EXHIBIT 10.8
FORM OF KRONOS COST SHARING AGREEMENT
between
1. KRONOS INTERNATIONAL, INC., a corporation organized under the laws of
the State of Delaware/USA, with its principal office and seat of
management in Leverkusen, Germany (hereinafter being referred to as
"KII").
2. KRONOS EUROPE S.A./N.V., a corporation organized under the laws of the
Kingdom of Belgium with its registered office at Gent, Belgium
(hereinafter being referred to as "KEU").
3. KRONOS (US), INC., a corporation organized under the laws of the State
of Delaware (USA), with its principal office in Houston, Texas
(hereinafter being referred to as "KUS").
4. NL INDUSTRIES, INC., a corporation organized under the laws of the
State of New Jersey (USA), with its principal office in Houston, Texas
(hereinafter being referred to as "NL").
5. KRONOS TITAN GmbH & Co. OHG, a corporation organized under the laws of
the Federal Republic of Germany with its seat in Leverkusen, Germany
(hereinafter being referred to as "TG").
6. SOCIETE INDUSTRIELLE du TITANE S.A., a corporation organized under the
laws of the Republic of France, with its registered office at Paris,
France (hereinafter being referred to as "SIT").
7. KRONOS TITAN A/S, a corporation organized under the laws of the Kingdom
of Norway, with its seat in Fredrikstad, Norway (hereinafter being
referred to as "TAS").
8. TITANIA A/S, a corporation organized under the laws of the Kingdom of
Norway, with its seat in Hauge i Dalane, Norway (hereinafter being
referred to as "TIA").
9. KRONOS LTD., a corporation organized under the laws of the United
Kingdom with its registered office at Wilmslow, Cheshire, United
Kingdom (hereinafter being referred to as "KUK").
10. KRONOS CANADA, INC., a corporation incorporated under the laws of the
Dominion of Canada with its registered office at Montreal, Canada
(hereinafter being referred to as "KC").
11. KRONOS DENMARK ApS, a corporation organized under the laws of Denmark,
with its registered office at Holte, Denmark (hereinafter being
referred to as "KDK").
12. KRONOS LOUISIANA INC., a corporation organized under the laws of the
state of Delaware (USA), with its principal office in Houston, Texas
(hereinafter being referred to as "KLA").
Whereas, some of the parties hereto are parties to a cost sharing agreement
dated December 31, 1993 (hereinafter referred to as the "1993 KRONOS Cost
Sharing Agreement").
Whereas, KII has been organized with its seat of management in Germany in order
to improve the worldwide coordination of management experience and in order to
improve the position of the group in a unified European market.
Whereas, the parties hereto intend to rationalize the separate management
responsibilities for the TiO2 business.
Whereas, the parties hereto wish to maximize their individual and collective
profitability.
Whereas, TIA is engaged in the business of mining ilmenite which is a raw
material necessary to the production of TiO2.
Whereas, the other parties hereto are engaged in either or both of the
businesses of manufacturing and selling TiO2.
Whereas, KUS has expertise in:
o Information Systems
o Business Operations and Strategies
o Executive Management
o Credit and Collections
Whereas, KEU has expertise in:
o Sales and marketing of TiO2
o Information Systems
o Finance and Control
o Treasury, Credit, Collections, Factoring
Whereas, KII has expertise in:
o Customer Support
o Advertising
o Logistics
o Finance & Control
o Human resources and Legal
o Purchasing
o Production management
o Engineering
These areas of expertise of KUS, KEU and KII being hereinafter referred to as
the "Common Areas of Interest".
Whereas, pursuant to the Services Agreement between NL and KUS dated January 1,
1995 (the "NL-KUS Agreement"), NL provides Tax Planning and Compliance services,
Internal Audit services (including the services of the Internal Auditor employed
by KEU) and Risk
Management services (including Risk Management services provided by NL through
Contran Corporation) to KUS and other parties to this agreement and charges KUS
for all such services.
Whereas the services of the Internal Auditor employed by KEU are under the
direct supervision of the NL Internal Audit Department and are used for the
benefit of other parties to this agreement.
Whereas, the parties hereto desire to benefit from the expertise of KUS, KEU and
KII in the Common Areas of Interest.
Now, therefore, the parties hereto agree to what follows:
1. The old KRONOS Cost Sharing Agreement is terminated effective December
31, 2001.
2. KUS, KEU and KII shall advise, and coordinate the activities of the
parties hereto in the Common Areas of Interest. In order to achieve a
close cooperation in the Common Areas of Interest, the contracting
parties shall be entitled to draw on the experience of KUS, KEU and KII
on demand.
3. In their capacity as parties to this agreement KUS, KEU and KII have a
mere advisory capacity and shall in no event be authorized to give
binding directions to the other parties to this agreement or to act in
their name or as their agent.
4. In order to compensate KUS, KEU, and KII for the continued extension of
advice in the Common Areas of Interest, the parties hereto shall share
the costs of KUS, KEU, and KII in the Common Areas of Interest.
Further, in order to compensate KUS for NL costs charged under the
NL-KUS Agreement for services rendered by NL to KUS as well as to other
parties to this agreement, the parties hereto shall share such NL
costs. The costs to be shared or other compensation agreed to, shall
hereinafter be referred to as the "Reimbursable Costs". Any withholding
tax or value added tax that shall arise with respect to any payment
hereunder shall be for the account of the recipient of the services and
will be payable in addition to the amount of Reimbursable Costs payable
hereunder.
5. The parties hereto shall, before the beginning of each calendar year,
agree on the budgeted amounts of Reimbursable Costs and the allocation
method to be applied for the coming year. The initial method of
allocation is attached hereto as Exhibit 1. Such allocation method may
with mutual agreement be revised from time to time. All amounts on
which the allocation is based shall be computed in US-$ for KUS and
Euros for KEU and KII at the exchange rates applicable for the planning
cycle.
6. KUS, KII and KEU shall charge quarterly in advance, based on their
budgeted amounts for such quarter and on budgeted allocation keys, the
participating parties hereto. Such payables of the participating
parties are netted within the KRONOS netting system the first month of
that quarter. After the end of each calendar year, KUS, KII and KEU
shall each determine the annual total actual amount of its respective
Reimbursable Costs and the final share of each obligated party and
shall issue, based on actual allocation keys, a credit or debit note,
as the case may be. All charges shall be made in the currency of the
charging unit.
7. All internal audit costs of KEU shall be charged to NL. Internal audit
costs charged to KUS by NL under the NL-KUS Agreement (which shall
include a portion of the internal audit costs charged by KEU to NL),
shall be charged to other parties to this agreement on a per diem basis
as internal audit services are rendered to such parties. Per diem rates
for such services shall be determined based on relevant salary,
benefit, travel and other costs of the individuals performing and
supervising such services.
8. Information Services from KUS shall be charged on a direct allocation
basis as determined by the Director of IS.
9. Engineering charges from KII shall be charged on a direct allocation
basis as determined by the KII Director of Engineering.
10. This agreement shall commence on January 1, 2002 and shall continue to
be effective unless it is cancelled by any party giving three months
advance written notice preceding the start of the next calendar year.
11. This agreement shall be governed by the laws of the Federal Republic of
Germany
12. In case a successor should take over the business of a party to this
agreement, in whole or in part, such successor shall assume the rights
and obligations of the transferring party.
13. Any disputes arising out of or in connection with this agreement shall
be settled by arbitration. The court of arbitration shall consist of
three arbiters. The claimant and the defendant shall each appoint one
arbiter; in the case of a plurality of parties on any one side, such
parties must appoint a single arbiter jointly. If they cannot agree on
a common arbiter, their arbiter shall be appointed by the German
Institution for Arbitration (Deutsche Institution fur
Schiedsgerichtsbarkeit e.V., Schedestrasse 13, 53113 Bonn). The two
arbiters shall appoint a third arbiter; if they cannot agree, the third
arbiter shall also be appointed by the German Institution for
Arbitration. The location for any arbitrations shall be Leverkusen,
Germany, unless another location is jointly agreed upon.
Made as of December 31, 2001
Kronos Cost Sharing Agreement
Effective January 1, 2002
Kronos International, Inc.
by:
---------------------------
Kronos Europe S.A/N.V.
by: E. Van der Auwera
---------------------------
Kronos (US), Inc.
by:
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NL Industries, Inc.
by:
---------------------------
Kronos Cost Sharing Agreement
Effective January 1, 2002
Kronos Titan GmbH & Co. OHG.
by:
------------------------------------
Societe Industrielle du Titane S.A.
by: E. Van der Auwera
------------------------------------
Kronos Titan A/S
by:
------------------------------------
Titania A/S
by:
------------------------------------
Kronos Ltd.
by:
------------------------------------
Kronos Cost Sharing Agreement
Effective January 1, 2002
Kronos Canada, Inc.
by:
---------------------------
Kronos Denmark ApS
by:
---------------------------
Kronos Louisiana Inc.
by:
---------------------------
KRONOS COST SHARING AGREEMENT
EFFECTIVE JANUARY 1, 2002
EXHIBIT 1
INITIAL ALLOCATION METHODS
Note: Direct allocations include direct monetary allocation of a percent of a
total expense, per diem allocations, and hourly allocations.
<Table>
<Caption>
Billing Unit Function Allocation Method
- ------------ -------- -----------------
KUS Information Systems Direct Allocations as determined by Director of IS
based on specific services provided to KC, KEU, and
TG.
Business Operations and Strategies Direct allocation, allocated and apportioned to TIA
and producing units by: direct allocation to TIA,
with balance of allocation apportioned to producing
units based on their 2002 rated production capacity.
NL Tax Planning and Compliance Direct allocation, allocated and apportioned to TIA
and producing units by: direct allocation to TIA,
with balance of allocation apportioned (to TG, KC,
KEU and TAS) based on their 2002 rated production
capacity.
NL Risk Management 50% of costs apportioned to all parties to the
(including services provided by NL agreement (except KDK and KLA) based on 2002 budgeted
through Contran) insurance premiums; 50% of costs allocated to same
parties based on physical assets (net PP&E and
Inventory as of 9/30/01).
NL Internal Audit Per diem allocations based on time spent as
determined by the Director, Internal Audit and
Consulting.
Credit and Collections Direct allocation of 25% of credit manager's
compensation plus related expenses.
KEU
Sales and Marketing Direct allocation: part thereof directly allocated to
KII and TIA and balance thereof apportioned to TG,
KEU and TAS based on their 2002 production capacity.
</Table>
<Table>
Information Systems Costs charged out based on CPU usage and number of
users to KEU, TG, TAS, TIA, KUK, SIT, -*-KII, and
KDK.
Finance & Control Direct allocation by KEU Controller to SIT and KUK,
units for which he is functionally responsible.
Treasury, Credit, Collections, Factoring 100% of costs incurred for services rendered to KII.
Customer Support Direct allocation (to exclude TAS), apportioned to
KII TG, KEU and KC based on their 2002 rated production
capacity, with apportionment to KC based on only 10%
of its rated production capacity.
Advertising Apportioned to TG, KEU and TAS based on their 2002
rated production capacity.
Logistics Direct allocation, apportioned to TG, KEU, TAS and
KII based on their budgeted 2002 distribution
expenses.
Finance & Control Direct allocation by KII Controller to KDK, for which
he is functionally responsible. Direct allocation (to
exclude certain costs) apportioned to TG, KEU, TAS,
TIA, KUK, SIT, KII and KC based on their 2002 AOP
trade sales.
Human Resources & Legal Direct allocation (to exclude certain costs)
apportioned to TG, KEU, KWS, TAS, TIA, KUK, SIT and
KII based on their projected plan headcounts as of
year end 2002. Certain of the excluded costs are then
apportioned based on 2002 AOP trade sales to TG, KEU,
TAS, TIA, KUK and SIT.
Purchasing Direct allocation (to exclude certain costs),
apportioned to TG, KEU and TAS based on their
budgeted 2002 purchases.
Production Management Direct allocation, allocated and apportioned by
direct allocation to TIA, with balance apportioned
based on their 2002 rated production capacity to TG,
KEU, TAS and KC.
Engineering Hourly allocations based on time spent as determined
by KII Director of Engineering.
</Table>