EXHIBIT 10.3
Second Supplemental Agreement
to the
Contract dated 30 December 1986
between
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇.-▇▇▇▇▇▇-▇▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
hereinafter referred to as "▇▇▇▇▇▇▇▇▇▇"
and
KRONOS TITAN GMBH, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
hereinafter referred to as "KRONOS"
On 30 December 1986 ▇▇▇▇▇▇▇▇▇▇ and KRONOS entered into a contract to reuse the
dilute acid which results from the production of titanium oxide in the
Leverkusen and ▇▇▇▇▇▇▇ works, to separate both the filter salts which derive
from this dilute acid together with the additional filter salts delivered from
Nordenham, to deliver the fresh acid produced from the filter salts and to
deliver burner discharge ("Main Contract"). In order to adapt this contract to
changed circumstances and to clarify cases where doubt has arisen, the
contracting parties enter into the following agreements:
1. Interest
1.1 A proportion of the interest paid on borrowings by ▇▇▇▇▇▇▇▇▇▇, which
corresponds to the ratio of the plant assets used in the cooperation to
▇▇▇▇▇▇▇▇▇▇'▇ plant assets as a whole, also constitutes part of the
operating costs for the dilute acid recovery plant and for the filter
salts separation plant. These costs are to be apportioned between the
parties as a fixed-cost component (Main Contract Section 8; 1st
Supplemental Agreement dated 3 May 1996 No. 3). The cooperation assets
consist of the filter salts separation plant and the ancillary
operations belonging wholly or in part to it. Interest on any other
▇▇▇▇▇▇▇▇▇▇ ancillary operations shall only be charged to the extent that
plant attributable to the cooperation assets is served, either directly
or indirectly, by these ancillary operations and where interest on
borrowings must be expended for such service plant. The book values in
accordance with German law are used as a basis to determine the plant
asset values. Interest paid to affiliates of ▇▇▇▇▇▇▇▇▇▇ shall also be
taken into account (Section 15 German Stock Corporation Act,
Aktiengesetz, "AktG").
1.2 Interest to be paid by KRONOS shall - as shown in Annex 1 - be
calculated by taking the product (B) of the factor (p) which results
from the comparison of the interest for costing purposes on the
cooperation assets (A1, A2) with that on the plant assets as a whole
(K), as computed internally at ▇▇▇▇▇▇▇▇▇▇ in accordance with the
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clearing system installed at SC (currently SAP-R/3), and the amount
planned in ▇▇▇▇▇▇▇▇▇▇'▇ Income Statement for interest on borrowings
actually expended (F).
1.3 The amount of interest to be paid by KRONOS, calculated in accordance
with 1.2, shall, with temporary effect, be included in the monthly
invoicing in the course of the routine ▇▇▇▇▇▇▇▇▇▇ cost accounting. This
amount shall be itemized separately in the monthly account.
1.4 Within three months following the expiry of the financial year,
▇▇▇▇▇▇▇▇▇▇ shall calculate the final amount of the interest to be paid
by KRONOS. In this calculation the total amount of interest paid on
borrowings shall be taken from the attested annual accounts and any
fractional set-off resulting from a budgeted/actual cost check of the
participation factor shall be waived, by analogy with the procedure on
expenditure for depreciation. The amount thus calculated shall be
compared with the sum of the invoiced installments over the year. Any
difference between the amounts in favor, or to the detriment, of KRONOS
shall be payable or credited within 14 days without interest.
1.5 The foregoing new regulations supplement Section 1 para. 12, Section 8
of the Main Contract with respect to the dilute acid recovery plant and
No. 3 of the 1st Supplementary Agreement dated 3 May 1996. They come
into force retrospectively, effective as of 1 October 2000. The interest
payments under No. 1.2 for the months October 2000 to September 2001
shall be calculated after the net annual profit of SC has been
ascertained. Any difference between this amount and installments
burdened thus far on account of interest for costing purposes shall be
refunded to KRONOS promptly.
2. Division of Capacity, Fixed Costs and Variable Costs of the Dilute Acid
Recovery Plant
2.1 The contracting parties are agreed that the current maximum capacity of
the dilute acid recovery plant is approx. 900,000 metric tons per year.
They are agreed that KRONOS is entitled to a partial capacity of 235,000
metric tons per year, equivalent to 26%, and that ▇▇▇▇▇▇▇▇▇▇ is entitled
to a partial capacity of 665,000 metric tons per year, equivalent to
74%.
2.2 The fixed operating costs of the dilute acid recovery plant shall be
borne by the contracting parties in the ratio: KRONOS 26% and ▇▇▇▇▇▇▇▇▇▇
74%. The actual utilization proportions shall be revealed in the course
of invoicing. The contracting parties may reach agreement once annually
on the utilization proportions and, as the case may be, agree a new
assessment of the fixed cost proportions. Any adjustment of the fixed
cost proportions where the plant capacity is agreed to be >= 780,000
metric tons per year shall be based on KRONOS' taking up at least
225,000, max. 235,000 metric tons per year and ▇▇▇▇▇▇▇▇▇▇'▇ taking up at
least 545,000 metric tons per year. In individual cases the contracting
parties shall reach agreement in good time on the adjustment of costs
for investment in the dilute acid recovery plant and on the effects of
investments (or other measures) which modify the plant capacity.
2.3 Effective as of 1 October 2000, the above provisions modify the relevant
provisions in Section 5.1, Section 7.1, and Section 8.1 1st and 2nd
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sentence (with Annex 6) of the Main Contract, together with the
provisions in No. 3 and No. 4 of the 1st Supplemental Agreement dated 3
May 1996. For the period up to 30 September 2000, the provisions which
were in force thus far remain unchanged. ▇▇▇▇▇▇▇▇▇▇ took the modified
calculation into account for the first time in the invoicing for April
2001. After both parties have signed the instant Supplemental Agreement,
▇▇▇▇▇▇▇▇▇▇ shall calculate the discrepancy arising from the overburdened
fixed costs between October 2000 and March 2001and refund the excess
amount to KRONOS.
3. Continued Validity
The Main Contract and the First Supplemental Agreement to the Main
Contract dated 3 May 1996 continue to remain in force unchanged, insofar
as they are not modified by an express provision of the instant
Supplemental Agreement.
4. Written Form Requirement
Any modifications to this Agreement must be in writing. Cancellation of
the written form requirement must also be in writing.
47198 Duisburg-▇▇▇▇▇▇▇, dated December 6, ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ GmbH
/s/ ▇▇. ▇▇▇▇▇▇▇▇ Mr. Dratsdrummer
-----------------------------------
▇▇. ▇▇▇▇▇▇▇▇ Mr. Dratsdrummer
51373 Leverkusen, dated January 8, 2002
KRONOS TITAN GMBH & CO OHG
/s/ Dr. U. Fiand ▇. ▇▇▇▇
-----------------------------------
Dr. U. Fiand ▇. ▇▇▇▇
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Annex 1
Diagram for calculating the interest burden for KRONOS
1. Calculation of the interest for costing purposes in the operating A(A1;A2)
costs via primary cost check (currently in SAP-R/3 System)
(Separate for ancillary operations of the DSR and FS and its
ancillary operations)
2. Interest for costing purposes on SC as a whole K
3. Calculation of the proportion of interest for costing purposes, p = A/K
contained in the operating costs, in the interest for costing
purposes as a whole
4. Interest on borrowings in accordance with the Income Statement F
5. Calculation of the proportion of interest on borrowings for the B=F x p
operating costs
6. Apportionment of B based on the separate calculation of A B1
B2
DSR:
FS:
7. Calculation of the interest burden KRONOS B1 x 26%
invoicing B2 x 45%
DSR:
FS:
