STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered
into as of the 24th day of September, 2004, between Valhi, Inc. ("Valhi") and
Valcor, Inc. ("Valcor"), each a Delaware corporation (Valhi and Valcor each a
"Seller" and collectively the "Sellers"), and NL Industries, Inc., a New Jersey
corporation ("Purchaser").
Recitals
A. Valcor wishes to sell 10,000,000 shares (the "Valcor Shares") of
Class B common stock, $0.01 par value per share, of CompX International Inc.
("CompX"), a Delaware corporation,
B. Valhi wishes to sell 374,000 shares (the "Valhi Shares") of Class A
common stock, $0.01 par value per share, of CompX, and
C. Purchaser wishes to purchase the Valcor Shares and the Valhi Shares
(collectively, the "Shares"), on the terms and subject to the conditions set
forth in this Agreement (the "Transaction").
Agreement
The parties agree as follows:
ARTICLE I.
THE TRANSACTION
Section 1.1 Purchase and Sale of Shares. Against payment of the
purchase price therefor as specified in Section 1.2, each of Valcor and Valhi
hereby sells, transfers, assigns and delivers to Purchaser the Valcor Shares and
the Valhi Shares, respectively, and delivers certificates representing the
Valcor Shares and the Valhi Shares, respectively, accompanied by stock powers
duly endorsed in blank.
Section 1.2 Purchase Price and Payment. Purchaser hereby purchases all of the
Shares for a purchase price of $16.25 per Share, payment for which is hereby
made by means of two promissory notes that the Purchaser has caused Kronos
Worldwide, Inc., an affiliate of the Purchaser ("Kronos Worldwide"), to execute
as maker in the original principal amounts of $6,077,500 and $162,500,000 and
payable to Valhi and Valcor, respectively (the "Notes"). The Notes have
substantially identical terms as that certain Promissory Note dated December 8,
2003 in the original principal amount of $200 million executed by Kronos
Worldwide as maker and payable to Purchaser, which original promissory note has
been divided in substitution and replacement pursuant to Purchaser's
instructions in order to create the Notes.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller hereby jointly and severally represents and warrants to
Purchaser as of the date hereof as follows:
Section 2.1 Organization and Standing of CompX and the Sellers. CompX
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware with full corporate power and authority to own,
lease, use and operate its properties and to conduct its business as and where
now owned, leased, used, operated and conducted. Each of CompX's subsidiaries is
an organization duly organized, validly existing, and in good standing under the
laws of its jurisdiction of organization with full power and authority to own,
lease, use and operate its properties and to conduct its business as and where
now owned, leased, used, operated and conducted. Each of CompX and its
subsidiaries is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the property
it owns, leases or operates requires it to so qualify, except where the failure
to be so qualified or in good standing in such jurisdiction would not have a
Material Adverse Effect (as defined in Section 2.22 below) on CompX. Neither
CompX nor any of its subsidiaries is in default in the performance, observance
or fulfillment of any provision of its certificate of incorporation or bylaws.
CompX has elected not to be governed by Section 203 of the Delaware General
Corporation Law. Each of the Sellers is a corporation organized, validly
existing and in good standing under the laws of the State of Delaware.
Section 2.2 Subsidiaries of CompX. Except for the subsidiaries
described in Exhibit 21.1 to CompX's Annual Report on Form 10-K for the fiscal
year ended December 31, 2003 filed with the Securities and Exchange Commission
or as set forth in Section 2.2 to the disclosure schedules to this Agreement
(the "CompX Disclosure Schedule"), CompX does not own, directly or indirectly,
any equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise. CompX is not subject to any obligation or
requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such entity or any other person. CompX
owns, directly or indirectly, each of the outstanding shares of capital stock
(or other ownership interests having by their terms ordinary voting power to
elect a majority of directors or others performing similar functions with
respect to such subsidiary) of each of its subsidiaries. Except as set forth in
Section 2.2 to the CompX Disclosure Schedule, each of the outstanding shares of
capital stock of each of CompX's subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, and is owned, directly or indirectly, by
CompX free and clear of all liens, pledges, security interests, claims or other
encumbrances. There are no outstanding subscriptions, options, warrants, puts,
calls, agreements, understandings, claims or other commitments or rights of any
type relating to the issuance, sale or transfer of any securities of any of
CompX's subsidiaries, nor are there outstanding any securities that are
convertible into or exchangeable for any shares of capital stock of any of
CompX's subsidiaries, and neither CompX nor any of its subsidiaries has any
obligation of any kind to issue any additional securities or to pay for or
repurchase any securities of any of CompX's subsidiaries or any predecessor
thereof.
Section 2.3 Corporate Power and Authority of Sellers. Each of the
Sellers has all requisite corporate power and authority, without having to
obtain the consent or approval of any other person, to enter into and deliver
this Agreement, to perform its obligations under this Agreement and to
consummate the Transaction. The execution and delivery of this Agreement by each
of the Sellers have been duly authorized by all necessary corporate action on
the part of each of the Sellers. This Agreement has been duly executed and
delivered by each of the Sellers, and constitutes the legal, valid and binding
obligation of each of the Sellers enforceable against it in accordance with the
terms of this Agreement.
Section 2.4 Capitalization of CompX. As of September 22, 2004, CompX's
authorized capital stock consisted solely of: (a) 20,000,000 shares of Class A
common stock, par value $0.01 per share ("Class A Common Stock"), of which (i)
5,169,780 shares were issued and outstanding, (ii) no shares were issued and
held in treasury (which does not include the shares reserved for issuance set
forth in clause (iii) below), and (iii) 570,500 shares were reserved for
issuance upon the exercise of outstanding options to purchase shares of Class A
Common Stock ("Class A Options"); (b) 10,000,000 shares of Class B common stock,
par value $0.01 per share ("Class B Common Stock" and, together with the Class A
Common Stock, the "Common Stock"), of which (i) 10,000,000 shares were issued
and outstanding, (ii) no shares were issued and held in treasury (which does not
include the shares reserved for issuance set forth in clause (iii) below), and
(iii) no shares were reserved for issuance upon the exercise of outstanding
options to purchase shares of Class B Common Stock (the "Class B Options" and,
together with the Class A Options, the "Options"); and (c) 1,000 shares of
preferred stock, par value $0.01 per share ("Preferred Stock"), of which (i) no
shares were issued and outstanding, (ii) no shares were issued and held in
treasury and (iii) no shares were reserved for issuance upon the exercise of
outstanding options to purchase shares of Preferred Stock. No other shares of
capital stock or other securities of CompX are outstanding. None of CompX's
subsidiaries owns any capital stock of CompX. Each outstanding share of CompX
capital stock is duly authorized and validly issued, fully paid and
nonassessable, and has not been issued in violation of any preemptive or similar
rights. Other than as set forth in the first sentence of this Section 2.4 or in
Section 2.4 to the CompX Disclosure Schedule, there are no outstanding
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance,
sale, repurchase or transfer of any securities of CompX, nor are there
outstanding any securities that are convertible into or exchangeable for any
shares of CompX capital stock, and neither CompX nor any of its subsidiaries has
any obligation of any kind to issue any additional securities or to pay for or
repurchase any securities of CompX or any predecessor. The issuance and sale of
all of the shares of capital stock described in this Section 2.4 have been in
compliance with United States federal and state securities laws. Section 2.4 to
the CompX Disclosure Schedule accurately sets forth the names of all holders of
CompX capital stock subject to transfer restrictions, including the number of
shares of each class of CompX capital stock held by that holder and the vesting
schedule with respect to the CompX capital stock. Neither CompX nor any of its
subsidiaries has agreed to register any securities under the Securities Act of
1933, as amended (together with the rules and regulations thereunder, the
"Securities Act"), or under any state securities law or granted registration
rights to any individual or entity; complete and correct copies of any such
agreements have previously been provided to Purchaser. There are no outstanding
shares of restricted stock of CompX.
Section 2.5 Conflicts; Consents and Approvals. Neither the execution
and delivery of this Agreement by the Sellers nor the consummation of the
transactions contemplated by this Agreement will:
(a) conflict with, or result in a breach of any provision of,
the certificate of incorporation or bylaws of CompX or either of the
Sellers;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event that, with the
giving of notice, the passage of time or otherwise, would constitute a
default) under, or entitle any person (with the giving of notice, the
passage of time or otherwise) to terminate, accelerate, modify or call
a default under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties or
assets of CompX or either of the Sellers or any of their subsidiaries
under, any of the terms, conditions or provisions of any material note,
bond, mortgage, indenture, deed of trust, license, contract,
undertaking, agreement, lease or other instrument or obligation to
which CompX or the Sellers or any of their subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to CompX or the Sellers or any of their
subsidiaries or any of their respective properties or assets; or
(d) require any action or consent or approval of, or review
by, or registration or filing by CompX or the Sellers or any of their
affiliates with, any third party or any local, domestic, foreign or
multinational court, arbitral tribunal, administrative agency or
commission or other governmental or regulatory body, agency
instrumental ability or authority ("Governmental Authority"); except in
the case of Sections 2.5(c) and 2.5(d) for any of the foregoing that
would not, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect on CompX or a material
adverse effect on the ability of the parties hereto to consummate the
transactions contemplated by this Agreement.
Section 2.6 Brokerage and Finders' Fees; Expenses. None of the Sellers,
CompX or any stockholder, director, officer, employee or affiliate thereof has
incurred or will incur on behalf of CompX or its subsidiaries, any brokerage,
finders', advisory or similar fee in connection with the Transaction.
Section 2.7 CompX SEC Documents; Securities Law Matters. CompX and its
subsidiaries have timely filed with the Securities and Exchange Commission (the
"Commission") all forms, reports, schedules, statements and other documents
required to be filed by them since January 1, 2001 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or the Securities Act (as
supplemented and amended since the time of filing, collectively, the "CompX SEC
Documents"). The CompX SEC Documents, including any financial statements or
schedules included in the CompX SEC Documents, at the time filed (and, in the
case of registration statements and proxy statements, on the dates of
effectiveness and the dates of mailing, respectively, and, in the case of any
CompX SEC Document amended or superseded by a filing prior to the date of this
Agreement, then on the date of such amending or superseding filing) (a) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be. The
financial statements of CompX and its subsidiaries included in the CompX SEC
Documents at the time filed (and, in the case of registration statements and
proxy statements, on the dates of effectiveness and the dates of mailing,
respectively, and, in the case of any CompX SEC Document amended or superseded
by a filing prior to the date of this Agreement, then on the date of such
amending or superseding filing) complied as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the Commission with respect thereto, were prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto, or, in the case of unaudited statements, as permitted by Form
10-Q of the Commission), and fairly present (subject, in the case of unaudited
statements, to normal, recurring audit adjustments) the consolidated financial
position of CompX and its consolidated subsidiaries as at the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended. None of CompX's subsidiaries is subject to the periodic reporting
requirements of the Exchange Act or required to file any form, report or other
document with the Commission, any stock exchange or any other comparable
Governmental Authority.
With respect to each Annual Report on Form 10-K and each Quarterly
Report on Form 10-Q included in the CompX SEC Documents filed since January 1,
2001, the financial statements and other financial information included in such
reports fairly present in all material respects the financial condition and
results of operations of CompX as of, and for, the periods presented in the
CompX SEC Documents. CompX's principal executive officer and its principal
financial officer have disclosed to CompX's auditors and the audit committee of
the board of directors, based on their most recent evaluation, (i) all
significant deficiencies in the design or operation of internal controls that
could adversely affect CompX's ability to record, process, summarize and report
financial data and have identified for CompX's auditors any material weaknesses
in internal controls and (ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in CompX's internal
controls. CompX has established and maintains disclosure controls and procedures
(as such term is defined in Rule 13a-14 under the Exchange Act); such disclosure
controls and procedures are designed to ensure that material information
relating to CompX, including its consolidated subsidiaries, is made known to
CompX's principal executive officer and its principal financial officer by
others within those entities, particularly during the periods in which the
periodic reports required under the Exchange Act are being prepared; and, to the
best knowledge of the Sellers (as described in Section 2.23 below), such
disclosure controls and procedures are effective in timely alerting CompX's
principal executive officer and its principal financial officer to material
information required to be included in CompX's periodic reports required under
the Exchange Act. There are no outstanding loans made by CompX or any of its
subsidiaries to any executive officer (as defined in Rule 3b-7 under the
Exchange Act) or director of CompX. Since the enactment of the Sarbanes-Oxley
Act of 2002, neither CompX nor any of its subsidiaries has made any loans to any
executive officer or director of CompX or any of its subsidiaries.
Section 2.8 Compliance with Law. Except as disclosed in the CompX SEC
Documents, CompX and its subsidiaries are in compliance, and at all times since
January 1, 2001 have been in compliance, in each case, in all material respects,
with all applicable laws, statutes, orders, rules, regulations, policies or
guidelines promulgated, or judgments, decisions or orders entered by, any
Governmental Authority ("Applicable Laws") relating to CompX and its
subsidiaries or their business or properties, except where noncompliance with
Applicable Laws would not be reasonably expected to have a Material Adverse
Effect on CompX.
Except as disclosed in the CompX SEC Documents, no investigation or
review by any Governmental Authority with respect to CompX or any of its
subsidiaries is pending, or, to the best knowledge of the Sellers, threatened,
nor has any Governmental Authority indicated in writing an intention to conduct
such an investigation or review, except where any investigation or review would
not be reasonably expected to have a Material Adverse Effect on CompX.
To the best knowledge of the Sellers, neither CompX, nor any of CompX's
respective officers, directors, stockholders, employees, agents and/or
representatives has directly or indirectly (i) offered or paid any remuneration,
in cash or in kind, to or made any financial arrangements with, any past or
present customers, past or present suppliers, contractors or third party payors
in order to obtain business or payments from such persons, (ii) given or agreed
to give or is aware that there has been made that or there is any agreement to
make any material gift or gratuitous payment of any kind nature or description
to any customer or potential customer supplier or potential supplier, contractor
or third party payor or any other person, (iii) made or agreed to make or is
aware that that there has been made or that there is any agreement to make, any
material contribution, payment or gift of funds or property to or for the
private use of any governmental official, employee or agent where either the
contribution, payment or gift is illegal under applicable laws or regulations,
(iv) made, or agreed to make or is aware that there has been made or that there
is any agreement to make any material payment to any person with the intention
or understanding that any part of such payment would be used for any purpose
other than that described in the document supporting such payment, and/or (v)
conducted business other than in compliance with all applicable anti-kickback
laws and regulations, including but not limited to 42 U.S.C. 1320 a-7b(b) as
amended or any applicable state anti-kickback or other similar state or federal
laws.
Section 2.9 Litigation. Products Liability. Except as set forth in the
CompX SEC Documents, there is no suit, claim, action, proceeding, hearing,
notice of violation, demand letter or investigation (an "Action") pending, or,
to the best knowledge of the Sellers, threatened, against CompX or any of its
subsidiaries or any executive officer or director of CompX or any of its
subsidiaries that would reasonably be expected to have a Material Adverse Effect
on CompX or a material adverse effect on the ability of the Sellers to
consummate the Transaction. Neither CompX nor any of its subsidiaries is subject
to any outstanding order, writ, injunction or decree that, individually or in
the aggregate, insofar as can be reasonably foreseen, would be reasonably
expected to have a Material Adverse Effect on CompX or a material adverse effect
on the ability of the Sellers to consummate the Transaction. Since January 1,
2001, neither CompX nor any of its subsidiaries have been subject to any
outstanding order, writ, injunction or decree relating to CompX's or any of its
subsidiaries' method of doing business or its or their relationship with past,
existing or future users or purchasers of any goods or services of CompX or any
of its subsidiaries, except in all cases where such order, writ, injunction or
decree would not reasonably be expected to have a Material Adverse Effect on
CompX. There is no Action presently pending, or, to the best knowledge of the
Sellers, threatened, against CompX relating to any alleged hazard or alleged
defect in design, manufacture, materials or workmanship, including any failure
to warn or alleged breach of express or implied warranty or representation,
relating to any product manufactured, distributed or sold by or on behalf of
CompX or any of its subsidiaries, except in all cases where the Action would not
reasonably be expected to have a Material Adverse Effect on CompX. Neither CompX
nor any of its subsidiaries has extended to its customers any written nonuniform
product warranties, indemnifications or guarantees, except in all cases where
such warranty, indemnification or guarantee is not reasonably expected to have a
Material Adverse Effect on CompX.
Section 2.10 No Material Adverse Change. Except as set forth in Section
2.10 to the CompX Disclosure Schedule, since December 31, 2003, there has been
no material adverse change in the assets, liabilities, business, results of
operations or financial condition of CompX and its subsidiaries taken as a whole
or any event, occurrence or development that would reasonably be expected to
have a Material Adverse Effect on CompX or a material adverse effect on the
ability of the Sellers to consummate the Transaction.
Section 2.11 Taxes.
(a) Each of CompX, its subsidiaries, and any Company Group
(defined below) has (i) timely filed all federal, state, local and
foreign tax returns, declarations, statements, reports, schedules,
forms and information returns ("Tax Returns") required by applicable
law to be filed by any of them prior to or as of the date hereof,
except where the failure to so file would not be reasonably expected to
have a Material Adverse Effect on CompX, and (ii) withheld all Taxes
(defined below) required to be withheld by any of them, and paid all
Taxes required to be paid by any of them, except where the failure to
so withhold or pay would not be reasonably expected to have a Material
Adverse Effect on CompX. For purposes of this Agreement, (x) "Company
Group" means any group of corporations, of which CompX is or has been a
member, which files or has filed consolidated federal income tax
returns or combined, unitary, or consolidated state tax returns, and
(y) "Taxes" shall include all federal, state, local and foreign income,
withholding, property, sales, excise and other taxes, tariffs or
governmental charges of any nature whatsoever, together with penalties,
interest or additions with respect thereto.
(b) The most recent audited financial statements for CompX
reflect an adequate reserve for all Taxes payable by CompX and its
subsidiaries for all taxable periods and portions thereof through the
date of such financial statements, and, after such date, none of CompX
or any of its subsidiaries has incurred any material liability for
Taxes other than in the ordinary course of business.
(c) There are no material liens for Taxes with respect to any
of the properties of CompX or its subsidiaries, other than statutory
liens for Taxes not yet due.
(d) (i) No Tax Return of CompX, its subsidiaries, or any
Company Group is under audit or examination by any taxing authority
that would be reasonably expected to have a Material Adverse Effect on
CompX, (ii) no deficiency or adjustment for any Taxes has been
threatened, proposed, asserted or assessed against CompX, its
subsidiaries, or any Company Group that would be reasonably expected to
have a Material Adverse Effect on CompX, (iii) no requests for waivers
of the time to assess any Taxes are pending or have been agreed to by
CompX, its subsidiaries, or any Company Group, and (iv) the relevant
statute of limitations is closed with respect to the federal, foreign
and material state and local Tax Returns of CompX, its subsidiaries,
and any Company Group for all years through 2000.
(e) Neither CompX nor any of its subsidiaries is a party to or
is bound by any tax sharing agreement, tax indemnity obligation or
similar agreement, arrangement or practice with respect to Taxes, other
than the Tax Sharing Agreement, dated January 2, 1998, among Valcor,
CompX, and Valhi.
(f) Neither CompX nor any of its subsidiaries will be required
to include in a taxable period ending after the date of this Agreement
any taxable income attributable to income that accrued, but was not
recognized, on or prior to the date of this Agreement, as a result of
an adjustment under Section 481 of the Internal Revenue Code of 1986,
as amended, or any comparable provision of state, local, or foreign Tax
law, or for any other reason.
Section 2.12 Intellectual Property. "Intellectual Property" means the
collective reference to, whether or not registered, United States and foreign
patents, patent application, trademarks, trademark applications, trade names,
service marks, and the associated goodwill, technical knowledge and processes,
formal or informal licensing, arrangements, blueprints, internet domain names,
websites, technical specifications, copyrights, copyright applications, trade
secrets, designs, rights in designs, know-how, inventions (whether or not
patentable), and all embodiments of the foregoing and rights thereto.
(a) CompX owns or possesses licenses or other rights to use
all Intellectual Property necessary to the conduct of the business as
currently conducted.
(b) To the Sellers' best knowledge, CompX has not interfered
with, infringed upon, misappropriated or otherwise come into conflict
with the Intellectual Property of any third party or committed any acts
of unfair competition and no claims have been asserted by any third
party alleging such interference, infringement, misappropriation,
conflict or act of unfair competition.
(c) To the Sellers' best knowledge, no third party is
infringing upon the Intellectual Property owned or used by CompX, and
CompX has not notified any third party that it believes that such third
party is interfering with, infringing, misappropriating or otherwise
acting in conflict with the Intellectual Property owned or used by
CompX, or engaging in any act of unfair competition or has done any of
the foregoing, except for such infringements, interference,
misappropriation or other acts that would not be reasonably expected to
have a Material Adverse Effect.
(d) There is no Intellectual Property developed by any
shareholder, director, officer, consultant or employee of CompX that is
used in CompX's business and that has not been transferred to, or is
not owned free and clear of any liens by, CompX (except for liens
granted to third party institutional lenders).
(e) CompX has taken reasonable and practicable steps
(including, without limitation, entering into confidentiality and
nondisclosure agreements with all officers, directors and employees of
and consultants to CompX with access to or knowledge of its
Intellectual Property) designed to safeguard and maintain the secrecy,
confidentiality and proprietary nature of the Intellectual Property
owned or used by CompX.
(f) CompX has taken (or has ensured that the owner of its
Intellectual Property has taken) all necessary action in all
appropriate jurisdictions to register and maintain the registration of
all of its Intellectual Property that may be registered, except where
the failiure to so act would not be reasonably expected to have a
Material Adverse Effect.
Section 2.13 Title to and Condition of Properties. CompX and its
subsidiaries own or hold under valid leases all real property, plants, machinery
and equipment necessary for the conduct of the business of CompX and its
subsidiaries as presently conducted, except where the failure to own or hold
such property, plants, machinery and equipment would reasonably be expected to
have a Material Adverse Effect on CompX. The buildings, plants, machinery and
equipment necessary for the conduct of the businesses of CompX and its
subsidiaries as presently conducted are structurally sound, are in good
operating condition and repair, normal wear and tear excepted, and are adequate
for the uses to which they are being put, and none of such buildings, plants,
machinery or equipment is in need of maintenance or repairs, except for
ordinary, routine maintenance and repairs that are not material in nature or
cost.
Section 2.14 Employee Benefit Plans. All employee benefit plans (as
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and all other pension, profit sharing, deferred compensation, stock
option, employee stock purchase, insurance, vacation, sick leave, and other
employee benefit plans or arrangements sponsored or maintained by CompX, or with
respect to which CompX has or may have any liability (all are referred to herein
as "Employee Benefit Plans"), are and have been at all times fully funded and
are and have been at all times in compliance in all material respects with all
applicable provisions of ERISA and all other applicable laws.
Section 2.15 Contracts. Except as disclosed in the CompX SEC Documents,
neither CompX nor any of its subsidiaries is a party to or otherwise bound by
any written or oral contracts, agreements, guarantees, leases and executory
commitments, (each, a "Contract") that fall within any of the following
categories: (a) Contracts not entered into in the ordinary course of CompX's or
any of its subsidiaries business other than those that are not material to the
business of CompX or any of its subsidiaries, (b) joint venture, partnership and
similar agreements, (c) Contracts that are service contracts or equipment leases
involving payments by CompX and any of its subsidiaries, in the aggregate, of
more than $250,000 per year, (d) Contracts containing covenants purporting to
limit CompX's or any of its subsidiaries' right to compete in any line of
business, sell, supply or distribute any product, in each case, in any
geographic area or to hire any individual or group of individuals, (e) Contracts
that would have the effect of limiting the freedom of Purchaser or any of its
subsidiaries (other than CompX and any of its subsidiaries) to compete in any
line of business in any geographic area or to hire any individual or group of
individuals, (f) Contracts that contain minimum purchase conditions in excess of
$250,000 or requirements or other terms that restrict or limit the purchasing
relationships of CompX or any of its affiliates, or any customer, licensee or
lessee thereof, (g) Contracts relating to any outstanding commitment for capital
expenditures in excess of $250,000, (h) Contracts relating to the lease or
sublease of or sale or purchase of real or personal property not cancelable by
CompX or any of its subsidiaries (without premium or penalty) within one month,
(i) Contracts with any labor organization or union, (j) indentures, mortgages,
promissory notes, loan agreements, guarantees of borrowed money in excess of
$1,000,000, letters of credit or other agreements or instruments of CompX or any
of its subsidiaries or commitments for the borrowing or the lending of amounts
in excess of $1,000,000 by CompX or any of its subsidiaries or providing for the
creation of any charge, security interest, encumbrance or lien upon any of the
assets of CompX or any of its subsidiaries, (k) Contracts involving annual
revenues to the businesses of CompX and any of its subsidiaries in excess of 5%
of CompX's 2003 annual revenues, (l) Contracts providing for "earn-outs,"
"savings guarantees," "performance guarantees," or other contingent payments by
CompX or any of its subsidiaries involving more than $1,000,000 over the term of
the Contract and (m) Contracts with or for the benefit of any of CompX's
affiliates or immediate family member thereof (other than CompX's subsidiaries)
involving more than $60,000 in the aggregate per affiliate. All Contracts
disclosed in the CompX SEC Documents are valid and binding obligations of CompX
or of its subsidiary, and, to the best knowledge of the Sellers, the valid and
binding obligation of each other party thereto, except such Contracts that, if
not so valid and binding, would not, individually or in the aggregate, be
reasonably expected to have a Material Adverse Effect on CompX. None of CompX,
any of its subsidiaries, and, to the best knowledge of the Sellers or any other
party thereto, is in violation of or in default in respect of, nor has there
occurred an event or condition that with the passage of time or giving of notice
(or both) would constitute a default under or permit the termination of, any
such Contract except such violations or defaults under or terminations which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on CompX.
Section 2.16 Labor Matters.
(a) To the Sellers' best knowledge, no officer, employee, or
any group of employees, intends to terminate his, her or their
employment with CompX, and CompX has no present intention to terminate
the employment of any officer, employee or group of employees.
(b) CompX is in compliance with the terms of its collective
bargaining agreement and, to the Sellers' best knowledge, the
applicable union is in compliance with the terms thereof.
(c) CompX is in compliance in all material respects with all
currently applicable laws and regulations respecting wages, hours,
occupational safety, health and employment practices, and
discrimination in employment terms and conditions, and is not engaged
in any unfair labor practice except, in each case, where such practice
or failure to comply, individually or collectively, would not
reasonably be expected to have a Material Adverse Effect on CompX.
(d) There are no proceedings pending or, to the Sellers' best
knowledge, threatened, between CompX and any of its current or former
employees, including any applicable unions.
Section 2.17 Undisclosed Liabilities. To the best knowledge of the
Sellers, except (a) as and to the extent disclosed or reserved against on the
balance sheet of CompX as of December 31, 2003 included in the CompX SEC
Documents, (b) as incurred after the date thereof in the ordinary course of
business consistent with prior practice or (c) as disclosed in the CompX SEC
Documents, neither CompX nor its subsidiaries have any liabilities or
obligations of any nature, whether known or unknown, absolute, accrued,
contingent or otherwise and whether due or to become due, that, individually or
in the aggregate, would reasonably be expected to have a Material Adverse Effect
on CompX.
Section 2.18 Permits; Compliance. CompX and its subsidiaries are in
possession of all material franchises, grants, authorizations, licenses,
permits, easements, variances, exemptions, consents, certificates, approvals and
orders necessary to own, lease and operate its properties and to carry on
business as it is now being conducted (collectively, the "CompX Permits"), and
there is no Action pending, or, to the best knowledge of the Sellers,
threatened, regarding any of the CompX Permits. CompX is not in conflict with,
or in default or violation of any of the CompX Permits, except for any such
conflicts, defaults or violations that, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect on CompX.
Section 2.19 Environmental Matters. Except as disclosed in the CompX
SEC Documents, CompX and its subsidiaries and all properties owned or operated
by CompX or its subsidiaries are in compliance with all federal, state and local
laws governing hazardous substances, pollution or the protection of the
environment ("Environmental Laws"), except where the failure to comply with
Environmental Laws would not be reasonably expected to have a Material Adverse
Effect on CompX. Except as disclosed in the CompX SEC Documents, no written
claim has been received by CompX or any of its subsidiaries from any
governmental entity alleging that CompX or any of its subsidiaries is not in
compliance with any Environmental Law and there has been no release of a
Hazardous Substance, as such term is defined in the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss.ss. 9601 et seq., on any
of the real properties now or previously owned or operated by CompX or any of
its subsidiaries for which CompX or such subsidiary could reasonably be expected
to have a liability, except where such claim or release would not reasonably be
expected to have a Material Adverse Effect on CompX.
Section 2.20 Insurance. CompX and its subsidiaries presently are
insured and during each of the past five calendar years have been insured
against such risks as companies engaged in a similar business would, in
accordance with good business practice, customarily be insured. CompX's
insurance policies are in all material respects in full force and effect in
accordance with their terms, no notice of cancellation has been received, and
there is no existing default or event that, with the giving of notice or lapse
of time or both, would constitute a default thereunder. Such insurance policies
are in all material respects in amounts that are customary, adequate and
suitable in relation to the business, assets and liabilities of CompX or any of
its subsidiaries and all premiums to date have been paid in full.
Section 2.21 Ownership of Shares. Each of the Sellers is the record and
beneficial owner of the Shares being sold by it hereunder and, upon consummation
of the Transaction, Purchaser will acquire good title to such Shares, free and
clear of any liens, encumbrances, security interests, restrictive agreements or
claims of any nature whatsoever, other than restrictions on transfer imposed by
applicable federal and state securities laws.
Section 2.22 Material Adverse Effect. For the purposes of any provision
of this Agreement, a "Material Adverse Effect" with respect to any party hereto
shall be deemed to occur if (a) in any individual representation or warranty in
this Agreement, when read without any exception or qualification for materiality
or a material adverse effect, the aggregate consequences of breaches and
inaccuracies of such representation and warranty taken together with breaches
and inaccuracies of any other representation and warranty would or would
reasonably be expected to have a material adverse effect on the assets,
liabilities, business, long-term profitability, results of operations or
financial condition of such party hereto and its subsidiaries taken as a whole,
and (b) elsewhere in this Agreement, the aggregate consequences of all breaches
and inaccuracies of covenants and representations of such party under this
Agreement, when read without any exception or qualification for materiality or a
material adverse effect, would or would reasonably be expected to have a
material adverse effect on the assets, liabilities, business, long-term
profitability, results of operations or financial condition of such party and
its subsidiaries taken as a whole or on its ability to consummate the
transactions contemplated by this Agreement.
Section 2.23 Best Knowledge. Whenever the term "best knowledge" is used
in this Agreement with respect to a Seller, the same shall mean the current,
actual knowledge of such Seller's executive officers.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to each Seller as of the date
of this Agreement as follows:
Section 3.1 Authority. It is a corporation validly existing and in good
standing under the laws of the State of New Jersey. It has full corporate power
and authority, without the consent or approval of any other person, to execute
and deliver this Agreement, to cause the delivery of the Notes and to consummate
the Transaction. All corporate and other actions required to be taken by or on
behalf of it to authorize the execution, delivery and performance of this
Agreement have been duly and properly taken.
Section 3.2 Validity. This Agreement is duly executed and delivered by
it and, assuming the due authorization, execution and delivery hereof by the
other parties hereto, constitutes its lawful, valid and binding obligation,
enforceable against the Purchaser in accordance with the terms of this
Agreement.
Section 3.3 Consents and Approvals; No Conflicts. None of the
execution, delivery and performance of this Agreement or the consummation by it
of the Transaction (a) conflict with or result in a breach of any term or
provision of its charter or bylaws; (b) require any consent, approval
authorization or permit of, or filing with or notification to any court or
governmental entity, including without limitation pursuant to the Hart Scott
Rodino Antitrust Improvements Act of 1976, as amended, but excluding disclosure
of the Transaction pursuant to the Exchange Act; (c) violate, conflict with or
constitute a breach of any of the terms or provisions of, require any consent
under, result in a default (or an event that with notice or lapse of time or
both would become a default) under any material contract, agreement or other
instrument to which it is a party or by which it is bound; or (d) violate or
conflict with any order, writ, injunction, decree or judgment of any court or
governmental entity applicable to it; except in each case for such consents,
approvals, authorizations, permits, filings or notifications that are not
obtained, or such conflicts, breaches, violations, defaults or violations, that
would not have a material adverse effect on its authority to consummate the
Transaction.
Section 3.4 Purchase for Investment. It is an "accredited investor" as
defined in Regulation D promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), and it is purchasing the Shares sold and delivered to it
hereunder for investment solely for its own account and not with a view to, or
for resale in connection with, the distribution thereof. It understands that
such Shares are restricted securities under the Securities Act and that such
Shares must be held indefinitely unless they are registered under the Securities
Act and any applicable state securities or blue sky laws or an exemption from
such registration is available. It is not acquiring the Shares as a result of
any general solicitation or general advertising, including advertisements,
articles, notices or other communications published in any newspaper, magazine
or similar media or broadcast over radio or television, or any seminar or
meeting whose attendees have been invited by general solicitation or general
advertising.
Section 3.5 Nature of Purchaser. It has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the purchase of the Shares and is able to financially bear the
risks thereof. It has had the opportunity to discuss CompX and its business,
management and financial affairs with the management of CompX and its affiliates
and has received (or has had made available) any financial and business
documents it has requested, and there is no additional information regarding
CompX or the Shares that it wishes to receive or that it requires in order to
made an informed business decision with respect to the Shares.
Section 3.6 Brokers. Neither Purchaser nor any stockholder, director,
officer, employee or affiliate thereof has incurred or will incur on behalf of
CompX or its subsidiaries, any brokerage, finders', advisory or similar fee in
connection with the Transaction.
ARTICLE IV.
INDEMNIFICATION
Section 4.1 Survival of Representations and Warranties. All of the
representations, warranties and agreements made by the Sellers shall survive the
execution and delivery of this Agreement for a period of twelve (12) months
following the date hereof; provided, that the representations, warranties and
agreements made by the Sellers in Sections 2.3, 2.11, 2.19 and 2.21 shall
survive the execution and delivery of this Agreement and for the respective
applicable statute of limitations.
All representations, warranties and agreements of Purchaser shall
survive the execution and delivery of this Agreement for a period of twelve (12)
months following the date hereof.
Section 4.2 Obligation of the Sellers to Indemnify. Subject to the
limitations set forth in Sections 4.1 and 4.5, the Sellers hereby agree to
indemnify, defend and hold harmless Purchaser and its directors, officers,
employees, affiliates, successors, assigns and representatives, from and against
all claims, losses, liabilities, damages, deficiencies, judgments, settlements,
costs of investigation or other out-of-pocket expenses (including interest,
penalties and reasonable attorneys' fees and disbursements and expenses incurred
in enforcing this indemnification or in any litigation between the parties or
with third parties) (collectively, the "Losses") suffered or incurred by
Purchaser or any of the foregoing persons arising out of any breach of the
representations, warranties and agreements of the Sellers contained in this
Agreement or the CompX Disclosure Schedule; provided, that, for any
representation, warranty or agreement that is limited by materiality or a
Material Adverse Effect ("Materiality Language"), a misrepresentation or breach
of such representation, warranty or agreement shall be determined, solely for
purposes of this Article IV, as if Materiality Language were not included
therein.
Section 4.3 Obligations of Purchaser to Indemnify. Purchaser hereby
agrees to indemnify, defend and hold harmless each Seller and its directors,
officers, employees, affiliates, successors, assigns and representatives from
and against all Losses suffered or incurred by the Sellers or any of the
foregoing persons arising out of any breach of the representations, warranties
or agreements of Purchaser contained in this Agreement.
Section 4.4 Notice and Opportunity to Defend Third Party Claims.
(a) Promptly after receipt by any party hereto (the
"Indemnitee") of notice of any demand, claim or circumstance that gives
rise to a claim or the commencement (or a written threat of the
commencement) of any action, proceeding or investigation (an "Asserted
Liability") that may result in a Loss, the Indemnitee shall give prompt
notice thereof (the "Claims Notice") to the party or parties obligated
to provide indemnification pursuant to Section 4.2 or 4.3 (the
"Indemnifying Party"). The Claims Notice shall describe the Asserted
Liability in reasonable detail and shall indicate the amount
(estimated, if necessary, and to the extent feasible) of the Loss that
has been or may be suffered by the Indemnitee.
(b) The Indemnifying Party may elect to defend, at its own
expense and with its own counsel satisfactory to Indemnitee, any
Asserted Liability, but only if (A) the Indemnifying Party notifies the
Indemnitee in writing within 30 days after the Indemnitee has given
notice of the Asserted Liability that the Indemnifying Party will
indemnify the Indemnitee from and against any Losses the Indemnitee may
suffer resulting from, arising out of, relating to, or caused by the
Asserted Liability, (B) the Asserted Liability involves only money
damages and does not seek an injunction or other equitable relief, (C)
settlement of, or an adverse judgment with respect to, the Asserted
Liability is not, in the good faith judgment of the Indemnitee, likely
to establish a precedential custom or practice adverse to the
continuing business interests of the Indemnitee, (D) the Indemnifying
Party conducts the defense of the Asserted Liability actively and
diligently, and (E) the Indemnitee shall have reasonably concluded that
there is no conflict of interest between the Indemnitee and the
Indemnifying Party in the conduct of such defense. If the Indemnifying
Party elects to defend such Asserted Liability, it shall within 30 days
(or sooner, if the nature of the Asserted Liability so requires) notify
the Indemnitee of its intent to do so, and the Indemnitee shall
cooperate, at the expense of the Indemnifying Party, in the defense of
such Asserted Liability. If the Indemnifying Party assumes the defense
against any Asserted Liability it will be conclusively established for
purposes of this Agreement that such Asserted Liability is within the
scope of, and subject to, indemnification. If the Indemnifying Party
elects not to defend the Asserted Liability, is not permitted to defend
the Asserted Liability by reason of the first sentence of this Section
4.4(b), fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement
with respect to such Asserted Liability, the Indemnitee may pay,
compromise or defend such Asserted Liability at the sole cost and
expense of the Indemnifying Party if determined to be liable to the
Indemnitee hereunder. In any event, the Indemnitee and the Indemnifying
Party may participate, at their own expense, in the defense of such
Asserted Liability. If the Indemnifying Party chooses to defend any
Asserted Liability, the Indemnitee shall make available to the
Indemnifying Party any books, records or other documents within its
control that are necessary or appropriate for such defense. Any
expenses of any Indemnitee for which indemnification is required
hereunder shall be paid upon written demand therefor; provided that the
Indemnitee provides the Indemnifying Party with all documentation
necessary to support such expenses and undertakes to reimburse the
Indemnifying Party for any such expenses if indemnification is
ultimately determined not to be available or appropriate under the
terms of this Agreement.
Section 4.5 Limitation and Indemnification; Payments of Losses.
(a) The Sellers' liability for indemnifiable damages pursuant
to this Article IV shall not be payable unless and until the amount of
Losses suffered or incurred by Purchaser exceeds in the aggregate $1.7
million (the "Basket Amount"); thereafter, the Sellers shall be
responsible for the payment of Losses in excess of the Basket Amount
subject to the limitations set forth in this Section 4.5.
(b) The Sellers shall not have any liability for indemnifiable
damages pursuant to this Article IV to the extent the aggregate amount
of Losses suffered or incurred by Purchaser in excess of the Basket
Amount exceeds an amount equal to $80.0 million (the "Cap").
(c) Notwithstanding anything to the contrary hereunder, any
amounts payable by the Indemnifying Party pursuant to this Article IV
shall be reduced by the amount of any insurance proceeds recovered by
the Indemnitee in connection with such Claim.
(d) The parties will act in good faith so that any amounts
payable by an Indemnifying Party to an Indemnitee pursuant to this
Article IV shall be treated, for tax purposes, as an adjustment to the
Purchase Price, unless a final determination with respect to an
Indemnitee or any of its affiliates causes any such payment not to be
treated as an adjustment to purchase price for United States federal
income tax purposes. Subject to the Cap, if such payment cannot be
treated as an adjustment to the purchase price for tax purposes, then
such indemnification payment shall be increased to take account of any
net tax cost incurred by the Indemnitee as a result of the receipt or
accrual of such payments.
ARTICLE V.
GENERAL PROVISIONS
Section 5.1 Restricted Shares. Purchaser hereby consents to the placing
of a legend on any stock certificates evidencing the Shares stating that the
Shares are restricted securities and to CompX's issuance of stop transfer
instructions in connection with the Shares.
Section 5.2 Amendment and Waiver. No amendment or waiver of any
provision of this Agreement shall in any event be effective unless the same
shall be in a writing referring to this Agreement and signed by the parties
hereto, and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
Section 5.3 Parties and Interest. This Agreement shall bind and inure
to the benefit of the parties named herein and their respective heirs,
successors and assigns.
Section 5.4 Entire Transaction. This Agreement contains the entire
understanding among the parties with respect to the transactions contemplated
hereby and supersedes all other agreements and understandings among the parties
with respect to the subject matter of this Agreement.
Section 5.5 Applicable Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Delaware, without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
Section 5.6 Severability. If any provision of this Agreement is found
to violate any statute, regulation, rule, order or decree of any governmental
authority, court, agency or exchange, such invalidity shall not be deemed to
effect any other provision hereof or the validity of the remainder of this
Agreement and such invalid provision shall be deemed deleted to the minimum
extent necessary to cure such violation.
Section 5.7 Notice. All notices, requests, demands and other
communications hereunder shall be in writing and shall be sent by registered or
certified mail, postage prepaid as follows:
If to the Sellers: Valhi, Inc.
5430 LBJ Freeway
Three Lincoln Centre, Suite 1700
Dallas, Texas 75240-2697
Attention: General Counsel
Valcor, Inc.
5430 LBJ Freeway
Three Lincoln Centre, Suite 1700
Dallas, Texas 75240-2697
Attention: General Counsel
If to Purchaser: NL Industries, Inc.
5430 LBJ Freeway
Three Lincoln Centre, Suite 1700
Dallas, Texas 75240-2697
Attention: General Counsel
Section 5.8 Headings. The sections and other headings contained in this
Agreement are for reference purposes only and shall not effect in any way the
meaning or interpretation of this Agreement.
Section 5.9 Expenses. Except as otherwise expressly provided herein,
each party to this Agreement shall pay its own costs and expenses in connection
with the transactions contemplated hereby.
Section 5.10 Transfer Taxes. All stock transfer, real property
transfer, documentary, sales, use, registration, value-added and other similar
taxes incurred in connection with the transactions contemplated by this
Agreement shall be borne by the Sellers and the Sellers shall indemnify
Purchaser for any such taxes incurred by Purchaser as a result of the Sellers'
failure to timely pay such taxes.
The parties hereto have caused this Agreement to be executed by their
duly authorized officers as of the date first written above.
VALHI, INC.
By: /s/ Bobby D. O'Brien
------------------------------------
Bobby D. O'Brien, Vice President
VALCOR, INC.
By: /s/ Bobby D. O'Brien
------------------------------------
Bobby D. O'Brien, Vice President
NL INDUSTRIES, INC.
By: /s/ Gregory M. Swalwell
-----------------------------------
Gregory M. Swalwell, Vice President