
Fiscal Year 10.02
Free Return Employee 9.08(a)
General Managers 8.01(a)
IC 3.04(c)
Incur 12.03(b)
Initial Business Plan 8.02(a)
8
Term Section
---- -------
Invoking Partner 14.01(b)
Joint Venture 2.01
Joint Venture Accounting Principles 10.01(b)
Kronos Partner Recitals
Kronos Partner Stock 4.01(v)
Liquidator 13.05
Majority Partner 4.04(a)
Material Adverse Development 4.03
Minority Call Closing 4.04(c)
Minority Partner 4.04(a)
Non-Borrowing Partner 12.03(b)
Non-Defaulting Partner 3.03(a)
OC 3.04(c)
Offeree Partner 4.02(a)
Offeree Partner Response Date 4.02(a)
Offeree Partner's Notice 4.02(a)
Offeree Partner's Price 4.02(a)
Parent Committee 7.02(e)
Partnership Act 2.01
Permitted Amount 12.03(b)
Permitted Expansion 3.02(a)
Plant Recitals
Production Factors 7.02(d)
Providing Partner 12.02(a)
Purchased Transferred Assets 5.02(c)
Purchasing Partner 4.03
Put Closing 4.03
Put Notice 4.03
Put Price 4.03
Receiving Partner 12.02(a)
Requesting Partner 3.02(a)
Responding Partner 3.02(a)
Selling Partner 4.02(a)
Selling Partner's First Notice 4.02(a)
Selling Partner's Price 4.02(a)
Selling Partner's Second Notice 4.02(a)
Supervisory Committee 7.01(a)
Supervisory Committee Members 7.01(a)
Third Party 4.02(d)
Third Party Sale Materials 4.02(e)
Tioxide Partner Recitals
Tioxide Partner Stock 4.01(iv)
ARTICLE II
FORMATION AND PURPOSES OF THE JOINT VENTURE
9
2.01. Formation of the Joint Venture. Effective as of the filing for
record of a Certificate of Limited Partnership in the office of the Secretary of
State of the State of Delaware, the Partners hereby form and establish a limited
partnership (the "JOINT VENTURE") under the terms and provisions of this
Agreement and the provisions of the Delaware Revised Uniform Limited Partnership
Act (the "PARTNERSHIP ACT"), and the rights and liabilities of the Partners
shall be as provided in this Agreement and, except as herein otherwise expressly
provided, in the Partnership Act. The making of the Original Capital
Contributions as described in Section 3.01 shall occur as of the Closing Date in
accordance with the Formation Agreement.
2.02. Name of the Joint Venture. The name of the Joint Venture shall be
"Louisiana Pigment Company, L.P.". The business of the Joint Venture shall be
conducted solely under such name (or such trade names as the Joint Venture may
adopt in conformity with applicable law) and all assets (other than as expressly
provided in the Formation Agreement) of the Joint Venture shall be held under
such name.
2.03. Purpose of the Joint Venture. The purpose of the Joint Venture is
to operate the Plant to achieve the highest output of TiO2 consis tent with
meeting the respective product specifications of the Partners, such output to be
produced in the most efficient and cost-effective manner deemed reasonable in
the circumstances by the Supervisory Committee. The Joint Venture shall operate
the Plant in accordance with prudent operating, safety, health and environmental
standards and in compliance with all federal, state and local laws and
regulations. The Joint Venture shall be operated for the exclusive benefit of
the Partners. In furtherance of its purpose, the Joint Venture shall have and
may exercise all the powers now or hereafter conferred by Delaware law on, or
permitted by Delaware law to be exercised by, limited partnerships formed under
the laws of such State.
2.04. Place of Business of the Joint Venture. The principal place of
business of the Joint Venture shall be located at the Plant.
2.05. Duration of the Joint Venture. The Joint Venture shall commence on
the date of filing of the Certificate of Limited Partnership in the Office of
the Secretary of State of the State of Delaware and shall continue until its
termination in accordance with the provisions of Article XIII.
10
2.06. Title to Joint Venture Property. As to all property that is owned
by the Joint Venture, such property shall be deemed to be owned by the Joint
Venture as an entity for the exclusive benefit of its Partners and neither
Partner, individually, shall have any direct ownership interest in such
property.
2.07. Filing of Certificates. The Partners shall file and publish all
such certificates, notices, statements or other instruments required by law for
the formation, qualification and operation of a limited partnership in all
jurisdictions where the Joint Venture may elect to do business.
2.08. Registered Office; Registered Agent. The address of the registered
office of the Joint Venture shall be Corporation Trust Center, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000. The name of the registered agent of the
Joint Venture at such address shall be The Corporation Trust Company.
2.09. Reliance by Third Parties. Persons dealing with the Joint Venture
are entitled to rely conclusively upon the power and authority of the general
partners or the Supervisory Committee as herein set forth.
ARTICLE III
PARTNERS; CAPITAL CONTRIBUTIONS; DEFAULTS
3.01. Partners. (a) Each of the Partners shall make its Original
Capital Contribution to the Joint Venture on the terms and subject to the
conditions set forth in the Formation Agreement. After giving effect to the
transactions contemplated by the Formation Agreement, the names, addresses, the
Original Capital Contribution and initial Percentage Interests of the Partners
shall be as follows:
Initial
Original Capital Percentage
Name and Address Contributions Interest
---------------- ---------------- ----------
TIOXIDE AMERICAS $175,000,000 less 50% (consisting
INC. the original of a 25% general
Suite 115 principal amount of partnership
000 Xxxxxxxxxxx Xxxx the Tranche A interest and a
Facility, paid to
the Joint Venture
pursuant to Section
2.01 of the
11
Xxxxx, XX 00000 Formation Agreement 25% limited
partnership interest)
KRONOS LOUISIANA, A one-half undivided 50% (consisting
INC. interest in the of a 25% general
3000 North Xxx Transferred Assets, partnership interest
Houston Parkway East contributed to the and a 25% limited
Xxxxxxx, XX 00000 Joint Venture partnership interest)
pursuant to Section
2.02(a) of the
Formation Agreement
(b) No additional partner shall at any time be admitted to the Joint
Venture without the consent of each Person that is a partner in the Joint
Venture at such time and, except as otherwise provided in this Agreement, no
partner shall demand or receive a return of its capital contributions to or
withdraw from the Joint Venture (with respect to all or any part of its
Percentage Interest in the Joint Venture whether general or limited), in each of
the foregoing cases, without the consent of each other partner.
(c) Except as otherwise specifically provided in this Agreement or the
Transitional Services Agreement, neither Partner shall receive any interest,
salary or drawing with respect to its capital contributions for services
rendered on behalf of the Joint Venture or otherwise in its capacity as a
Partner.
(d) Notwithstanding any other provision of this Agreement, the general
partnership interest of each Partner shall at all times equal its limited
partnership interest and any adjustments to or change in the Percent age
Interest of either Partner shall result in equal adjustments to or changes in
both the general partnership interest and the limited partnership interest of
such Partner.
(e) Unless otherwise specifically provided in this Agreement, all rights,
obligations and agreements of either Partner hereunder shall be deemed to be
rights, obligations and agreements of such Partner in respect of both its
general partnership interest and its limited partnership interest.
3.02. Additional Capital Contributions. (a) At any time after the
Seasoning Period, either Partner shall have the right to cause a Permitted
Expansion (as defined below) to be made. The Partner desiring the expansion
(the "REQUESTING PARTNER") shall submit a written appropriation request (the
"EXPANSION PLAN") to the Supervisory Committee
12
and the other Partner (the "RESPONDING PARTNER"), which request shall (x)
describe in reasonable detail the nature of the proposed Permitted Expansion,
(y) include a proposed capital budget and timetable therefor and (z) unless
waived by the Responding Partner, shall be accompanied by a report from an
independent engineering firm confirming that in the opinion of such firm the
Permitted Expansion can be completed at a total cost and with an output capacity
which are, in each case, within 10% of the estimates contained in the Expansion
Plan. The Requesting Partner and its employees and agents shall be permitted
reasonable access to the Plant and its personnel for the purpose of developing
an Expansion Plan. Notwithstanding anything to the contrary in this Section
3.02, any Permitted Expansion must be carried out in a manner that does not
materially interrupt production of TiO2 or materially adversely affect the Joint
Venture. The Responding Partner shall have 180 days from the date it receives
the Expansion Plan to notify the Requesting Partner of its decision as to
whether it wishes to participate in the Permitted Expansion described in such
Expansion Plan. "PERMITTED EXPANSION" means (i) the construction of one or more
chloride process lines or pigment finishing lines (which pursuant to its design
specifications is intended to increase the total output of the Plant by at least
10%), either within the existing Plant (but separate from and in addition to the
chloride process lines and pigment finishing lines forming part of the Plant on
the Closing Date) or on property of the Joint Venture located adjacent to the
Plant, or (ii) the achievement of "debottlenecking" through an individual
project for the modification of certain equipment or other facilities of the
Plant which pursuant to its design specifications is intended to increase the
total output of the Plant by at least 10% by permitting other equipment or
facilities of the Plant to perform at greater capacity or efficiency.
(b) If within 180 days after its receipt of an Expansion Plan, the
Responding Partner either (i) fails to deliver a written notice to the
Requesting Partner setting forth a binding commitment on the part of the
Responding Partner to participate in and fund its share of the Permitted
Expansion described in such Expansion Plan or (ii) delivers a written notice to
the Requesting Partner stating that the decision of the Responding Partner is
not to participate in such Permitted Expansion, the Requesting Partner shall be
entitled to implement the Permitted Expansion unilaterally in accordance with
such Expansion Plan and fund it in accordance with Section 3.02(d). In
connection with any Permitted Expansion in which the Responding Partner is not
participating, the Responding Partner shall cooperate, and cause its
representatives on
13
the Supervisory Committee to cooperate, with the Requesting Partner in
implementing the Permitted Expansion in accordance with the Expansion Plan
relating thereto and the Requesting Partner shall indemnify and hold harmless
the Joint Venture and the Responding Partner for any losses, claims or damages
(including, without limitation, consequential and incidental damages) arising
from such Permitted Expansion.
(c) If the Responding Partner delivers the participation notice described
in clause (i) of Section 3.02(b) within the time period specified therein, the
Permitted Expansion described therein shall be implemented promptly by the Joint
Venture and the cost thereof shall be funded by one or more capital
contributions to the Joint Venture as set forth in the Expansion Plan or as
otherwise agreed by the Partners, such capital contributions to be made by the
Partners in proportion to their respective Percentage Interests on the date the
Responding Partner delivers its participation notice in accor dance with this
Section 3.02(c).
(d) The Requesting Partner shall have the option of funding any Permitted
Expansion in which the Responding Partner is not participating by (i) making one
or more additional capital contributions to the Joint Venture in an aggregate
amount equal to the total cost of such Permitted Expansion (including, without
limitation, additional start-up and operating costs to the extent such costs are
not already included in the Requesting Partner's share of Fixed Operating Costs
or Variable Costs pursuant to its Offtake Agreement) in return for an increased
Percentage Interest in the Joint Venture to be calculated in accordance with
Section 3.04(c); (ii) except in the case of a Permitted Expansion described in
Section 3.02(a)(ii), making the required funds available to an Affiliate of the
Requesting Partner which would con struct and own the assets comprising the
Permitted Expansion on property leased from the Joint Venture and enter into a
management and support services agreement with the Joint Venture, both of which
arrangements shall be on an arm's length basis (which lease and agreement shall
be subject to the prior written approval of the Responding Partner, such
approval not to be unreason ably withheld); or (iii) providing the required
funds on such other terms as the Partners may mutually agree at such time. All
payments required to fund any Permitted Expansion shall be made on or prior to
the date on which expenses relating to such Permitted Expansion are due and
payable. The Partners agree to review the provisions of Section 3.03(e) hereof
in connection with any proposed Permitted Expansion and to use their best
efforts to agree upon any
14
modifications thereto that may be equitable in light of the proposed funding of
such Permitted Expansion.
3.03. Defaults. (a) Within 24 hours of the due date of any payment
required to be made by either Partner to the Joint Venture pursuant to any
Transaction Agreement, the Joint Venture shall provide each Partner with notice
by verified facsimile of (i) all amounts actually received by the Joint Venture,
(ii) the failure by either Partner to make any payment and (iii) the amount of
any underpayment or non-payment. If a Default shall occur with respect to
either Partner (the "DEFAULTING PARTNER"), the other Partner (the "NON-
DEFAULTING PARTNER") shall, in addition to any rights it may have under the
other Transaction Agreements, have the rights set forth in this Section 3.03.
From and after the occurrence of any Default and for so long as such Default
shall continue, the Defaulting Partner shall not take any action that materially
and adversely affects the operation of the Plant in the ordinary course of its
business consistent with past practice.
(b) Within 10 days after the occurrence of any Default or, if later,
written notice referred to in Section 3.03(a) to the Non-Defaulting Partner, the
Non-Defaulting Partner shall have the right at its option to either make a
capital contribution or a Convertible Loan to the Joint Venture in an amount (as
reasonably determined by the Non-Defaulting Partner) sufficient to cure such
Default. At any time prior to the later of (i) 21 days after the making of a
capital contribution by the Non-Defaulting Partner pursuant to this Section
3.03(b) or (ii) the conversion pursuant to Section 3.04(e) of this Agreement of
a Convertible Loan made by the Non-Defaulting Partner pursuant to this Section
3.03(b), the Defaulting Partner shall have the right to cure the Default giving
rise to such capital contribution or Convertible Loan and prevent the adjustment
of the Percentage Interests of the Partners pursuant to Section 3.04(e)
resulting therefrom, by making a capital contribution to the Joint Venture in
cash in an amount equal to (1) the aggregate amount of all capital contributions
made by the Non-Defaulting Partner to the Joint Venture in respect of such
Default, together with an amount equal to interest thereon from the respective
date or dates of contribution through the date of repay ment at the rate per
annum then applicable, or that would then be applicable, to Convertible Loans
and (2) the aggregate amount of all Convertible Loans (including all interest
accrued thereon) made by the Non-Defaulting Partner to the Joint Venture in
respect of such Default. Immediately upon receipt of a capital contribution
from a Defaulting Partner pursuant to the immediately preceding sentence, the
Joint Venture shall
15
make a special cash distribution, or shall repay the Convertible Loan (including
all accrued interest thereon), to the Non- Defaulting Partner in an amount equal
to such capital contribution by the Defaulting Partner. No partial cure of any
Default attempted by the Defaulting Partner shall prevent the full adjustment of
Percentage Interests of the Partners pursuant to Section 3.04(e) resulting from
the aggregate amount of capital contributions and Convertible Loans made by the
Non-Defaulting Partner in respect of such Default.
(c) Within 30 days after the occurrence of any Class I Default or, if
later, written notice referred to in Section 3.03(a) to the Non-Defaulting
Partner of such Class I Default, the Non-Defaulting Partner shall, in addition
to its rights under Section 3.03(b), have the right to purchase the Percentage
Interest of the Defaulting Partner in the Joint Venture (the "DEFAULT CALL") at
an aggregate purchase price (the "DEFAULT CALL PRICE") equal to $125 million
plus the Defaulting Partner's Percentage Interest of the Joint Venture's net
working capital (excluding work-in-process inventory) all as determined in
accordance with GAAP as of the date the applicable Default Call Notice (as
defined below) is issued (the amount of such net working capital being evidenced
by a certificate of the Joint Venture's chief accounting officer) less the sum
of all outstanding Convertible Loans to the Joint Venture in respect of Fixed
Operating Costs and Variable Costs owed but not paid by the Defaulting Partner
from the date of written notice to the Defaulting Partner of the exercise of the
Default Call to the date of the Default Call Closing, which shall be paid by the
Non-Defaulting Partner in the following order: first: to the lenders under the
Credit Agreement in an amount equal to all amounts payable in respect of the
Tranche A Debt (in case the Tioxide Partner is the Defaulting Partner) or the
Tranche B Debt (in case the Kronos Partner is the Defaulting Partner)
outstanding under the Credit Agreement immediately prior to the closing of such
purchase (the "DEFAULT CALL CLOSING"); second: to the relevant obligees under
all other Debt of the Joint Venture (other than Convertible Loans) in an amount
equal to the product of (x) the aggregate principal amount of such Debt
outstanding immediately prior to the Default Call Closing and (y) the Percentage
Interest of the Defaulting Partner immediately prior to the Default Call
Closing; and third: to the Defaulting Partner in an amount equal to the
remaining balance, if any. To exercise the foregoing option, the Non-Defaulting
Partner shall deliver a written notice (the "DEFAULT CALL NOTICE") to the
Defaulting Partner setting forth its election and a proposed date for the
Default Call Closing, which date shall in no event be set earlier than 15 days
or later than 60 days
16
after delivery of the Default Call Notice (except as otherwise provided in the
last paragraph of Section 3.03(e). Promptly after delivery of the Default Call
Notice each Partner shall file an HSR Report to report the proposed acquisition
by the Non-Defaulting Partner of the Percentage Interest of the Defaulting
Partner (unless that acquisition does not require a filing under the HSR Act).
Delivery of a Default Call Notice shall constitute an irrevocable agreement by
the Non-Defaulting Partner to purchase the Percentage Interest of the Defaulting
Partner, and shall irrevocably obligate the Defaulting Partner to sell such
Percentage Interest, at the Default Call Price and on the other terms and
conditions set forth in Section 4.05. The Default Call Closing shall be
postponed for up to 208 days after the HSR Filing Date if, as of the proposed
Default Call Closing date set forth in the Default Call Notice, the condition
set forth in Section 4.05(a)(i) remains unsatisfied. If at the end of such 208-
day period, such condition still remains unsatisfied, neither Partner shall have
any further obligation under this Section 3.03(c) to consummate such Default
Call Closing; provided, however, that (i) the Non-Defaulting Partner shall
retain all of its rights under this Section 3.03(c) in respect of any subsequent
Class I Default by the Defaulting Partner and (ii) such 208-day period shall be
extended indefinitely after the authorization of any general assignment by the
Defaulting Partner for the benefit of creditors or of the institution by any
Person (including the Defaulting Partner) of any proceeding to adjudicate the
Defaulting Partner as bankrupt or insolvent, or seeking the liquidation, winding
up, reorganization, arrangement, adjustment, dissolution, protection, relief or
composition of the Defaulting Partner or its debts under any existing or future
law of any jurisdiction relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for the Defaulting
Partner or for any substantial part of its assets. Notwithstanding anything to
the contrary in this Section 3.03(c), the exercise of the Default Call shall be
unavailable (A) during any period in which the closing of the purchase of the
Percentage Interest of the Defaulting Partner pursuant to Section 4.02 or 4.04
has been extended beyond the period initially provided for closing to satisfy
the condition set forth in Section 4.05(a)(i) and (B) until the later of (i) the
expiration of the ten (10) day grace period provided in the definition of Class
I Default and (ii) three (3) days after the Defaulting Partner has received
notice of its failure to make a payment required under its Offtake Agreement or
any Assumption Agreement, either from the Joint Venture pursuant to the first
sentence of Section 3.03(a) or
17
from the Non-Defaulting Partner, and during such three-day period the Defaulting
Partner has failed to cure such Class I Default by making payment in full to the
Joint Venture.
(d) From and after written notice to the Defaulting Partner of the
exercise by the Non-Defaulting Partner of the Default Call pursuant to Section
3.03(c), the Defaulting Partner shall be obligated to pay, prospectively,
pursuant to the provisions of its Offtake Agreement, Fixed Operating Costs and
Variable Costs in order to receive its Output Share of TiO2 from the Joint
Venture from and after the date upon which, but only so long as, the sum of (i)
the aggregate principal amount then outstanding under the Tranche A Debt (if the
Tioxide Partner is the Defaulting Partner) or the Tranche B Debt (if the Kronos
Partner is the Defaulting Partner), (less the aggregate principal amount thereof
assumed by the Non-Defaulting Partner pursuant to Assumption Agreements), (ii)
the product of the Percentage Interest of the Defaulting Partner and the
aggregate principal amount of all Debt of the Joint Venture (except for any
Convertible Loans and Tranche A and Tranche B Loans) and (iii) the total
outstanding aggregate principal amount of Convertible Loans made after the
Default Call Notice by the Non-Defaulting Partner the proceeds of which were
used to pay Fixed Operating Costs and Variable Costs that the Defaulting Partner
has failed to pay pursuant to its Offtake Agreement, exceeds $125,000,000. The
making of any capital contribution or Convertible Loan by the Non-Defaulting
Partner in respect of any Default by the Defaulting Partner does not entitle the
Non-Defaulting Partner to any additional output of TiO2 from the Plant, except
to the extent specifically provided in Section 3.04 as a result of the
adjustment of the Percentage Interests of the Partners.
(e) Within 60 days after the occurrence of any Bank Default, the Non-
Defaulting Partner shall, in addition to its rights under Section 3.03(b) (if
any), have the option to purchase the Percentage Interest of the Defaulting
Partner in the Joint Venture (the "BANK DEFAULT CALL") at an aggregate purchase
price (the "BANK DEFAULT CALL PRICE") equal to the greater of
(i) the aggregate principal amount outstanding at the time of Bank
Default Call Closing (as defined below) of the Tranche A Debt in the case
of a Tioxide Bank Default or the Tranche B Debt in the case of a Kronos
Bank Default or
(ii) the Bank Default Price on the date of the closing of such
purchase (the "BANK DEFAULT CALL CLOSING") pursuant to the formula:
18
BDP = (FMV + AD) X PI
Where:
BDP = Bank Default Price
FMV = Fair Market Value of the Joint
Venture as of the date of the Bank
Default Call Notice (as defined
below)
AD = the total aggregate principal
amount of the Debt of the Joint
Venture outstanding as of the date
of the Bank Default Call Notice
PI = the Percentage Interest of the
Defaulting Partner as of the date
of the Bank Default Call Notice
The Bank Default Call Price shall be paid by the Non-Defaulting
Partner and applied in the following order:
first: to the lenders under the Credit Agreement in an amount equal to
the aggregate amount of (a) all amounts payable in respect of the Tranche A
Debt (in case the Tioxide Partner is the Defaulting Partner) or the Tranche
B Debt (in case the Kronos Partner is the Defaulting Partner) outstanding
under the Credit Agreement immediately prior to the Bank Default Call
Closing plus (b) all other obligations for Debt assumed by the Defaulting
Partner pursuant to any Assumption Agreement;
second: to the Non-Defaulting Partner in an amount equal to the
aggregate outstanding amount of the Convertible Loans made by the Non-
Defaulting Partner less the aggregate outstanding amount of the Convertible
Loans made by the Defaulting Partner;
third: to the relevant obligees under all other Debt of the Joint
Venture (other than Convertible Loans) in an amount equal to the product of
(x) the aggregate principal amount of such Debt outstanding immediately
prior to the Bank Default Call Closing and (y) the Percentage Interest of
the Defaulting Partner immediately prior to the Bank Default Call Closing;
and
19
fourth: to the Defaulting Partner in an amount equal to the remaining
balance, if any.
To exercise the Bank Default Call option, the Non-Defaulting Partner
shall deliver written notice (the "BANK DEFAULT CALL NOTICE") to the Defaulting
Partner setting forth its election to exercise the Bank Default Call and two
proposed Valuation Firms. If the Partners fail to agree on the selection of two
Valuation Firms within the 15-day period after the date of the Bank Default Call
Notice, the Partners shall request that two Valuation Firms shall be appointed
by the AAA as soon as practicable but no later than 30 days thereafter. The
decisions of the AAA and the Valuation Firms, respectively, shall be final and
binding upon the Partners. As soon as practicable after their appointment and
using their best efforts to complete the task no later than 30 days thereafter,
both Valuation Firms shall estimate the Fair Market Value of the Joint Venture
as of the date of the delivery of the Bank Default Call Notice and deliver
reports setting forth their respective estimates to each Partner and the Joint
Venture. The average of the estimates of the Fair Market Value by each of the
Valuation Firms shall be deemed to be the final and conclusive determination of
the Fair Market Value. Within 10 days after the earlier of (i) delivery of the
report of the Valuation Firm or (ii) agreement by the Partners concerning the
Fair Market Value of the Joint Venture, the Non-Defaulting Partner shall set a
date for the Bank Default Call Closing, which date shall in no event be set
earlier than 15 days or later than 60 days after the delivery of the report of
the Valuation Firm or agreement by the Partners concerning the Fair Market Value
of the Joint Venture. Promptly after delivery of the Bank Default Call Notice
each Partner shall file an HSR Report to report the proposed acquisition by the
Non-Defaulting Partner of the Percentage Interest of the Defaulting Partner
(unless that acquisition does not require a filing under the HSR Act).
Unless during the 60-day period beginning on the date of any Bank
Default, either (A) the lenders under the Credit Agreement have waived or
withdrawn notice of all Bank Defaults relating to the Defaulting Partner or any
of its Affiliates in accordance with the terms of the Credit Agreement or (B)
the Non-Defaulting Partner rescinds its Bank Default Call Notice (by written
notice delivered to the Defaulting Partner), the Bank Default Call Notice shall
irrevocably obligate the Non-Defaulting Partner to purchase the Percentage
Interest of the Defaulting Partner and the Defaulting Partner to sell such
Percentage Interest, at the Bank Default Call Price and on the other terms and
conditions set forth in Section 4.05. The Bank Default Call
20
Closing shall be postponed until the end of the Forbearance Period (as defined
in the Credit Agreement) if, as of the proposed Bank Default Call Closing date,
the condition set forth in Section 4.05(a)(i) remains unsatisfied. If at the
end of such Forbearance Period, such condition still remains unsatisfied,
neither Partner shall have any further obligation under this Section 3.03(d) to
consummate such Bank Default Call Closing; provided, however, that the Non-
Defaulting Partner shall retain all of its rights under this Section 3.03(e) in
respect of any other or subsequent Bank Default by the Defaulting Partner.
If after the date of delivery of a Bank Default Call Notice but prior
to the date of the Bank Default Call Closing, there is a Class I Default by the
Defaulting Partner, the Non-Defaulting Partner shall have the right to terminate
such Bank Default Call and to exercise its rights under Section 3.03(c) of this
Agreement, provided, however, that the Default Call Notice may specify any date
(within 60 days after the date of such Default Call Notice) as the Closing Date.
3.04. Adjustment of Percentage Interests. (a) On each and every
occasion that a Requesting Partner or a Non-Defaulting Partner makes an
additional capital contribution to the Joint Venture pursuant to Section 3.02(d)
or 3.03(b), respectively, or converts pursuant to its terms a Convertible Loan
made pursuant to Section 3.03(b), the Percentage Interests of the Partners shall
be adjusted in accordance with Section 3.01(d) and this Section 3.04.
(b) In the case of any Permitted Expansion effected pursuant to
Section 3.02(d)(i), within 30 days after the delivery of written notice from the
Requesting Partner to the Responding Partner setting forth its good faith
determination that such Permitted Expansion has been completed and achieved a
capacity increase acceptable to the Requesting Partner, which notice shall be
delivered no later than one year after the completion of construction of such
Permitted Expansion, the Partners shall mutually agree on the old capacity
("OC") of the Plant and the increase in capacity ("IC") of the Plant (as such
terms are defined below) resulting from such Permitted Expansion (determined as
of the date the completion notice is delivered by the Requesting Partner (the
"CAPACITY TEST DATE")), or, failing agreement, mutually appoint a Valuation Firm
to determine either or both of the OC and the IC of the Plant as of the Capacity
Test Date. If the Partners fail to agree on the selection of a Valuation Firm
within such 30-day period, as soon as practicable but no later than 30 days
thereafter, a Valuation Firm shall be appointed by AAA, whose decision
21
shall be final and binding upon the Partners. As soon as practicable after its
appointment, the Valuation Firm shall determine either or both, as may be
necessary, of (i) the OC of the Plant immediately prior to the Capacity Test
Date without giving effect to any increase in capacity resulting from such
Permitted Expansion and (ii) the IC of the Plant as of the Capacity Test Date
giving full effect to the increase in capacity resulting from such Permitted
Expansion and deliver a report setting forth its determination to each Partner
and the Joint Venture.
(c) Upon the earlier to occur of (i) the delivery of the report of
the Valuation Firm pursuant to 3.04(b) and (ii) agreement by the Partners with
respect to both the OC and the IC of the Plant, the Percentage Interest of the
Requesting Partner shall immediately be adjusted pursuant to the formula:
(OPI X OC) + IC
---------------
API = OC + IC
Where:
API = the adjusted Percentage Interest of the Requesting
Partner (to be calculated to five decimal places);
OPI = the Percentage Interest of such Partner immediately
prior to such adjustment;
OC = the capacity of the Plant to produce TiO2 measured
in metric tons on a per annum basis as of the
Capacity Test Date without giving effect to any
increase in capacity resulting from such Permitted
Expansion;
IC = the capacity of the Plant to produce TiO2 measured
in metric tons on a per annum basis giving full
effect to the increase in capacity resulting from
such Permitted Expansion less the OC.
Simultaneously with the adjustment of the Percentage Interest of the
Requesting Partner, the Percentage Interest of the Responding Partner shall be
adjusted to equal 100% less the newly adjusted Percentage Interest of the
Requesting Partner.
(d) Within 30 days of the making of a capital contribution pursuant
to Section 3.03(b) or the conversion
22
of a Convertible Loan made pursuant to Section 3.03(b), the Partners shall
either mutually agree on the Fair Market Value of the Joint Venture to be
applicable to such capital contribution or conversion, or, failing agreement,
appoint a Valuation Firm to determine the Fair Market Value of the Joint
Venture; provided, however, that if the Fair Market Value of the Joint Venture
shall have been determined by a Valuation Firm pursuant to this Section 3.04 at
any time during the 90 days immediately preceding such capital contribution or
conversion, unless the Partners otherwise agree, no new valuation shall be
conducted and the Fair Market Value of the Joint Venture as determined in such
prior valuation shall be applicable to such capital contribution or conversion.
If the Partners fail to agree on the selection of a Valuation Firm within such
30-day period, as soon as practicable but no later than 30 days thereafter, a
Valuation Firm shall be appointed by the AAA, whose decision shall be final and
binding upon the Partners. As soon as practicable after its appointment, the
Valuation Firm shall determine the Fair Market Value of the Joint Venture as of
the date the capital contribution or loan conversion is made and deliver a
report setting forth its determination to each Partner and the Joint Venture.
(e) Upon the earliest to occur of (i) delivery of the report of the
Valuation Firm pursuant to Section 3.04(d), (ii) agreement by the Partners
concerning the Fair Market Value of the Joint Venture and (iii) 10 days after
the making of a capital contribution or the conversion of a Convertible Loan (if
pursuant to the proviso to Section 3.04(d) no new valuation of the Fair Market
Value of the Joint Venture is required), the Percentage Interest of the Non-
Defaulting Partner shall immediately be adjusted pursuant to the formula:
API = OPI + (1.15 X IPI)
Where:
API = the adjusted Percentage Interest of the Non-
Defaulting Partner (to be calculated to five
decimal places);
OPI = the Percentage Interest of such Partner immediately
prior to such adjustment; and
IPI = the increase in Percentage Interest expressed as
percentage points given by the formula:
23
IPI = (NC / (FMV + PA)) X 100
Where:
NC = the aggregate amount of the capital contribution or the
aggregate principal amount of the Convertible Loan (excluding
any interest accrued on such Convertible Loan) giving rise to
such adjustment;
FMV = the Fair Market Value of the Joint Venture immediately
following the capital contribution or the loan conversion, as
determined in accordance with Section 3.04(d) (i.e. the net
equity value); and
PA = the aggregate principal amount of the Tranche B Debt (if
Tioxide is the Defaulting Partner) or the Tranche A Debt (if
the Kronos Partner is the Defaulting Partner) plus any Debt of
the Defaulting Partner previously assumed by the Non-
Defaulting Partner pursuant to Section 3.04(f), in each case,
outstanding immediately following the capital contribution
(after application of the proceeds thereof) or the loan
conversion.
Simultaneously with the adjustment of the Percentage Interest of the Non-
Defaulting Partner, the Percentage Interest of the Defaulting Partner shall be
adjusted to equal 100% less the newly adjusted Percentage Interest of such Non-
Defaulting Partner.
(f) In the event that the Non-Defaulting Partner's Percentage
Interest increases as a result of a Default, the Non- Defaulting Partner shall
(i) be entitled to output from the Plant in accordance with its adjusted
Percentage Interest and shall be responsible for the Plant's Fixed Operating
Costs in accordance with its adjusted Percentage Interest, in each case,
pursuant to the Offtake Agreements and (ii) execute an Assumption Agreement
pursuant to which it shall assume, and indemnify the Defaulting Partner against,
obligations with respect to the Assumed Amount (as defined below) of the Tranche
A Debt then outstanding (if the Kronos Partner is the Non-Defaulting Partner) or
the Tranche B Debt then outstanding (if the
24
Tioxide Partner is the Non-Defaulting Partner). "ASSUMED AMOUNT" means a portion
of the principal amount of the Tranche A Debt or Tranche B Debt, as the case may
be, determined pursuant to the formula:
AA = (IPI X (FMV + APA)) - NC
Where:
AA = the Assumed Amount;
APA = the aggregate principal amount of the Tranche A Debt
plus the Tranche B Debt; and
IPI, FMV and NC have the respective values ascribed to such
variables pursuant to Section 3.04(e) in respect of the
adjustment of Percentage Interests giving rise to the
assumption of Debt by the Non-Defaulting Partner.
If the Non-Defaulting Partner thereafter fails to meet its obligations with
respect to its additional Percentage Interest of Fixed Operating Costs or
assumed Debt of the Joint Venture, such failure shall be deemed to be a "Class I
Default" for purposes of Section 3.03, subject to cure by the other Partner and
readjustment of the Partners' Percentage Interests as provided in Sections 3.03
and 3.04.
ARTICLE IV
TRANSFER RESTRICTIONS;
OFFER RIGHT; PUT OPTION; CALL OPTION
4.01. Transfer Restrictions. Except as specifically permitted in this
Agreement:
(i) Neither Partner shall sell, assign, dispose of, encumber,
mortgage, hypothecate or otherwise transfer, or withdraw from the
Joint Venture with respect to, all or any portion of its general
partnership interest or its limited partnership interest without
simultaneously in the same transaction selling, assigning, disposing
of, encumbering, mortgaging, hypothecating, transferring or
withdrawing with respect to (as the case may be) an equal portion
of, respectively, its remaining limited or general partnership
interest in the Joint Venture.
25
(ii) Except as required by the Credit Agreement, neither
Partner shall sell, assign, dispose of, encumber, mortgage,
hypothecate or otherwise transfer all or any portion of its
Percentage Interest without the prior written consent of the other
Partner and, if required, the lenders under the Credit Agreement;
provided that the Tioxide Partner may transfer all but not less than
all of its Percentage Interest to any Tioxide Group Member and the
Kronos Partner may transfer all but not less than all of its
Percentage Interest to any Kronos Group Member so long as the
transferee of such Percentage Interest shall have entered into an
agreement on terms reasonably satisfactory to the non-transferring
Partner to be bound by the terms of this Agreement, which agreement
shall in all events require that, in the event such transferee shall
thereafter cease to be a Tioxide Group Member (in the case of any
transfer by the Tioxide Partner) or a Kronos Group Member (in the
case of any transfer by the Kronos Partner), the Percentage Interest
held by such transferee shall first be retransferred to the
transferring Partner or another Tioxide Group Member or Kronos Group
Member, respectively. After giving effect to any such permitted
transfer of a Percentage Interest, (x) each reference herein to the
Partner transferring such Percentage Interest shall be deemed to
include a reference to the relevant transferee and (y) any right
exercisable by the transferring Partner hereunder shall be
exercisable by such transferee and any obligation of the
transferring Partner hereunder shall be a joint and several
obligation of the transferring Partner and such transferee,
notwithstanding the fact that the transferring Partner shall no
longer continue to have a Percentage Interest.
(iii) Neither Partner shall issue any shares of its capital
stock or other equity interest except to a Tioxide Group Member in
the case of the Tioxide Partner or to a Kronos Group Member in the
case of the Kronos Partner; provided, however, that either Partner
may issue up to a total of 20% of its capital stock outstanding
after such issuance to any Person or Persons in one or more
transactions; provided that in connection with any such issuance no
Person acquiring such capital stock or other equity interest shall
be given any right to veto, approve or consent with respect to
material decisions affecting the Joint Venture (including, without
limitation, the election of Supervisory Committee Members, the
appointment of General Managers or the amendment of or grant of
26
consent or waiver under any Transaction Agreement or the Credit
Agreement).
(iv) No Tioxide Group Member shall, except as expressly
permitted by Section 4.01(iii) of this Agreement, directly or
indirectly, sell, assign, transfer, dispose of, or, except as
required by the Credit Agreement, directly encumber, mortgage or
hypothecate any shares of capital stock of or other equity interest
in the Tioxide Partner ("TIOXIDE PARTNER STOCK") except to another
Tioxide Group Member; provided that if the Tioxide Group Member to
which such transfer is made shall thereafter cease to be a Tioxide
Group Member such transferee shall first be required to retransfer
such Tioxide Partner Stock to another Tioxide Group Member.
(v) No Kronos Group Member shall, except as expressly
permitted by Section 4.01(iii) of this Agreement, directly or
indirectly, sell, assign, transfer, dispose of, or, except as
required by the Credit Agreement, directly encumber, mortgage or
hypothecate any shares of capital stock of or other equity interest
in the Kronos Partner ("KRONOS PARTNER STOCK") except to another
Kronos Group Member; provided that if the Kronos Group Member to
which such transfer is made shall thereafter cease to be a Kronos
Group Member such transferee shall first be required to retransfer
such Kronos Partner Stock to another Kronos Group Member.
4.02. Offer Right. (a) At any time after the expiration of the
Seasoning Period, either Partner shall have the right to sell all (but not less
than all) of its Percentage Interest provided such sale is made in compliance
with the procedure set forth in this Section 4.02. The Partner desiring to sell
its Percentage Interest (the "SELLING PARTNER") shall deliver a written notice
(the "SELLING PARTNER'S FIRST NOTICE") to the other Partner (the "OFFEREE
PARTNER") substantially in the form of the letter of intent attached as Exhibit
2 hereto stating the intention of the Selling Partner to sell its Percentage
Interest. If the Offeree Partner determines that it may desire to exercise
certain of its rights under this Section 4.02 it shall, within 10 days after
receipt of the Selling Partner's First Notice, return an executed copy thereof
to the Selling Partner; provided, however, that the failure of the Offeree
Partner to execute or return the Selling Partner's First Notice shall not affect
any of its rights under this Section 4.02, other than its right to postpone the
closing of any purchase by it hereunder if the condition set forth in
27
Section 4.05(a)(i) has not been satisfied as of the scheduled closing date.
Promptly after delivery to the Selling Partner of a copy of the Selling
Partner's First Notice executed by the Offeree Partner, each Partner shall file
an HSR Report to report the possible acquisition by the Offeree Partner of the
Percentage Interest of the Selling Partner (unless that acquisition does not
require a filing under the HSR Act). No later than 90 days after delivery of the
Selling Partner's First Notice, the Selling Partner shall deliver a second
written notice (the "SELLING PARTNER'S SECOND NOTICE") to the Offeree Partner
setting forth the proposed sale price (the "SELLING PARTNER'S PRICE") and
describing the proposed structure of the transaction. If the Offeree Partner
desires to purchase the Percentage Interest of the Selling Partner, it shall, on
or prior to the Offeree Partner Response Date (as defined below) deliver a
written notice (the "OFFEREE PARTNER'S NOTICE") to the Selling Partner. The
Offeree Partner's Notice shall either (i) set forth an irrevocable commitment by
the Offeree Partner to purchase the Percentage Interest of the Selling Partner
at the Selling Partner's Price and the other terms and conditions set forth in
the Selling Partner's Second Notice and in Section 4.05 or (ii) set forth an
offer to purchase the Percentage Interest of the Selling Partner at a price (the
"OFFEREE PARTNER'S PRICE") and on such other terms and conditions as stated
therein. "OFFEREE PARTNER RESPONSE DATE" means the later of (x) the date that is
120 days after the receipt by the Offeree Partner of the Selling Partner's First
Notice and (y) the date that is 30 days after the receipt by the Offeree Partner
of the Selling Partner's Second Notice.
(b) If the Offeree Partner's Notice sets forth a commitment to
purchase the Percentage Interest of the Selling Partner at the Selling Partner's
Price, the closing of such purchase shall take place within 90 days after
delivery of the Offeree Partner's Notice (subject to extension for up to 208
days from the HSR Filing Date if required to satisfy the condition set forth in
Section 4.05(a)(i)). If at the end of such 208-day period, such condition still
remains unsatisfied, the Selling Partner shall have no further obligations to
the Offeree Partner under this Section 4.02 for the 24-month period beginning at
the end of such 208-day period.
(c) If the Offeree Partner's Notice sets forth an offer to purchase
the Percentage Interest of the Selling Partner at a price other than the Selling
Partner's Price, the Offeree Partner and the Selling Partner shall have a period
of 30 days in which to execute a binding agreement governing the purchase of the
Percentage Interest of the
28
Selling Partner by the Offeree Partner. If the Partners fail to execute such an
agreement within the required 30-day period, they shall promptly submit the sale
price dispute to binding arbitration pursuant to the procedure set forth in
Section 4.02(f).
(d) If the Offeree Partner either notifies the Selling Partner in
writing that it has elected not to purchase the Percentage Interest of the
Selling Partner or fails to provide the Offeree Partner's Notice on or prior to
the Offeree Partner Response Date, the Selling Partner shall have (i) 180 days
in which to execute a definitive agreement with any Person which shall not be an
Affiliate of the Selling Partner (a "THIRD PARTY") committing the Selling
Partner to sell, and such Third Party to purchase (subject to the Offeree
Partner's right of first refusal set forth in Section 4.02(e)), the Percentage
Interest of the Selling Partner and (ii) 90 days thereafter in which to complete
such sale (subject to extension for up to another 118 days if required to
satisfy the condition set forth in Section 4.05(a)(i)). If the Selling Partner
fails to either execute a definitive sale agreement or complete the sale
contemplated thereby within such periods, it shall not again be entitled to
invoke the offer procedure set forth in this Section 4.02 during the 12 months
following the end of the relevant period.
(e) Prior to consummating a proposed sale of its Percentage Interest
to any Third Party pursuant to Section 4.02(d), the Selling Partner shall
provide the Offeree Partner with a description of the material terms and
conditions of the proposed sale (including the proposed purchase price and
structure), together with any letter of intent or definitive agreement relating
to such proposed sale if executed as of such date, to the extent that the
delivery of such letter of intent or definitive agreement to third parties is
not prohibited by the terms thereof (collectively, the "THIRD PARTY SALE
MATERIALS"). The Offeree Partner shall have a right of first refusal in respect
of such proposed sale, exercisable by delivery of a written notice to the
Selling Partner within 10 days after receipt by the Offeree Partner of the Third
Party Sale Materials. The Offeree Partner's notice shall set forth an
irrevocable commitment by the Offeree Partner to purchase the Percentage
Interest of the Selling Partner on the terms and conditions set forth in the
Third Party Sale Materials and in Section 4.05. The closing of the sale of the
Selling Partner's Interest to the Offeree Partner pursuant to this Section
4.02(e) shall take place within 30 days after the delivery of such notice by the
Offeree Partner, subject to extension for up to an additional 208 days from the
HSR
29
Filing Date if required to satisfy the condition set forth in Section
4.05(a)(i). If at the end of such 208-day period, such condition still remains
unsatisfied, the Selling Partner shall have no further obligations to the
Offeree Partner under this Section 4.02 for the 24-month period beginning at the
end of such 208-day period. If the Offeree Partner fails to deliver such written
notice to the Selling Partner within such 10-day period, the Selling Partner
shall be free to consummate its proposed sale to the Third Party in accordance
with such Third Party Sale Materials and Section 4.02(d).
(f) If pursuant to Section 4.02(c), the Partners are required to
submit a sale price dispute to binding arbitration they shall mutually appoint a
Valuation Firm to determine the Fair Market Value of the Percentage Interest of
the Selling Partner. If within 10 days after delivery of the first written
notice by either Partner of the identity of the Valuation Firm it wishes to
designate, the Partners are unable to mutually agree upon a Valuation Firm, as
soon as practicable but no later than 30 days thereafter, a Valuation Firm shall
be appointed by the AAA, whose determination shall be final and binding upon the
Partners. Until a Valuation Firm has been appointed by both Partners or the AAA,
as the case may be, the Selling Partner may revise the Selling Partner's Price
by written notice to the Offeree Partner (in which case such revised price shall
after receipt of notice by the Offeree Partner be deemed the "Selling Partner's
Price") and the Offeree Partner may revise the Offeree Partner's Price by
written notice to the Selling Partner (in which case such revised price shall
after receipt of notice by the Selling Partner be deemed the "Offeree Partner's
Price"). Within 10 days after the appointment of the Valuation Firm, the Selling
Partner shall submit to such Valuation Firm and the Offeree Partner, the Selling
Partner's Price and any supporting information it wishes to include and the
Offeree Partner shall submit to the Valuation Firm and the Selling Partner, the
Offeree Partner's Price and any supporting information it wishes to include. At
any time prior to the making of such submissions to the Valuation Firm, either
Partner may abandon the sale process by written notice to the other Partner (in
which case, if it is the Offeree Partner that has elected to abandon the
process, the Selling Partner may sell its Percentage Interest in accordance with
Sections 4.02(d) and (e) (provided that the Offeree Partner shall have no right
of first refusal as contemplated by Section 4.02(e) if the Selling Partner is
able to sell its Percentage Interest to a Third Party at a price greater than
the Selling Partner's Price and the Selling Partner keeps the Offeree Partner
reasonably informed as to the progress
30
of the third party sale process), or, if it is the Selling Partner that has
elected to abandon the process, it may not again invoke the offer procedure set
forth in this Section 4.02 during the 12-month period following delivery of its
notice of abandonment). In case the Offeree Partner elects to abandon the sale
process, the Selling Partner's Price in effect at the time notice of abandonment
is first given shall be the Selling Partner's Price for purposes of the
immediately preceding sentence and may not thereafter be revised by the Selling
Partner. Once the Partners have made their formal submissions to the Valuation
Firm, the Selling Partner shall be obligated to sell, and the Offeree Partner
shall be obligated to purchase (subject to satisfying the conditions set forth
in Section 4.05), the Selling Partner's Percentage Interest at the Arbitrated
Price (as defined below). The Valuation Firm shall, as promptly as practicable,
determine the Fair Market Value of the Percentage Interest of the Selling
Partner and deliver a report setting forth such determination to each Partner.
The closing of the sale of the Selling Partner's Interest to the Offeree Partner
pursuant to this Section 4.02(f) shall take place within 30 days after the
delivery of the Valuation Firm's report (subject to extension for up to 208 days
from the HSR Filing Date if required to satisfy the condition set forth in
Section 4.05(a)(i)). If at the end of such 208-day period, such condition still
remains unsatisfied, the Selling Partner shall have no further obligations to
the Offeree Partner under this Section 4.02 for the 24-month period beginning at
the end of such 208-day period. "ARBITRATED PRICE" means (1) the Selling
Partner's Price if it is closer to the Fair Market Value of the Percentage
Interest of the Selling Partner as determined by the Valuation Firm, or (2) the
Offeree Partner's Price if it is closer to such Fair Market Value.
4.03. Put Option. At any time after the expiration of the Seasoning
Period, if as of such time the Non-Defaulting Partner has not delivered a
Default Call Notice pursuant to Section 3.03, either Partner (the "ELECTING
PARTNER") may, subject to the following terms and conditions, elect to put its
Percentage Interest in the Joint Venture to the other Partner (the "PURCHASING
PARTNER") at an aggregate purchase price (the "PUT PRICE") equal to $125 million
plus the Electing Partner's Percentage Interest of the Joint Venture's net
working capital (excluding work-in-process inventory) all as determined in
accordance with GAAP as of the date the Put Notice (as defined below) is issued
(the amount of such net working capital being evidenced by a certificate of the
Joint Venture's chief accounting officer) which shall be paid by the Purchasing
Partner in the following order: first: to
31
the lenders under the Credit Agreement in an amount equal to all amounts payable
in respect of the Tranche A Debt (in case the Tioxide Partner is the Electing
Partner) or the Tranche B Debt (in the case the Kronos Partner is the Electing
Partner) outstanding under the Credit Agreement immediately prior to the closing
of such sale (the "PUT CLOSING"); second: to the relevant obligees under all
other Debt of the Joint Venture (other than Convertible Loans) in an amount
equal to the product of (x) the aggregate principal amount of such Debt
outstanding immediately prior to the Put Closing and (y) the Percentage Interest
of the Electing Partner immediately prior to the Put Closing; third: to the
Purchasing Partner to the extent that it has outstanding Convertible Loans to
the Joint Venture in respect of Fixed Operating Costs or Variable Costs owed but
not paid by the Electing Partner from the date which is 180 days prior to the
date of delivery of the Put Notice (as defined below) to the date of the Put
Closing; and fourth: to the Electing Partner in an amount equal to the remaining
balance, if any. To exercise this put right, the Electing Partner shall deliver
a written notice (the "PUT NOTICE") to the Purchasing Partner setting forth its
election and a proposed date for the Put Closing, which date shall in no event
be set earlier than 60 or later than 90 days after delivery of the Put Notice.
Promptly after delivery of the Put Notice each Partner shall file an HSR Report
to report the proposed acquisition by the Purchasing Partner of the Percentage
Interest of the Electing Partner (unless that acquisition does not require a
filing under the HSR Act). Delivery of a Put Notice shall constitute an
irrevocable agreement by the Electing Partner to sell its Percentage Interest to
the Purchasing Partner, and shall obligate the Purchasing Partner to purchase
such Percentage Interest, at the Put Price and on the other terms and conditions
set forth in Section 4.05; provided, however, that the Purchasing Partner shall
have no obligation to purchase the Percentage Interest of the Electing Partner
pursuant to this Section 4.03 if as a result of a Material Adverse Development
(as defined below) (i) the Fair Market Value of such Percentage Interest as of
the Put Closing plus the aggregate principal amount (but only in an aggregate
amount not to exceed the Put Price) of all Debt of the Joint Venture that is
required to be repaid from the proceeds of the Put Price in accordance with the
first sentence of this Section 4.03 does not exceed (ii) the Put Price by at
least $15 million. The Put Closing shall be postponed for up to 208 days from
the HSR Filing Date if, as of the proposed Put Closing date set forth in the Put
Notice, the condition set forth in Section 4.05(a)(i) remains unsatisfied. If at
the end of such 208-day period, such condition still remains unsatisfied, the
Purchasing Partner shall have no further
32
obligation under this Section 4.03 to purchase the Percentage Interest of the
Electing Partner as a result of the exercise of the put option set forth in this
Section 4.03; provided, however, the Electing Partner shall retain the right to
again exercise such put option no earlier than 24 months after the end of such
208-day period. "MATERIAL ADVERSE DEVELOPMENT" means a material adverse
development affecting the financial condition, business, assets or results of
operations of the Joint Venture that has occurred since the Closing Date other
than an adverse development affecting the TiO2 industry generally.
4.04. Minority Call Option. (a) If, at any time after the Closing
Date, the Percentage Interest of either Partner equals or exceeds 85%, such
Partner (the "MAJORITY PARTNER") shall have the option to purchase the
Percentage Interest of the other Partner (the "MINORITY PARTNER") at the Fair
Market Value of such Percentage Interest determined as of the date of delivery
of the Call Notice (as defined below) and on the other terms and conditions set
forth below. If the Majority Partner desires to exercise its call option, it
shall deliver a written notice (the "CALL NOTICE") to the Minority Partner
setting forth its election. Promptly after delivery of the Call Notice each
Partner shall file an HSR Report to report the proposed acquisition by the
Majority Partner of the Percentage Interest of the Minority Partner (unless that
acquisition does not require a filing under the HSR Act). Delivery of a Call
Notice shall constitute an irrevocable agreement by the Majority Partner to
purchase the Percentage Interest of the Minority Partner, and shall obligate the
Minority Partner to sell such Percentage Interest, at the Fair Market Value of
such Percentage Interest determined in accordance with Section 4.04(b) and on
the other terms and conditions set forth in Section 4.04(c) and Section 4.05.
(b) Within 30 days of the delivery of a Call Notice pursuant to
Section 4.04(a), the Partners shall either mutually agree on the Fair Market
Value of the Percentage Interest of the Minority Partner, or, failing agreement,
appoint a Valuation Firm to determine such Fair Market Value. If the Partners
fail to agree on the selection of a Valuation Firm within such 30-day period, as
soon as practicable but no later than 30 days thereafter, a Valuation Firm shall
be appointed by the AAA, whose decision shall be final and binding upon the
Partners. As soon as practicable after its appointment, the Valuation Firm shall
determine the Fair Market Value of the Percentage Interest of the Minority
Partner and deliver a report setting forth its determination thereof to each
Partner and the Joint Venture.
33
(c) The closing of the sale of the Percentage Interest of the
Minority Partner (the "MINORITY CALL CLOSING") shall take place no later than 30
days after delivery of the Valuation Firm's report on a date established by the
Majority Partner by written notice to the Minority Partner. The Minority Call
Closing shall be postponed for up to 208 days from the HSR Filing Date if, as of
the scheduled date for the Minority Call Closing, the condition set forth in
Section 4.05(a)(i) remains unsatisfied. If at the end of such 208-day period,
such condition still remains unsatisfied, neither Partner shall have any further
obligation under this Section 4.04 to consummate such purchase and sale;
provided, however, that the Majority Partner shall have the right to once again
exercise its call option set forth in this Section 4.04 no earlier than 24
months after the end of such 208-day period. In addition to paying the Minority
Partner the Fair Market Value of its Percentage Interest in accordance with this
Section 4.04, the Majority Partner shall reimburse the Minority Partner for the
out-of-pocket legal fees reasonably incurred by the Minority Partner during any
period in which the Minority Call Closing is postponed beyond its scheduled date
at the request of the Majority Partner to satisfy the condition set forth in
Section 4.05(a)(i).
4.05. Conditions Relating to the Sale of an Interest. (a) The
obligation of either Partner to sell its Percentage Interest or to purchase the
Percentage Interest of the other Partner pursuant to Section 3.03, 4.02, 4.03 or
4.04 is subject to the satisfaction of the following conditions:
(i) Any applicable waiting period under the HSR Act relating to such
transaction shall have expired or been terminated;
(ii) (A) No provision of any applicable law or regulation
and no judgment, injunction, order or decree shall prohibit the
consummation of such transaction and (B) in the case of the
transactions described in Sections 3.03, 4.02, 4.03 or 4.04, the
purchasing Partner shall not have received any communication from
any HSR Authority (which communication shall be confirmed to the
selling Partner by such HSR Authority) that causes the purchasing
Partner to reasonably believe that any HSR Authority has
authorized the institution of litigation challenging the proposed
transaction under the U.S. antitrust laws, which litigation will
include a motion seeking an order or injunction of the type
described in Section 4.05(a)(iii) (provided that prior to
invoking the
34
condition set forth in clause (B) of this Section 4.05(a)(ii),
the purchasing Partner shall first consult with the selling
Partner and shall use its reasonable commercial efforts to
negotiate a final resolution of all issues raised by the HSR
Authority that is acceptable to both Partners);
(iii) No motion seeking to restrain or enjoin such
transaction or seeking to prohibit, alter, prevent or materially
delay the consummation thereof shall have been filed by any
Person (other than one of the Partners or any of such Partner's
Affiliates) before any court, arbitrator or governmental body,
agency, official or authority and be pending or still subject to
appeal; and
(iv) All actions by or in respect of or filings with any
governmental body, agency, official or authority required to
permit the consummation of such transaction shall have been taken
or made.
(b) Each Partner agrees to cooperate with the other Partner and to
use its reasonable commercial efforts to take such actions and make such filings
as are necessary to satisfy the conditions set forth in Section 4.05(a)
(including, without limitation, the filing of HSR Reports and the provision of
supplemental information under the HSR Act) in connection with any sale of the
Percentage Interest of either Partner pursuant to this Agreement, provided that
neither Partner shall be required to agree to any consent decree or order in
connection with satisfying any of the conditions set forth in Section 4.05(a)(i)
or (ii) that would, (1) impose material limitations on the ability of such
Partner to effectively control, operate, or enjoy full rights of ownership with
respect to the business, assets or operations of the Joint Venture or any other
material business or assets of such Partner or its Affiliates, (2) require the
divestiture of any other material business or assets by such Partner or its
Affiliates or (3) require the prior approval by any HSR Authority of future
acquisitions by such Partner or its Affiliates.
(c) In connection with any sale made pursuant to this Article IV,
the selling Partner shall only be required to make representations and
warranties to the purchasing Partner concerning its ownership of its Percent age
Interest free and clear of any Lien or other adverse interest (except for Liens
created pursuant to the Credit Agreement), its power and authority to consummate
the sale, the absence of any motion seeking to enjoin the sale and the absence
of any
35
material default under or breach or violation of any applicable agreement or
law.
4.06. Exit Debt Satisfaction. Notwithstanding any other provision of
this Agreement, prior to the sale of any Percentage Interest of a Defaulting
Partner pursuant to Section 3.03(c) and Section 3.03(e), a Selling Partner
pursuant to Section 4.02, an Electing Partner pursuant to Section 4.03 or a
Minority Partner pursuant to Section 4.04 (each of the foregoing, an "EXITING
PARTNER"): (a) the Joint Venture and the Purchasing Partner shall indemnify and
hold the Exiting Partner harmless from and against (i) all Debt, liabilities and
obligations relating to or arising from the business, operations or activities
of the Joint Venture from and after the date of such sale; and (ii) all
executory obligations arising or entered into prior to the date of such sale to
the extent not related to periods prior to the date of such sale; and (b) the
Joint Venture and the purchasing Partner shall: (1) pay or otherwise provide for
satisfaction in full of, or (2) obtain the full and complete release of the
Exiting Partner with respect to, all Debt, liabilities and other obligations of
the Joint Venture that were taken into account in determining the Fair Market
Value of the Percentage Interest that was sold, that were deducted from the
Default Call Price or that were paid, in part or in whole, from the proceeds of
the Default Call Price or the Put Price, as the case may be, in accordance with
the requirements of Section 3.03 and 4.03; provided, however, that the Joint
Venture and the purchasing Partner shall pay in full any Debt which Debt by its
terms requires such payment upon the sale of the Percentage Interest of the
Exiting Partner, and provided further that in the event that the Joint Venture
and the purchasing Partner do not fulfill (and are not required by the terms of
Debt to fulfill) the requirement in (1) above, but have used their reasonable
commercial efforts to fulfill the requirement in (2) above and are unable to do
so, the Joint Venture and the purchasing Partner shall indemnify and hold the
Exiting Partner harmless, to the reasonable satisfaction of such Exiting
Partner, from and against, all Debt, liabilities and other obligations of the
Joint Venture that were taken into account in determining the Fair Market Value
of the Percentage Interest that was sold, that were deducted from the Default
Call Price or that were paid, in part or in whole, from the proceeds of the
Default Call Price or the Put Price, as the case may be, in accordance with the
requirements of Section 3.03 and 4.03. The indemnification described in the
foregoing sentence shall be deemed reasonably satisfactory to the Exiting
Partner if (i) in the form of the attached Exhibit 3; and (ii) executed by the
36
Joint Venture, the purchasing Partner and one or more Affiliates of the
purchasing Partner, which Affiliate or Affiliates shall be at least as
creditworthy as of the date of such indemnification as was Kronos, in the event
that the Tioxide Partner is the Exiting Partner, or Tioxide, in the event that
the Kronos Partner is the Exiting Partner, as of the date of this Agreement.
ARTICLE V
TAX MATTERS
5.01 Partnership For Tax Purposes. The Partners hereby agree that
the Joint Venture shall be treated as a partnership for tax purposes under
United States federal, state and local income tax laws or other laws, and
further agree not to take any position or to make any election, in a tax return
or otherwise, inconsistent herewith or with the election described in Section
5.02(a).
5.02. Tax Matters. (a) Notwithstanding anything to the contrary in
Section 5.01, the Partners shall cause the Joint Venture to make a timely
election in accordance with the provisions of Section 761(a) of the Code,
Regulations Section 1.761-2 and any relevant state or local law to be excluded
from the application of the provisions of subchapter K of the Code. This
Agreement is a manifestation of the Partners' intent that the Joint Venture be
excluded from the provisions of subchapter K of the Code. The Joint Venture
shall make no other tax election or filing without the mutual consent of the
Partners.
(b) Consistent with the election described in Section 5.02(a), the
Partners intend that all tax allocations shall be made in a manner consistent
with treating the Tioxide Partner as having directly acquired a 50% undivided
interest in the Transferred Assets from the Kronos Partner and as if the ongoing
operations of the Joint Venture were conducted jointly and directly by the
Partners (rather than through the Joint Venture).
(c) Within 75 days of the close of each Fiscal Year, the General
Managers of the Joint Venture shall provide a copy to each Partner of the Joint
Venture's financial statements (the "FINANCIAL STATEMENTS") for such Fiscal Year
to facilitate each Partner's tax return filing obligations. The Financial
Statements shall allocate to each Partner each line item in accordance with
Section 5.02(b) of this Agreement (and as described below). Each
37
Partner shall have the right to review the books and records of the Joint
Venture to confirm the accuracy of the Financial Statements, and, if upon any
such review, a Partner reasonably believes the Financial Statements are
incorrect in any material respect, such Partner shall promptly notify the Joint
Venture and the other Partner of such inaccuracy.
Allocations on the Financial Statements with respect to the items
described in (i)-(iv) below shall be made as so provided below:
(i) The Tioxide Partner shall be allocated all items of tax
depreciation attributable to the 50% portion of the Transferred Assets
purchased by the Joint Venture from the Kronos Partner for an amount equal
to the sum of the Tioxide Partner's Original Capital Contribution and the
proceeds of the Tranche A Debt (the "PURCHASED TRANSFERRED ASSETS"), and
the Kronos Partner shall be allocated all items of tax depreciation
attributable to the 50% portion of the Transferred Assets contributed to
the Joint Venture by the Kronos Partner in exchange for its Percentage
Interest in the Joint Venture (the "CONTRIBUTED TRANSFERRED ASSETS");
provided that any Partner receiving an increased Percentage Interest in the
Joint Venture pursuant to Article III of this Agreement shall be allocated
all items of tax depreciation attributable to the portion of the Property
of the Joint Venture deemed purchased by such Partner as a result of such
Partner's increased Percentage Interest;
(ii) The Tioxide Partner shall be allocated all of the interest
deductions associated with the Tranche A Debt, and the Kronos Partner shall
be allocated all of the interest deductions associated with the Tranche B
Debt; provided, however, that notwithstanding the foregoing, a Partner that
has assumed Debt of the other Partner pursuant to Section 3.04(f) shall be
entitled to all interest deductions associated therewith.
(iii) With respect to any period, (A) the Tioxide Partner shall be
allocated all items of income or deduction associated with all Variable
Costs in accordance with its entitlement during such period to the total
TiO2 output of the Joint Venture pursuant to the Tioxide Offtake Agreement,
and (B) the Kronos Partner shall be allocated all items of income or
deduction associated with all Variable Costs in accordance with its
entitlement during such period to
38
the total TiO2 output of the Joint Venture pursuant to Kronos Offtake
Agreement.
(iv) With respect to any period, all items of income, gain, loss or
deduction associated with all Fixed Operating Costs shall be allocated to
each Partner in accordance with its share of Fixed Operating Costs for such
period pursuant to its Offtake Agreement, based on its Percentage Inter
est.
(d) Subject to Sections 5.01 and 5.02(a), each of the Tioxide
Partner and the Kronos Partner, individually and without consent of or notice to
the other Partner, may make any election for U.S. federal income tax purposes or
take any tax position associated with (i) the Purchased Transferred Assets, in
the case of the Tioxide Partner; (ii) the Contributed Transferred Assets, in the
case of the Kronos Partner; and (iii) any portion of the Property of the Joint
Venture deemed purchased by either Partner as a result of an increase in such
Partner's Percentage Interest pursuant to Article III of this Agreement;
provided that each Partner shall prepare its separate tax returns in a manner
consistent with the Financial Statements unless such Partner reasonably believes
such Financial Statements are incorrect and has so notified the other Partner.
ARTICLE VI
DISTRIBUTIONS; CAPITAL CALLS
6.01. Distributions. (a) All distributions made to either Partner
hereunder shall be made equally in respect of its general partnership interest
and its limited partnership interest in the Joint Venture.
(b) The Joint Venture shall make the distribution to the Kronos
Partner required by Section 2.03(vi) of the Formation Agreement.
(c) Other than the initial distribution described in Section 6.01(b)
and any special distribution made to a Non-Defaulting Partner pursuant to
Section 3.03(b), the Joint Venture shall make distributions to the Partners in
proportion to their Percentage Interests at such times and in such amounts as
the Supervisory Committee may determine from time to time in accordance with
Section 7.02(c) (including at such times as the Supervisory Committee determines
that the Joint Venture has accumulated cash in excess of its requirements). In
connection with any
39
distributions involving a return of any capital contributions, neither Partner
shall have the right to receive property other than cash, except as may be
specifically provided in this Agreement.
6.02. Amounts Withheld from Distributions. The Joint Venture shall
withhold from distributions to the Partners and pay over to any United States
federal, state, local or foreign government any amounts which the Supervisory
Committee reasonably determines may be required to be so withheld pursuant to
the Code or any provisions of state, local or foreign law. All amounts so
withheld with respect to either Partner shall be treated as amounts distributed
to such Partner pursuant to this Article VI for all purposes and shall reduce on
a dollar-for-dollar basis any amounts otherwise distributable to such Partner.
6.03. Capital Calls. The Joint Venture may request the Partners to
make capital contributions to the Joint Venture at such times and in such
amounts as the Supervisory Committee may determine in accordance with Section
7.02(c).
ARTICLE VII
THE SUPERVISORY COMMITTEE
7.01. The Supervisory Committee. (a) Except as otherwise expressly
provided in this Agreement, the business and affairs of the Joint Venture shall
be managed under the direction of a four member supervisory committee (the
"SUPERVISORY COMMITTEE"), an equal number of the members of which (the
"SUPERVISORY COMMITTEE MEMBERS") shall be appointed by the Tioxide Partner on
the one hand and by the Kronos Partner on the other. Set forth on Schedule
7.01(a) are the names of the four initial Supervisory Committee Members.
(b) With respect to each Fiscal Year of the Joint Venture, one
Supervisory Committee Member shall be appointed Chairman and another Secretary.
Set forth on Schedule 7.01(b) are the names of the initial Chairman and
Secretary who shall serve until April 15, 1994. With respect to the period
commencing April 16, 1994 and ending December 31, 1994, and for each Fiscal Year
of the Joint Venture thereafter, the Chairman and the Secretary for such Fiscal
Year shall be appointed by the respective Partner which did not appoint such
officer the prior period or year.
40
(c) Unless granted additional powers by the Supervisory Committee,
the Chairman's sole duty as Chairman shall be to chair meetings of the
Supervisory Committee and the Secretary's sole duties as Secretary shall be to
provide notices of and record the proceedings of Supervisory Committee meetings.
7.02. Quorum and Manner of Acting. (a) Except as otherwise expressly
provided in this Agreement, (i) a majority of the total number of Supervisory
Committee Members, including at least one Supervisory Committee Member appointed
by the Tioxide Partner and at least one Supervisory Committee Member appointed
by the Kronos Partner, shall constitute a quorum for the transaction of
business, and (ii) the affirmative vote of at least three Supervisory Committee
Members present at a meeting at which a quorum exists, shall be required for the
Supervisory Committee to take any action.
(b) When a meeting is adjourned to another time or place (whether or
not a quorum is present), notice shall be given of the time and place of the
adjourned meeting. At the adjourned meeting, the Supervisory Committee may
transact any business which might have been transacted at the original meeting.
If a quorum shall not be present at any meeting of the Supervisory Committee,
the Supervisory Committee Members present thereat may adjourn the meeting, from
time to time, until a quorum shall be present.
(c) Except for actions specifically permitted or required pursuant to
this Agreement (including, without limitation, the implementation by any
Requesting Partner of any Permitted Expansion in accordance with Section 3.02 in
which the Responding Partner is not participating and the remedies and actions
upon the occurrence of any Default taken in accordance with Section 3.03) or
pursuant to a resolution, authorization, delegation of authority or other act of
the Supervisory Committee, the following actions (in addition to such other
actions as are required pursuant to other provisions of this Agreement to be
approved by the Supervisory Committee) shall require the approval of the
Supervisory Committee in accordance with Section 7.02(a):
(i) any merger, consolidation, business combination,
recapitalization, reconstitution or reorganization involving the Joint
Venture, including any change in the form of organization of the Joint
Venture from a limited partnership;
41
(ii) the adjustment of any Percentage Interest in the Joint Venture
other than the adjustment of any Percentage Interest pursuant to Section
3.02 or 3.03;
(iii) any distribution (other than as specifically required pursuant
to Section 2.03(vi) of the Formation Agreement) or any withdrawal by a
Partner of capital from the Joint Venture;
(iv) the making of additional capital contributions by either Partner
(or any capital call by the Joint Venture);
(v) the approval of each Business Plan of the Joint Venture and any
amendments or revisions thereof;
(vi) any change in the principal place of business of the Joint
Venture;
(vii) the authorization of any general assignment by the Joint
Venture for the benefit of creditors or of the institution by the Joint
Venture of any proceeding to adjudicate it as bankrupt or insolvent, or
seeking the liquidation, winding up, reorganization, arrangement,
adjustment, dissolution, protection, relief or composition of the Joint
Venture or its debts under any existing or future law of any jurisdiction
relating to bankruptcy, insolvency or reorganization or relief of debtors,
or seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for the Joint Venture or for
any substantial part of its property;
(viii) the appointment or removal, with or without cause, of any officer
of the Joint Venture (or any individual performing a similar managerial
function), except for the General Managers who may be removed only in
accordance with Section 9.04;
(ix) the creation of any sub-committee of the Supervisory Committee
(the constitution of which shall be an equal number of Supervisory
Committee Members appointed by the Kronos Partner and the Tioxide Partner,
respectively, unless otherwise agreed by the Supervisory Committee);
(x) any change in the fiscal year of the Joint Venture;
(xi) the appointment or termination of engagement of the independent
auditors for the Joint Venture;
42
(xii) any capital expenditure in excess of $25,000 that is not included
in or effected in the manner or within the budget provided in the then
current Business Plan previously approved by the Supervisory Committee in
accordance herewith;
(xiii) any sale, lease, exchange, transfer or other disposition,
directly or indirectly, in a single transaction or series of related
transactions of assets of the Joint Venture having a fair market value in
excess of $100,000 other than (i) sales of TiO2 or reactor discharge in the
ordinary course of business pursuant to any Offtake Agreement or (ii) any
other disposition of assets made in accordance with the then current
Business Plan previously approved by the Supervisory Committee in
accordance herewith;
(xiv) any purchase, lease, exchange or other acquisition, directly or
indirectly, in a single transaction or series of related transactions by
the Joint Venture of assets (including securities) having a fair market
value, at the time of such transaction or series of related transactions,
of more than $100,000, other than transactions effected in the manner and
within the budget provided in the then current Business Plan previously
approved by the Supervisory Committee in accordance herewith;
(xv) the entry into, amendment or modification of, or supplement to,
any contract to which the Joint Venture is a party (including with respect
to insurance coverage) or the creation of any other obligation or
commitment which creates a liability (contingent or otherwise) of or
requires payments by the Joint Venture, in any such case, aggregating in
excess of $250,000, other than as provided in the then current Business
Plan previously approved by the Supervisory Committee in accordance
herewith;
(xvi) (A) the creation, issuance, assumption, guarantee, incurrence or
voluntary prepayment (in whole or in part) by the Joint Venture in any one
transaction or series of related transactions of any Debt of the Joint
Venture in excess of $100,000 except as required pursuant to the Credit
Agreement, (B) the modification, amendment or waiver of any agreement or
instrument pursuant to which any such Debt is outstanding or (C) the making
of any advance or loan in excess of $100,000;
43
(xvii) the creation or incurrence of any Lien on any property or asset
of the Joint Venture other than any Lien arising (A) under the Credit
Agreement; (B) in the ordinary course of business other than to secure Debt
in excess of $100,000; (C) by operation of law and (D) in respect of
purchase money security interests created in connection with the purchase
of assets contemplated by the then current Business Plan previously
approved by the Supervisory Committee in accordance herewith;
(xviii) the making of any investment in, or the entry into any joint
venture or partnership with, any Person except for any investment made
pursuant to the then current Business Plan previously approved by the
Supervisory Committee in accordance herewith;
(xix) the sale, issuance, distribution, exchange, purchase or
redemption of any securities of the Joint Venture;
(xx) the filing of any registration statement by the Joint Venture
under the Securities Act of 1933, as amended;
(xxi) the adoption or amendment of any employee compensation,
severance, pension, profit sharing, bonus, stock option or other benefit
plan or arrangement (except for any such plan or arrangement contemplated
by the then current Business Plan previously approved by the Supervisory
Committee in accordance herewith) or the execution or amendment of, or
supplement to, any collective bargaining or union contract;
(xxii) to the extent permitted by applicable licenses and agreements,
the grant by the Joint Venture of any license, sublicense or similar right
in or to the proprietary technology or processes of the Joint Venture
except pursuant to the Master Technology Exchange Agreement or any License
Agreement to which the Joint Venture is a party;
(xxiii) any amendment of or waiver on the part of the Joint Venture under
any Transaction Agreement to which the Joint Venture is a party;
(xxiv) except for any transaction contemplated by the Transaction
Agreements, any transaction by the Joint Venture with either Partner or any
Affiliate of a Partner that is not in the ordinary course of business and
on an arm's length basis;
44
(xxv) the initiation or settlement by the Joint Venture of claims or
litigation in excess of $100,000, other than as provided in Section 7.03(a)
or (b) of the Formation Agreement;
(xxvi) the designation of costs of the Joint Venture pursuant to
Sections 1.9 and 1.28 of the Offtake Agreements and the increase or
decrease of any Cash Call Amount pursuant to Section 6.3 of the Offtake
Agreements; and
(xxvii) the reallocation of the output of the Joint Venture pursuant to
Section 7.02(d) of this Agreement;
(d) Pursuant to the Offtake Agreements, each Partner will be entitled
to obtain its Output Share (as defined therein) of the total monthly output of
the Plant. Each Partner acknowledges that various factors may affect the output
of the Plant, including, without limitation:
(i) the particular grade(s) of TiO2 ordered by each Partner,
including the amount of finishing work required in connection
therewith;
(ii) the mix of product grades of TiO2 and the number of changes in
product grades ordered by each Partner, including the amount of
Plant downtime required to effect such changes; and
(iii) the amount of TiO2 products that do not conform to the product
specifications requested by each Partner (collectively, the
"PRODUCTION FACTORS").
Accordingly, notwithstanding the entitlement of each Partner pursuant to its
respective Offtake Agreement to its Output Share of TiO2 for any given month,
the Supervisory Committee shall have the power to modify and shall modify the
amount (but not the type) of TiO2 products to be manufactured by the Joint
Venture in fulfillment of each Partner's product order for such month and the
schedule for the manufacture and delivery of the same, in each case, in light of
the Production Factors and such other equitable considerations as the
Supervisory Committee deems appropriate in the circumstances. The Supervisory
Committee shall cause the Joint Venture promptly to notify each Partner of any
reallocation of Output pursuant to this Section 7.02(d).
45
(e) If either Partner elects under its Offtake Agreement to take less
than its full Output Share of the output of the Joint Venture, the Supervisory
Committee shall promptly determine whether to increase the electing Partner's
share of the Variable Costs of the Joint Venture in light of any increase in
Variable Costs of the Joint Venture resulting from such election. The
Supervisory Committee shall make such determination in light of such equitable
principles as the Supervisory Committee deems appropriate in the circumstances.
If the Supervisory Committee determines that it should reallocate Variable Costs
pursuant to this Section 7.02(e), it shall promptly deliver a written notice to
each Partner of its determination. The Partner that has elected to take less
than its full Output Share shall only be liable for an increased share of the
Variable Costs of the Joint Venture incurred after the date of notice to it from
the Joint Venture pursuant to the immediately preceding sentence.
(f) If, with respect to any matter, the Supervisory Committee is
unable to reach an agreement to act in the manner required under Section
7.02(a), any Supervisory Committee Member may refer such dispute to a commit tee
consisting of the chief executive officers of Kronos and Tioxide or appropriate
corporate officers of any successor to either Partner (the "CEO COMMITTEE"). Any
such dispute that cannot be resolved by the CEO Committee within 10 days of
referral thereto (unless otherwise agreed by the CEO Committee) shall be
referred to a special committee consisting of a senior executive officer of a
controlling Affiliate of each Partner (the "PARENT COMMITTEE"). Any such dispute
that cannot be resolved by the Parent Committee within 30 days of referral
thereto, shall be referred to binding arbitration pursuant to Section 14.01.
7.03. Time and Place of Meetings. Unless otherwise agreed, the
Supervisory Committee shall hold its meetings at such time and place as may be
determined from time to time by the Supervisory Committee.
7.04. Regular Meetings. After the place and time of regular meetings
of the Supervisory Committee shall have been determined and notice of such
schedule shall have been given to each Supervisory Committee Member, regular
meetings may be held without further notice being given. The General Managers of
the Joint Venture shall deliver to each Supervisory Committee Member, at least
10 days before the meeting date, an agenda, any proposed resolutions and
appropriate background information regarding the matters to be acted upon.
46
7.05. Special Meetings. Special meetings of the Supervisory
Committee may be called upon the written request of any Supervisory Committee
Member. Notice of special meetings of the Supervisory Committee shall be given
by the Secretary to each Supervisory Committee Member at least three days before
the meeting date in such manner as is determined by the Supervisory Committee,
and shall include a statement of the purpose or purposes of such special
meeting, any proposed resolutions and appropriate background information
regarding the matters to be acted upon. A written waiver of any such notice
signed by the Supervisory Committee Member entitled thereto, whether before or
after the time stated therein, shall be deemed equivalent to notice. Attendance
of a Supervisory Committee Member at a meeting shall constitute a waiver of
notice of such meeting, except when such Supervisory Committee Member attends
the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Unless otherwise agreed by all of the Supervisory Committee
Members present, the business conducted at any special meeting shall be limited
to the purpose or purposes set forth in the notice thereof.
7.06. Action by Consent. Any action required or permitted to be
taken at any meeting of the Supervisory Committee or of any sub-committee
thereof may be taken without a meeting, if all Supervisory Committee Members or
sub-committee members, as the case may be, shall have consented thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Supervisory Committee or sub-committee, as the case may be. Any request
for written consent shall be accompanied by appropriate background information
regarding the matters to be acted upon.
7.07. Telephonic Meetings. Members of the Supervisory Committee or
any sub-committee thereof may participate in a meeting of the Supervisory
Committee, or such sub-committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which each person
participating in the meeting can hear all others, and such participation in a
meeting shall constitute presence in person at the meeting.
7.08. Resignation. Any Supervisory Committee Member may resign at
any time by giving written notice to the Supervisory Committee. The resignation
of any Supervisory Committee Member shall take effect upon receipt of notice
thereof or at such later time as shall be specified in such notice, and unless
otherwise specified
47
therein, the acceptance of such resignation shall not be necessary to make it
effective.
7.09. Term; Vacancies; Alternates. Each Supervisory Committee Member
shall hold office until his successor is appointed, or until his earlier death,
resignation or removal. A Supervisory Committee Member may be removed with or
without cause, at any time, only by the Partner that appointed such Supervisory
Committee Member. Vacancies and newly created memberships resulting from any
increase in the authorized number of Supervisory Committee Members shall be
filled by the Partner which appointed the departing Supervisory Committee Member
or which has the right to appoint a Supervisory Committee Member to the newly
created membership. In connection with each appointment or removal of any
Supervisory Committee Member, the Partner making such appointment or removal
shall give notice thereof to the Joint Venture and the other Partners. Each
Partner, by notice to the other Partner from time to time, shall be entitled to
designate one alternate for each Supervisory Committee Member appointed by such
Partner, who shall in the absence of such Supervisory Committee Member exercise
all of the functions thereof. The number of members of the Supervisory Committee
shall not be increased except by the prior written action of both Partners.
ARTICLE VIII
MANAGEMENT OF OPERATIONS
8.01. General Managers. (a) Unless otherwise specified by the
Supervisory Committee, the day-to-day operations of the Joint Venture shall be
managed by two general managers (the "GENERAL MANAGERS") appointed in accordance
with Section 9.02(b) and acting under the direction of the Supervisory
Committee.
(b) The General Managers are hereby granted the right, power and
authority, acting jointly but not severally, to cause the Joint Venture to do
all things which are necessary, proper or advisable to carry on the day-to-day
operations of the Joint Venture as contemplated in the then current Business
Plan (including all actions required to be taken by the Joint Venture in the
case of a Default), including but not limited to the right, power and authority
from time to time to cause the Joint Venture to do any or all of the following:
48
(i) to borrow money not in excess of the limitations set forth in the
then current Business Plan or limitations otherwise established from time
to time by the Supervisory Committee;
(ii) to pay to any Person all amounts that have been duly authorized
by the Supervisory Committee and that are due and payable by the Joint
Venture to such Person;
(iii) to employ such agents, employees, managers, accountants, attorneys,
consultants and other Persons necessary or appropriate to carry out the
business and affairs of the Joint Venture, whether or not any such Person
is employed by or otherwise associated with any Partner or any of its
Affiliates, and to pay reasonable fees, expenses, salaries, wages and other
compensation to such Persons; provided that the employment and compensation
of the officers of the Joint Venture shall be subject to the approval of
the Supervisory Committee as contemplated by Section 7.02(b) and Article
IX;
(iv) to pay any and all fees and to make any and all expenditures not
in excess of the limitations set forth in the then current Business Plan or
limitations otherwise established from time to time by the Supervisory
Committee, which fees and expenditures are necessary or appropriate in
connection with the organization of the Joint Venture, the management of
the affairs of the Joint Venture, and the carrying out of its obligations
and responsibilities under the then current Business Plan and this
Agreement;
(v) to the extent that funds of the Joint Venture are not immediately
required for the conduct of the Joint Venture's business, temporarily to
deposit the excess funds in a bank account or accounts, or invest such
funds in their discretion;
(vi) to acquire, prosecute, maintain, protect and defend or cause to
be protected and defended all patents (including all applications with
respect thereto) and all inventions, trade secrets and other proprietary
information which may be held by the Joint Venture;
(vii) to enter into, execute, acknowledge and deliver any and all
contracts or other instruments necessary or appropriate to carry on the
business of the Joint Venture as set forth in the then Current Business
Plan or this Agreement, subject, in the case
49
of any contract or other instrument requiring approval of the Supervisory
Committee in accordance with Section 7.02(b), to obtaining any such
required approval;
(viii) to pay any and all taxes, charges and assessments that may be
levied, assessed or imposed upon the Joint Venture or any of its proper
ties or assets;
(ix) to provide each Partner with all documents necessary or desirable
to export TiO2 or, to the extent permitted under the Transaction
Agreements, any related products outside of the United States of America;
and
(x) to allow on-site storage of TiO2 purchased by the Partners pursuant
to the Offtake Agreements, which storage space shall be allocated equitably
between the Partners in accordance with their respective Percentage
Interests.
8.02. Business Plan. (a) Attached as Schedule 8.02(a) is the
interim budget and business plan of the Joint Venture for the period commencing
on the Closing Date and ending on December 31, 1993 (the "INITIAL BUSINESS
PLAN").
(b) With respect to each Fiscal Year following the year ending
December 31, 1993, no later than of the preceding year, the General Managers
shall submit to the Supervisory Committee for its approval a budget and business
plan of the Joint Venture for such Fiscal Year which shall include, inter alia,
a cash plan, production goals, an offtake schedule for each Partner by product
grade and volume, a fixed and variable costs plan, a raw materials purchasing
plan, projected workforce levels, compensation and benefit plans, a capital
expenditure and maintenance plan and budget (including the capital expenditure
and maintenance costs to be included in Fixed Operating Costs under the Offtake
Agreements for such Fiscal Year). No later than the beginning of each Fiscal
Year, the Supervisory Committee shall approve the calendarized budget and
business plan submitted by the General Managers, with such revisions thereto as
the Supervisory Committee shall deem appropriate (as so revised, the "BUSINESS
PLAN"). To the extent reasonably within the control of the General Managers, the
Joint Venture shall be operated in accordance with the then current Business
Plan approved by the Supervisory Committee. If the Supervisory Committee shall
fail to approve the Business Plan for the year ending December 31, 1994, the
Joint Venture shall be operated in accordance with the Initial Business Plan
which shall be annualized to cover a 12-month period. If the Supervisory
50
Committee shall fail to approve the Business Plan for any subsequent Fiscal
Year, the Joint Venture shall be operated in accordance with the Business Plan
for the immediately preceding Fiscal Year, with each line item set forth in the
budget included in such Business Plan multiplied by one plus the percentage
increase, if any (expressed as a decimal), in the annual average All Items, All-
Urban United States Consumer Price Index published by the U.S. Department of
Labor (or, if such index is no longer published, any similar consumer price
index then published by the U.S. Government) for such immediately preceding
Fiscal Year.
8.03. General Managers' Reports. The General Managers shall prepare
and distribute to the Supervisory Committee Members a monthly financial report
on the business and operations of the Joint Venture, which report shall include,
among other things, a balance sheet, profit and loss statement and cash flow
statement.
ARTICLE IX
EMPLOYEES
9.01. Principal Officers. The principal officers of the Joint
Venture shall be, in addition to the Chairman, the Secretary and the General
Managers, one or more vice presidents (or persons with similar
responsibilities). The names of the initial principal officers of the Joint
Venture are set forth on Schedule 9.01.
9.02. Nomination, Confirmation, Term of Office and Remuneration. (a)
Except for the Chairman, the Secretary and the General Managers, the principal
officers of the Joint Venture shall be appointed by the Supervisory Committee.
Except as otherwise provided in Section 9.02(b), each such officer shall hold
office until his successor is nominated and confirmed, or until his earlier
death, resignation or removal. The remuneration of all principal officers whose
compensation is paid by the Joint Venture shall be determined by the Supervisory
Committee.
(b) The General Managers of the Joint Venture shall initially be the
individuals identified as such on Schedule 9.01. Each Partner shall appoint and
pay the salary and all benefits and other expenses for one General Manager, and
such Partner shall have the power in its sole discretion to remove such General
Manager, with or without cause. Promptly after any such removal, the Partner
that has removed its appointee shall notify the other Partner of
51
such removal and shall designate a successor General Manager, if any.
9.03. Subordinate Officers. In addition to the principal officers
contemplated by Section 9.01, the Joint Venture may have such other subordinate
officers as the Supervisory Committee may deem necessary. The Supervisory
Committee shall appoint any such officers unless the Supervisory Commit tee
shall have delegated to the General Managers or to any other principal officer
the power to appoint (and to determine compensation for) and to remove such
subordinate officers.
9.04. Removal. In addition to any power to remove subordinate
officers that may be delegated to a principal officer pursuant to Section 9.03,
officers other than the General Managers may be removed, with or without cause,
at any time, by the Supervisory Committee.
9.05. Resignations. Any officer may resign at any time by giving
written notice to the Supervisory Committee. The resignation of any officer
shall take effect upon receipt of notice thereof or at such later time as shall
be specified in such notice, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
9.06. Powers and Duties. Except as otherwise provided herein, each
of the principal officers of the Joint Venture shall have such powers as would
be incident to the comparable officer of a Delaware corporation and such other
powers and perform such other duties as may from time to time be conferred upon
or assigned to such officer by or pursuant to authority delegated by the
Supervisory Committee.
9.07. Tioxide Observers. During the Seasoning Period, the Tioxide
Partner shall have the right to send to the Joint Venture at any one time not
more than ten employees of the Tioxide Group who shall act as observers for the
benefit of the Tioxide Group and shall not interfere with the operations of the
Plant. The salaries and benefit expense for such observers shall be paid by the
Tioxide Group.
9.08. Transferred Employees. (a) Except for the Transferred
Employees (as defined in the Formation Agreement), the Joint Venture shall not
hire any employee of either Partner or its Affiliates unless (i) the employer of
such employee gives its prior written consent thereto and (ii) in the reasonable
judgment of both General Managers
52
there is a position available to be filled at the Joint Venture and the employee
is qualified to discharge the duties of such position. In addition, both
General Managers shall determine whether any such employee qualifies as a Free
Return Employee. "FREE RETURN EMPLOYEE" means an employee of either Partner or
its Affiliates who is hired by the Joint Venture to perform a job that in the
reasonable opinion of both General Managers as of the date of hire can be
completed by such employee by the end of the Seasoning Period. Except for Free
Return Employees and except as may be agreed by the Partners from time to time,
neither Partner nor the Affiliates shall hire or rehire a prior employee of the
Joint Venture for three (3) years after the employee's termination from the
Joint Venture. The Joint Venture shall require each employee of the Joint
Venture to sign non-competition and confidentiality agreements in forms to be
agreed on by the General Managers. The non-competition agreement shall
prohibit the employee from working for either Partner or its Affiliates or any
business entity involved in the manufacture of TiO2 for a period of three years
from the date of termination of his employment with the Joint Venture; provided,
however, that from the earlier of (A) the end of the Seasoning Period and (B)
the completion of the job for which he was hired by the Joint Venture, no Free
Return Employee shall be restricted from returning to the employ of the Partner
or Affiliate for whom he worked prior to his employment by the Joint Venture.
Any former employee of either Partner or its Affiliates who does not qualify as
a Free Return Employee will be subject to the restrictions relating to return to
his former employer set forth in his non-competition agreement.
(b) All Persons hired by the Joint Venture pursuant to Section
9.08(a) (including all Free Return Employees) shall be employed by the Joint
Venture at its expense (including salary and benefits), provided that either
Partner or its Affiliates may supplement the compensation or benefits paid by
the Joint Venture to any Free Return Employee.
9.09. Limitations on Hiring. So long as the Tioxide Partner and the
Kronos Partner remain partners in the Joint Venture, (i) the Tioxide Partner
shall not, and shall not permit any Tioxide Group Member to, knowingly employ or
offer employment to any employee of the Kronos Group without the prior written
consent of the Kronos Partner and (ii) the Kronos Partner shall not, and shall
not permit any Kronos Group Member to, knowingly employ or offer employment to
any employee of the Tioxide Group without the prior written consent of the
Tioxide Partner.
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ARTICLE X
ACCOUNTING
10.01. Auditors and Financial Statements. (a) The initial
independent public accountants of the Joint Venture shall be Coopers & Xxxxxxx.
Such accountants shall continue to serve the Joint Venture until their
successors shall be appointed by the Supervisory Committee. The independent
accountants of the Joint Venture shall audit the annual financial statements of
the Joint Venture.
(b) The Joint Venture shall adopt and follow GAAP; provided that the
Supervisory Committee may from time to time adopt changes in the accounting
methods and principles followed by the Joint Venture or in the application
thereof. The accounting methods and principles referred to in the preceding
sentence, as they exist and are applied from time to time, are herein referred
to as "JOINT VENTURE ACCOUNTING PRINCIPLES". In addition to preparing financial
statements in accordance with Joint Venture Accounting Principles, the Joint
Venture shall prepare, at the cost of the requesting Partner, such financial
statements as are required by the Partners and their Affiliates, at the times
and in the manner reasonably requested by either Partner (including, in the case
of the Tioxide Partner, the preparation of financial statements in accordance
with accounting principles generally accepted in the United Kingdom). Each
Partner and its independent auditors shall be entitled to consult with the Joint
Venture's independent public accountants and review their work papers and
information made available to them in connection with the preparation and audit
of the Joint Venture's financial statements.
10.02. Fiscal Year. Except for the initial partial fiscal year which
shall begin on the Closing Date and end on December 31, 1993, the fiscal year of
the Joint Venture (the "FISCAL YEAR") shall begin on January 1 and end on
December 31 of each year.
ARTICLE XI
INDEMNIFICATION
11.01. Employee Indemnification. (a) Except in the case of gross
negligence or willful misconduct, a Supervisory Committee Member or an officer
of the Joint
54
Venture shall not be liable to the Joint Venture or the Partners for monetary
damages for breach of fiduciary duty to the fullest extent permitted by the laws
of the State of Delaware for directors of corporations organized under the laws
of such State.
(b)(i) Except in the case of gross negligence or willful misconduct,
each person (and the heirs, executors or administrators of such person) who was
or is a party or is threatened to be made a party to, or is involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a Supervisory Committee Member, officer or employee of the
Joint Venture or is or was serving at the request of the Joint Venture as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall be indemnified and held harmless by
the Joint Venture to the fullest extent permitted by the laws of the State of
Delaware for directors and officers of corporations organized under the laws of
such State. The right to indemnification conferred in this Section shall also
include the right to be paid by the Joint Venture the expenses incurred in
connection with any such proceeding in advance of its final disposition to the
fullest extent authorized by the laws of the State of Delaware for directors and
officers of corporations organized under the laws of such State. The right to
indemnification conferred in this Section shall be a contract right.
(ii) The Joint Venture may, by action of the Supervisory Committee,
provide indemnification to such agents of the Joint Venture to such extent and
to such effect as the Supervisory Committee shall determine to be appropriate.
(c) The Joint Venture shall have power to purchase and maintain
insurance in such amount as may be determined by the Supervisory Committee on
behalf of any person who is or was a Supervisory Committee Member, officer,
employee or agent of the Joint Venture, or is or was serving at the request of
the Joint Venture as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss incurred by such person in any such capacity or
arising out of his status as such, whether or not the Joint Venture would have
the power to indemnify him against such liability under the laws of the State of
Delaware.
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(d) The rights and authority conferred in this Section shall not be
exclusive of any other right which any person may otherwise have or hereafter
acquire.
(e) Neither the amendment of this Section, nor, to the fullest extent
permitted by the laws of the State of Delaware, any modification of law, shall
eliminate or reduce the effect of this Section in respect of any acts or
omissions occurring prior to such amendment or modification.
11.02 Partner Indemnification. In addition to and not in lieu of
any other indemnification arrangement among the Partners and the Joint Venture
pursuant to the Formation Agreement or otherwise, the Joint Venture hereby
indemnifies each Partner and agrees to hold such Partner and its officers,
directors, employees and agents harmless from any loss, liability, damage, cost
or expense (including reasonable fees and expenses of accountants, consultants
and engineers, and reasonable attorneys' fees and expenses in connection with
any action, suit or proceeding) incurred or suffered by any of such Persons
resulting from the Joint Venture's negligence or willful misconduct or from
product liability or similar claims relating to TiO2 produced by the Joint
Venture; provided, however, that the Joint Venture's liability under this
Section 11.02 shall be limited to the amount of insurance proceeds available to
the Joint Venture in respect of the matter giving rise to such indemnification
obligation.
ARTICLE XII
COVENANTS OF THE PARTNERS
12.01. Nature of Obligations Between Partners. The Partners, acting
together through their duly authorized representatives, shall have the authority
to act for and assume any obligation on behalf of the Joint Venture. Except as
otherwise provided in any Transaction Agreement or by written agreement between
the Partners, neither Partner shall have any authority to act for or assume any
obligation or responsibility on behalf of the other Partner or the Joint
Venture.
12.02. Confidentiality. (a) Each Partner (the "RECEIVING PARTNER")
will hold and will use its best efforts to cause its Affiliates, officers,
directors, employees, lenders, accountants, counsel, consultants, advisors and
agents to hold, in confidence all documents and information concerning the other
Partner (the "PROVIDING PARTNER") and each Affiliate of the Providing Partner
furnished to the Receiving Partner or its Affiliates in connection with the
transactions contemplated by the Transaction Agreements and
56
the business and operation of the Joint Venture, except to the extent that (i)
the Receiving Partner or its Affiliates are permitted to use or transfer such
information under the Master Technology Exchange Agreement or any License
Agreement or (ii) such information can be shown to have (A) been already known
to the Receiving Partner at the time such information was received from the
Providing Partner as evidenced by preexisting written records or documents; (B)
been available, or to have become generally available to the public as evidenced
by written records or documents, through no fault of the Receiving Partner or
its Affiliates; or (C) been received by the Receiving Partner from a Person
other than the Providing Partner as evidenced by written records or documents,
which Person, to the best knowledge of the Receiving Partner, was not bound by a
confidentiality agreement with the Providing Partner with respect thereto or was
not otherwise prohibited from transmitting such information to the Receiving
Partner; provided that the Receiving Partner may disclose any such information
to its Affiliates, officers, directors, employ ees, accountants, counsel,
consultants, advisors and agents on a need-to-know basis, solely for use in
connection with the transactions contemplated by any Transaction Agreement or
the business and operation of the Joint Venture, so long as such Persons are
informed by the Receiving Partner of the confidential nature of such information
and are directed by the Receiving Partner to treat such information
confidentially and in accordance with the limitations of this Section 12.02.
The requirements of the previous sentence shall not apply to any Person if such
Person is compelled to disclose such information by judicial or administrative
subpoena or process or other legal requirements applicable to it; provided that
such Person promptly furnishes written notice to the Providing Partner, and
otherwise gives the Providing Partner an opportunity to protect all documents
and information concerning the Providing Partner, and, in addition, itself takes
all reasonable steps, including without limitation seeking protective orders, to
protect the secrecy of such documents and information. Each Receiving Partner's
obligation to hold information in confidence shall be satisfied if it exercises
the same care with respect to such information as it would take to preserve the
confidenti ality of its own similar information.
(b) The Joint Venture will hold, and will use its best efforts to cause
its officers, directors, employees, lenders, accountants, counsel, consultants,
advisors and agents to hold, in confidence, all documents and information
(including, without limitation, information relating to marketing activities,
pigment product mix, product customers, the location of each Partner's
warehouses and
57
receiving areas for the output of the Joint Venture and manufacturing technol
ogies and processes) concerning each Partner and its Affiliates; provided that
the Joint Venture may disclose such information to its officers, directors,
employees, lenders, accountants, counsel, consultants, advisors and agents on a
need-to-know basis, solely for use in connection with the transactions
contemplated by any Transaction Agreement or the business and operation of the
Joint Venture, so long as such Persons are informed by the Joint Venture of the
confidential nature of such information and are directed by the Joint Venture to
treat such information confidentially and in accordance with the limitations of
this Section 12.02. The requirements of the previous sentence shall not apply
to any Person if such Person is compelled to disclose such information by
judicial or administrative subpoena or process or other legal requirements
applicable to it; provided that such Person promptly furnishes written notice to
the Partner that such information concerns, and otherwise gives such Partner an
opportunity to protect all documents and information concerning such Partner,
and, in addition, itself takes all reasonable steps, including without
limitation seeking protective orders, to protect the secrecy of such documents
and information.
(c) With respect to documents and information covered by Article III of
the Master Technology Exchange Agreement, in the event of any conflict between
the Master Technology Exchange Agreement and this Agreement, the Master
Technology Exchange Agreement shall govern.
12.03. Debt. (a) Until the third anniversary of the Closing Date,
neither Partner shall create, assume, incur, guarantee, issue or in any manner
become liable, contingently or otherwise (collectively, "INCUR") any Debt other
than Debt in an aggregate principal amount not to exceed the Permitted Amount in
effect on the date of Incurrence (except for Debt Incurred by the Joint Venture,
including, without limitation, Debt under the Credit Agreement or pursuant to
the Transaction Agreements). "PERMITTED AMOUNT" means (A) from the Closing Date
to the second anniversary of the Closing Date, $0 and (B) from the second
anniversary of the Closing Date to the third anniversary of the Closing Date,
Debt in an aggregate principal amount equal to 83-1/3% of the Borrowing Base of
the Borrowing Partner (as defined below) as of the date of Incurrence less the
sum of (1) all Tranche A Debt (if the Tioxide Partner is the Borrowing Partner)
or all Tranche B Debt (if the Kronos Partner is the Borrowing Partner) and (2)
the amount of all other Debt of the Joint Venture outstanding on such date
multiplied by the Percentage
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Interest of the Borrowing Partner on such date. "BORROWING BASE" means, as of
any date, (i) the Percentage Interest of the Borrowing Partner multiplied by the
sum of (x) the Fair Market Value of the Joint Venture as of the date of
determination, (y) the aggregate principal amount of all Debt of the Joint
Venture outstanding on the date of determination and (z) the amount of any other
obligation deducted in determining the Fair Market Value plus (ii) the fair
market value of all other assets of the Borrowing Partner as of the date of
determination.
(b) Until the third anniversary of the Closing Date, at least ten days
prior to Incurring any Debt, the Partner which plans to Incur such Debt (the
"BORROWING PARTNER") shall deliver a written notice of its proposed borrowing to
the other Partner (the "NON-BORROWING PARTNER"), which notice shall set forth
the amount of Debt proposed to be Incurred, the total amount of Debt to be
outstanding after giving effect to the proposed Incurrence, and the estimated
Borrowing Base of the Borrowing Partner as of the proposed date of Incurrence,
together with a calculation showing in reasonable detail whether the proposed
Incurrence complies with Section 12.03(a). If the Non-Borrowing Partner
disagrees with the determinations set forth in the Borrowing Partner's Notice,
the Non-Borrowing Partner shall, within five days after the receipt of such
notice, deliver a written notice of disagreement to the Borrowing Partner. Any
notice of disagreement by the Non-Borrowing Partner shall describe in reasonable
detail the basis for such disagreement. If the Non-Borrowing Partner fails to
deliver a notice of disagreement within such five-day period, the Borrowing
Partner shall be free to Incur the Debt described in its notice of borrowing.
If the Non-Borrowing Partner delivers a notice of disagreement within such five-
day period and the Borrowing Partner refuses to withdraw its proposal to Incur
Debt, the Partners shall submit their dispute to arbitration pursuant to Section
14.01. If the Borrowing Partner's proposed Incurrence is ultimately determined
to be in compliance with the restriction set forth in Section 12.03(a), the Non-
Borrowing Partner shall compensate the Borrowing Partner for any loss, damage or
expense suffered by the Borrowing Partner as a result of the Non-Borrowing
Partner's objection.
12.04. Negative Pledge. Until the third anniversary of the Closing Date,
neither Partner will create, assume or suffer to exist any Lien on its limited
or general partnership interest in the Joint Venture except for Liens securing
obligations under, or under guarantees of, the Credit Agreement. Subsequent to
the third anniversary of the Closing Date, either Partner may create, assume or
59
suffer to exist any Lien on its interest except as prohibited by the lenders
under the Credit Agreement. Neither Partner will, at any time, assign or pledge
any or all of its rights, including, without limitation, any right to receive
TiO2, under its Offtake Agreement.
12.05. Consolidations, Mergers and Sales of Assets. Neither Partner will
(i) consolidate or merge with or into any other Person, (ii) liquidate or (iii)
except as specifically permitted in accordance with Article III or IV of this
Agreement, sell, lease or otherwise transfer, directly or indirectly, all or
substantially all of its assets.
12.06. Restriction on Other Businesses. Neither Partner will engage in
any business activities other than (i) the ownership of an interest in the Joint
Venture, (ii) the transactions contemplated by the Transaction Agree ments, and
(iii) the manufacture, purchase or sale of TiO2 and related products and
activities ancillary thereto. Neither the Joint Venture nor either Partner
shall have any right by virtue of this Agreement in or to any income or profits
derived from the business activities of the other Partner permitted by the first
sentence of this Section 12.06.
ARTICLE XIII
TERMINATION AND LIQUIDATION
13.01. Term. The Joint Venture shall continue in existence until
dissolved pursuant to Section 13.02.
13.02. Liquidating Event. The Joint Venture shall dissolve and commence
winding up and liquidating only upon the earlier to occur of (a) mutual
agreement of the Partners to dissolve, wind up and liquidate the Joint Venture;
and (b) subject to Section 13.04, an event of withdrawal of either general
partner (within the meaning of the Partnership Act) unless at the time there is
at least one other general partner of the Joint Venture and such general partner
shall agree to continue the business of the Joint Venture. Any such remaining
general partner is hereby authorized to continue the business of the Joint
Venture.
13.03. Resignation and Withdrawal. Each Partner covenants and agrees
that it will not withdraw or resign from the Joint Venture prior to its
termination, except in
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connection with a permitted transfer of its entire Percentage Interest in the
Joint Venture.
13.04. Bankruptcy. The bankruptcy or insolvency of either Partner, or
the occurrence with respect to either Partner of any event or circumstance
referenced in Section 17-402(a)(4) or 17-402(a)(5) of the Partnership Act, shall
not cause such Person to cease to be a general or limited partner of the Joint
Venture. Therefore, such event will not constitute an event of with drawal of
a general partner (within the meaning of the Partnership Act) and will not cause
the dissolution of the Joint Venture.
13.05. Winding Up. Upon the agreement of the Partners pursuant to
Section 13.02 to dissolve, wind up and liquidate the Joint Venture, the Joint
Venture shall continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its
creditors and Partners and neither Partner shall take any action that is
inconsistent with, or not necessary to or appropriate for, the winding up of the
Joint Venture's business and affairs, provided that all covenants con tained in
this Agreement and obligations provided for in this Agreement shall continue to
be fully binding upon the Partners until such time as the Property or the
proceeds from the sale thereof have been distributed pursuant to this Section
and the Joint Venture has terminated. The Partner designated by mutual
agreement of the Partners (the "LIQUIDATOR") shall be responsible for overseeing
the winding up and dissolution of the Joint Venture. The Liquida tor shall
take full account of the Joint Venture's liabilities and Property and shall
cause the Property or the proceeds from the sale thereof to the extent
sufficient therefor, to be applied and distributed to the maximum extent
permitted by law, in the following order:
(a) first, to the payment and discharge of all of the Joint Ven ture's
debts and liabilities; and
(b) second, to the Partners in accordance with their respective
Percentage Interests at such time, without distinction between their
general partnership interests and limited partnership interests.
13.06. Discretion of the Liquidator. In the discretion of the
Liquidator, a pro rata portion of the distributions that would otherwise be made
to the Partners pursuant to this Article may be:
(a) distributed to a trust established for the benefit of the
Partners for the purposes of liquidating
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Property, collecting amounts owed to the Joint Venture, and paying any
contingent or unforeseen liabilities or obligations of the Joint Venture or
of the Partners arising out of or in connection with the Joint Venture; the
assets of any such trust shall be distributed to the Partners from time to
time, in the reasonable discretion of the Liquidator in the same
proportions as the amount distributed to such trust by the Joint Venture
would otherwise have been distributed to the Partners pursuant to this
Agreement; or
(b) withheld to provide a reasonable reserve for Joint Venture
liabilities (contingent or otherwise) and to allow for the collection of
the unrealized portion of any installment obligations owed to the Joint
Venture, provided that such withheld amounts shall be distributed to the
Partners as soon as practicable.
13.07. Rights of Partners. Except as otherwise provided in this
Agreement, each Partner shall look solely to the assets of the Joint Venture for
the return of its capital contribution and shall have no right or power to
demand or receive property other than cash from the Joint Venture.
ARTICLE XIV
DISPUTE RESOLUTION
14.01. Arbitration. (a) All disputes arising out of this Agreement and
the Offtake Agreements that cannot be resolved by the Joint Venture, the
Partners and their Affiliates pursuant to the procedures and within the time
limits set forth in Section 7.02(f) shall be submitted for decision and final
resolution to arbitration to the exclusion of any courts of law, under the rules
of the AAA.
(b) The arbitration tribunal shall be composed of three disinter ested
arbitrators, appointed pursuant to the following procedure: the Partner
invoking arbitration (the "INVOKING PARTNER") shall give written notice to the
other Partner (the "ANSWERING PARTNER") stating the substance of its claim and
the name and address of the arbitrator it has chosen, who shall be a citizen of
the United States of America. Within 30 days of receipt of such notifica tion,
the Answering Partner shall give written notice to the Invoking Partner
providing its answer to the claim made, any counterclaim which it wishes to
assert in the arbitration, and the name and address of its arbitrator, who shall
be a
62
citizen of the United States of America. If the Answering Partner fails to give
such notice within 30 days, appointment of the second arbitrator shall be made
by the AAA upon request of the Invoking Partner.
(c) The two arbitrators shall choose a third arbitrator, who shall serve
as president of the tribunal thus composed. If the two arbitrators fail to
agree upon the choice of a third arbitrator within 20 days after the appointment
of the second arbitrator, the third arbitrator will be appointed by the AAA upon
the request of the arbitrators or either Partner.
(d) The arbitration shall take place in New York City unless the Partners
otherwise agree. The arbitrators will decide the dispute by majority decision
and in accordance with Delaware law. The decision shall be rendered in writing,
shall state the reasons on which it is based, and shall bear the signatures of
at least two arbitrators. It also shall identify the members of the arbitration
tribunal, and the time and place of the award granted. Finally, it will
determine the expenses of the arbitration and the Partner which shall be charged
therewith or the allocation of the expenses between the Partners in the
discretion of the tribunal.
(e) The arbitration decision shall be rendered as soon as possible after
the constitution of the arbitration tribunal. The arbitration decision shall be
final and binding upon both Partners and the Partners agree that any award
granted pursuant to such decision may be entered forthwith in any court of
competent jurisdiction.
14.02. Injunctive Relief. Each Partner acknowledges and agrees that in
the event either Partner breaches any of its obligations under this Agreement,
the other Partner would be irreparably harmed and could not be made whole by
monetary damages alone. Both Partners accordingly agree (i) to waive the
defense in any action for specific performance that a remedy at law would be
adequate, and (ii) that this agreement must be enforced by specific performance
or injunctive relief; provided, however that nothing in this Section 14.02 shall
be construed to prohibit either Partner from bringing an action for money
damages in addition to an action for specific performance or injunctive relief.
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ARTICLE XV
MISCELLANEOUS
15.01. Notices. All notices, requests and other communications to either
Partner or to the Joint Venture hereunder shall be in writing (includ ing
facsimile or similar writing) and shall be given,
if to the Tioxide Partner, to:
Tioxide Americas Inc.
Xxxxx 000, 000 Xxxxxxxxxxx Xxxx
Xxxxx, Xxxxxxxx 00000
Attention: Vice President - Administration
X. Xxxxxxxx
Telecopier: 000-000-0000
with copies to:
Tioxide Americas Inc.
c/o Tioxide Group Limited
Lincoln House
000-000 Xxxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxx X00 0XX
Attention: Secretary
Telecopier: 011-44-71-331-7778
and
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telecopier: 000-000-0000
if to the Kronos Partner, to:
Kronos Louisiana, Inc.
0000 Xxxxx Xxx Xxxxxxx Xxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Telecopier: 000-000-0000
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with copies to:
NL Industries, Inc.
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxx,
Vice President
Telecopier: 000-000-0000
and
On or before October 22, 1993:
Xxxxxxxx & Xxxxx
0000 Xxxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Telecopier: 000-000-0000
After October 22, 1993:
Bartlit Xxxx Xxxxxx Xxxxxxxxx & Xxxxx
000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
if to the Joint Venture, to:
Louisiana Pigment Company, L.P.
X.X. Xxx 00
Xxxxxxxx, XX 00000-0000
Attention: The General Managers
Telecopier:
or to such other address or telecopier number as such Partner or the Joint
Venture may hereafter specify for the purpose of notices hereunder. Each such
notice, request or other communication shall be effective (i) if given by
facsimile, when such facsimile is transmitted to the telecopier number specified
in this Section and transmission of the appropriate number of pages is confirmed
or (ii) if given by any other means, when delivered at the address specified in
this Section. A copy of each communication sent by telecopier to any party
shall also be sent to such party by registered mail, but notice hereunder shall
be effective upon telecopier transmission in the manner specified above.
15.02. Survival. The agreements contained herein shall survive the
Closing but shall not survive the termination of this Agreement except as
otherwise specifically provided for herein.
15.03. Amendments; No Waivers. (a) Except as otherwise provided in
Section 11.01(e), any provision of this Agreement may be amended or waived if,
and only if, such amendment or waiver is in writing and signed, in the case of
an amendment, by each Partner or in the case of a waiver, by the Partner against
whom the waiver is to be effective.
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(b) No failure or delay by either Partner in exercising any right, power
or privilege hereunder shall operate as a waiver 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. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
15.04. Expenses. Except as otherwise contemplated herein, all costs and
expenses incurred in connection with this Agreement shall be paid by the Partner
incurring such cost or expense, and this obligation shall survive the
termination of this Agreement. Any organization fees within the meaning of
Section 709 of the Code incurred by a Partner on behalf of the Joint Venture
shall be treated as a contribution to the Joint Venture, and any loss, deduction
or similar item attributable to such fees shall be specially allocated to such
Partner.
15.05. Successors and Assigns. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the Partners and their
respective permitted successors and assignees in accordance with Article IV.
Neither party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement except to the extent expressly provided in
Article IV. If this Agreement is assigned by either party, such party shall
also assign all of its rights and obligations under its Offtake Agreement. This
Agreement is for the sole benefit of the Partners and nothing herein expressed
or implied shall give or be construed to give any Person other than the
Partners, any legal or equitable rights hereunder.
(b) Any permitted successor or assignee of any partner in the Joint
Venture shall be required to execute an agreement by which such successor or
assignee agrees to be bound by all terms and conditions of this Agreement. Any
assignee of the Partnership Interest of either Partner shall also enter into an
agreement with the Joint Venture as of the date of such assignment which
agreement shall be substantially similar to the Offtake Agreements.
(c) Each of the parties hereto shall consent to the assignment of the
rights and obligations of the Partners under this Agreement (i) to Citibank,
N.A., as Agent under the Credit Agreement, in a foreclosure pursuant to the
Collateral Documents (as defined in the Credit Agreement) or to any other
assignee of substantially all of the assets of the Joint Venture or to any
assignee of the Partnership Interest of either Partner, in either case in a sale
66
pursuant to Collateral Documents; provided that such assignee shall agree
expressly in writing to be bound by terms and conditions of this Agreement from
and after the effective date of such assignment and (ii) to any subse quent
direct or indirect assignee of such assignee of all or substantially all the
assets of the Joint Venture or the Partnership Interest of either Partner;
provided that such assignee shall expressly agree in writing as aforesaid and,
if any such assignment(s) shall occur, references to the Joint Venture or such
Partner, as the case may be, in provisions of this Agreement which survive sale
pursuant to Collateral Documents shall refer to such assignee except as
otherwise specifically provided in this Agreement.
15.06. Headings. Headings are for ease of reference only and shall not
form a part of this Agreement.
15.07. Governing Law; Entire Agreement. (a) THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF DELAWARE
WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS OF SUCH STATE. The
choice of law and forum provisions of this Agreement have been negotiated in
good faith and agreed upon by the parties hereto. Each party by its execution
of this Agreement expressly agrees to the fullest extent permitted by law not to
challenge the choice of law or forum provisions contained in this Agreement.
(b) This Agreement and the other Transaction Agreements embody the entire
agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements with respect thereto.
15.08. Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original. This
Agreement shall become effective when each Partner shall have received a
counterpart hereof signed by the other Partner.
15.09. Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be invalid or unen
forceable to any extent, the remainder of this Agreement and the application of
such provisions to other Persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.
15.10. Further Assurances. The Partners will execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purpose of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
TIOXIDE AMERICAS INC., in its
capacity as a General Partner
and a Limited Partner
By: /s/ XXXXX XXXXX
Name: Xxxxx Xxxxx
Title: Vice President
KRONOS LOUISIANA, INC., in its
capacity as a General Partner
and a Limited Partner
By: /s/ XXXXX X. XXXXXXXX
Name: Xxxxx X. Xxxxxxxx
Title: Vice President
68
