SECURITY OVER SHARES AGREEMENT
THIS AGREEMENT is made on 11 April 2006
BETWEEN
(1) THE BANK OF NEW YORK of 101 Barclay Street, 21W, New York, New York 1028,
U.S.A. and fax number +1 212 235 2541, as trustee for the Holders on the
terms and conditions set out in the Indenture and the Notes (the "Trustee",
which expression shall include any person for the time being appointed as
trustee, or as an additional trustee, for the purposes of the Indenture and
the Notes); and
(2) KRONOS INTERNATIONAL, INC. (the "Chargor") having its registered office at
2711 Centreville Road, Suite 400, Wilmington, Delaware 19808, U.S.A.
IT IS AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement:
"Additional Notes" has the meaning given to it in the Indenture.
"Articles" means the articles of association of the Company delivered to
the Trustee or to solicitors acting for the Trustee on or about the date of
execution of this Agreement.
"Business Day" means a day (other than a Saturday or a Sunday) on which
banks are open for general business in London and New York.
"Charged Portfolio" means the Shares and the Related Assets.
"Collateral Agent Agreement" has the meaning given to it in the Indenture.
"Collateral Rights" means all rights, powers and remedies of the Trustee
provided by this Agreement or, in connection with this Agreement, by law.
"Company" means Kronos Limited, a company incorporated in England and Wales
(registered no. 02442679) whose registered office is at Barons Court,
Manchester Road, Wilmslow, Cheshire SK9 1BQ.
"Current Shares" means the shares in the share capital of the Company held
by the Chargor as identified in Schedule 1 to this Agreement.
"Event of Default" has the meaning given to it in the Indenture.
"High Yield Documents" means the Purchase Agreement, the Indenture and the
Notes, together with all other documents issued or entered into in
connection therewith including, without limitation, the Security Documents,
the Collateral Agent Agreement and the Registration Rights Agreement.
"Holders" has the meaning given to it in the Indenture.
"Indenture" means an indenture dated 11 April 2006 between the Trustee and
the Chargor.
"Initial Purchaser" means Deutsche Bank AG London as initial purchaser of
the Notes under the terms of the Purchase Agreement.
"New Shares" means any shares in the share capital of the Company which are
held by, or held to the order or on behalf of the Chargor excluding any
Current Shares and any shares which are Related Assets.
"Notes" means the 6.5% Senior Secured Notes due 2013 issued by the Chargor
under the Indenture, any global or other notes issued in exchange for the
Notes under the terms of the Registration Rights Agreement and the
Additional Notes (if any).
"Pensions Notice" means a contribution notice or a financial support
direction issued by the Pensions Regulator under the Pensions Act 2004.
"Purchase Agreement" means an agreement dated 5 April 2006 between the
Chargor and the Initial Purchaser.
"Registration Rights Agreement" has the meaning given to it in the
Indenture.
"Related Assets" means all dividends, interest and other monies payable in
respect of the Shares and all other rights, benefits and proceeds in
respect of or derived from the Shares (whether by way of redemption, bonus,
preference, option, substitution, conversion or otherwise).
"Secured Obligations" means all obligations owing by the Chargor under the
High Yield Documents to the Holders or to the Trustee (whether for its own
account or as trustee for the Holders), whether principal, premium,
interest or otherwise, present or future (and including any obligation in
respect of any further advances made thereunder), actual or contingent (and
whether incurred by the Chargor alone or jointly, and whether as principal
or surety or in some other capacity).
"Security Documents" has the meaning given to it in the Indenture.
"Shares" means the Current Shares and any New Shares in respect of which
the Chargor has delivered the share certificates relating thereto and blank
stock transfer forms pursuant to Clause 3.3.
1.2 In this Agreement:
(a) Unless a contrary indication appears, a term defined in the Indenture
has the same meaning when used in this Agreement.
(b) The rules of construction contained in the Indenture apply to the
construction of this Agreement.
(c) Unless otherwise stated, a "Clause" is a reference to a Clause of this
Agreement.
(d) A reference to any agreement or instrument is a reference to that
agreement or instrument as amended, supplemented or varied.
(e) Any reference to a "person" includes any person, firm, company,
corporation, government, state or agency of a state or any
association, trust or partnership (whether or not having separate
legal personality) or two or more of the foregoing.
(f) Any reference to a provision of law is a reference to that provision
as amended or re-enacted.
1.3 A person who is not a party to this Agreement has no right under the
Contracts (Rights of Third Parties) Act 1999 to enforce any term of this
Agreement.
2. COVENANT AND CHARGE
2.1 Pursuant to the terms of the Indenture, the Chargor shall on demand of the
Trustee discharge and pay to the Trustee (when due and payable) each of the
Secured Obligations.
2.2 The Chargor charges the Charged Portfolio, with full title guarantee and by
way of first fixed charge, in favour of the Trustee for the payment and
discharge of all of the Secured Obligations.
3. DEPOSIT OF CERTIFICATES AND NOTICES
3.1 The Chargor shall on the date of this Agreement deposit (or procure there
to be deposited) with the Trustee or solicitors acting for the Trustee all
certificates and other documents of title to the Current Shares, and stock
transfer forms (executed in blank by or on behalf of the Chargor) in
respect of the Current Shares.
3.2 The Chargor shall, promptly upon the accrual, offer or issue of any Related
Assets (in the form of stocks, shares, warrants or other securities) in
which the Chargor has a beneficial interest, procure the delivery to the
Trustee or solicitors acting for the Trustee of (a) all certificates and
other documents of title representing those Related Assets and (b) such
stock transfer forms or other instruments of transfer (executed in blank by
or on behalf of the Chargor) in respect of those Related Assets as the
Trustee may request.
3.3 To the extent necessary to comply with its obligations under Clause 5.3,
the Chargor shall procure that all certificates and other documents of
title relating to any New Shares and such stock transfer forms or other
instruments of transfer (executed in blank by or on behalf of the Chargor)
as the Trustee may request in respect of such New Shares are delivered to
the Trustee or solicitors acting for the Trustee.
3.4 The Chargor shall procure that:
(a) (save with the Trustee's prior written consent) any increase in the
issued share capital of the Company after the date of this Agreement
is issued to the Chargor; and
(b) promptly upon any such issue, to the extent necessary to comply with
its obligations under Clause 5.3, such Related Assets or New Shares
(as the case may be) are charged in favour of the Trustee in
accordance with Clause 3.2 or Clause 3.3, respectively.
3.5 The Chargor shall procure that:
(a) a notice substantially in the form set out in Schedule 2 is delivered
to the Company (a) on the date of execution of this Agreement in
respect of the Current Shares and (b) on the date of every occasion
when New Shares are charged in favour of the Trustee pursuant to
Clause 3.3 in respect of such New Shares; and
(b) the Company delivers acknowledgement of receipt of such notice to the
Trustee on the date hereof (in the case of the notice relating to the
Current Shares) and within 5 Business Days of receiving such notice in
relation to any New Shares.
4. VOTING RIGHTS AND DIVIDENDS
4.1 At any time whilst there is no Event of Default outstanding unremedied
or unwaived, the Chargor shall be entitled to:
(a) receive all dividends, interest and other monies arising from the
Charged Portfolio; and
(b) exercise all voting rights in relation to the Charged Portfolio
provided that the Chargor shall not exercise such voting rights
in any manner, or otherwise permit or agree to any (i) variation
of the rights attaching to or conferred by all or any part of the
Charged Portfolio, or (ii) increase in the issued share capital
of the Company, which in the opinion of the Trustee (acting
reasonably) would prejudice the value of, or the ability of the
Trustee to realise, the security created by this Agreement.
4.2 At any time whilst there is an Event of Default outstanding unremedied or
unwaived, the Trustee may, at its discretion, (in the name of the Chargor
or otherwise and without any further consent or authority from the
Chargor):
(a) exercise (or refrain from exercising) any voting rights in respect of
the Charged Portfolio;
(b) apply all dividends, interest and other monies arising from the
Charged Portfolio as though they were the proceeds of sale under this
Agreement;
(c) transfer the Charged Portfolio into the name of such nominee(s) of the
Trustee as it shall require; and
(d) exercise (or refrain from exercising) the powers and rights conferred
on or exercisable by the legal or beneficial owner of the Charged
Portfolio, including the right, in relation to the Company, to concur
or participate in:
(i) the reconstruction, amalgamation, sale or other disposal of the
Company or any of its assets or undertaking (including the
exchange, conversion or reissue of any shares or securities as a
consequence thereof);
(ii) the release, modification or variation of any rights or
liabilities attaching to such shares or securities; and
(iii) the exercise, renunciation or assignment of any right to
subscribe for any shares or securities,
in each case in the manner and on the terms the Trustee thinks fit,
and the proceeds of any such action shall form part of the Charged
Portfolio.
4.3 Waiver of voting rights by Trustee
(a) The Trustee may, in its absolute discretion and without any consent or
authority from the Chargor, by notice to the Chargor (which notice
shall be irrevocable) elect to give up the right to exercise (or
refrain from exercising) all voting rights in respect of the Charged
Portfolio conferred or to be conferred on the Trustee pursuant to
Clause 4.2.
(b) Once a notice has been issued by the Trustee under paragraph (a) of
this Clause 4.3, on and from the date of such notice the Trustee shall
cease to have the rights to exercise or refrain from exercising voting
rights in respect of the Charged Portfolio conferred or to be
conferred on it pursuant to Clause 4.2 or any other provision of this
Agreement and all such rights will be exercisable by the Chargor. The
Chargor shall be entitled on and from the date of such notice, to
exercise all voting rights in relation to the Charged Portfolio
subject only to the proviso contained in Clause 5.5.
5. CHARGOR'S REPRESENTATIONS AND UNDERTAKINGS
5.1 Except with the Trustee's prior written consent, the Chargor shall not
(save as permitted under the High Yield Documents):
(a) assign or dispose of all or any part of the Charged Portfolio;
(b) create, grant or permit to exist (a) any security interest over or (b)
any restriction on the ability to transfer or realise, all or any part
of the Charged Portfolio, save for: (i) the Company's lien on unpaid
shares conferred by Regulation 8 of Table A of the Companies (Tables A
to F) Regulations 1985 (as in force at the date of this Agreement);
and (ii) the ability of the directors of the Company to decline to
register a transfer of shares as set out in article 7.1 of the
Articles, provided that article 7.2 of the Articles continues to
apply; or
(c) do or (to the extent within its control) permit to be done any other
act which, in the opinion of the Trustee, would adversely affect the
Collateral Rights.
5.2 The Chargor represents and warrants to the Trustee and undertakes for the
duration of this Agreement that (save as specified or permitted under the
High Yield Documents):
(a) it is, and will be, the sole legal and beneficial owner of the Charged
Portfolio free from any security interest except as created by this
Agreement;
(b) it has not sold or disposed of, and will not sell or dispose of, the
benefit of all or any of its rights, title and interest in the Charged
Portfolio;
(c) it has and will have the necessary power to enable it to enter into
and perform its obligations under this Agreement;
(d) this Agreement constitutes its legal, valid and binding obligation;
(e) all necessary authorisations to enable it to enter into this Agreement
have been obtained and are, and will remain, in full force and effect;
and
(f) the authorised share capital of the Company as at the date hereof is
(pound)51,000 and the issued share capital of the Company as at the
date hereof consists of 50,032 ordinary shares of (pound)1.00 each and
all such shares are fully paid.
5.3 The Chargor represents and warrants to the Trustee and undertakes for the
duration of this Agreement to ensure that, at all times during the duration
of the Agreement, the Charged Portfolio represents 65% (to the nearest
share) but at no time more than 65% of the issued and voting share capital
of the Company.
5.4 The Chargor represents to the Trustee that the Shares are fully paid and
undertakes to pay all calls or other payments due in respect of any part of
the Charged Portfolio. If the Chargor fails to make any such payment the
Trustee may make that payment on behalf of the Chargor and any sums so paid
by the Trustee shall be reimbursed by the Chargor on demand, together with
interest on those sums. Such interest shall be calculated from the due date
up to the actual date of payment (after, as well as before, judgement) at a
rate equal to 1% per annum in excess of the interest rate applicable to the
Notes at such time (or if no interest rate is applicable at such time, the
most recent interest rate applicable to the Notes).
5.5 The Chargor shall not exercise its voting rights in relation to the Charged
Portfolio in any manner, or otherwise permit or agree to, or concur or
participate in any (i) variation of the rights attaching to or conferred by
all or any part of the Charged Portfolio (ii) increase in the issued share
capital of any company whose shares are charged pursuant to this Agreement
(iii) exercise, renunciation or assignment of any right to subscribe for
any shares or securities or (iv) reconstruction, amalgamation, sale or
other disposal of any company or any of the assets of any company
(including the exchange, conversion or reissue of any shares or securities
as a consequence thereof) whose shares are charged under this Agreement,
which in the opinion of the Trustee would prejudice the value of, or the
ability of the Trustee to realise, the security created by this Agreement
provided that the proceeds of any such action shall form part of the
Charged Portfolio.
5.6 The Charger shall immediately notify the Trustee if it or any of its
Subsidiaries receives a Pension Notice.
6. FURTHER ASSURANCE
6.1 The Chargor shall promptly execute all documents (including transfers) and
do all things (including the delivery, transfer, assignment or payment of
all or part of the Charged Portfolio to the Trustee or its nominee(s)) that
the Trustee may reasonably specify for the purpose of (a) exercising the
Collateral Rights or (b) securing and perfecting its security over or title
to all or any part of the Charged Portfolio.
6.2 At any time after the occurrence of an Event of Default, which is
continuing unremedied or unwaived, the Chargor shall upon demand from the
Trustee (a) procure the transfer of the Charged Portfolio into the name of
the Trustee or its nominee(s), agents or such purchasers as it shall direct
and (b) execute all documents and do all other things that the Trustee may
require to facilitate the realisation of the Charged Portfolio.
6.3 The Trustee shall only be entitled to transfer or request the transfer of
the Charged Portfolio whilst an Event of Default is continuing unremedied
or unwaived.
7. POWER OF ATTORNEY
7.1 The Chargor, by way of security, irrevocably appoints the Trustee to be its
attorney and in its name, on its behalf and as its act and deed to execute,
deliver and perfect all documents (including any stock transfer forms and
other instruments of transfer) and do all things that the Trustee may
consider to be necessary for (a) carrying out any obligation imposed on the
Chargor under this Agreement; (b) exercising any of the rights conferred on
the Trustee by this Agreement or by law, (including, after the security
constituted by this Agreement has become enforceable, the exercise of any
right of a legal or a beneficial owner of the Charged Portfolio); or (c)
preserving the rights conferred on the Trustee by this Agreement or by law.
The Chargor shall ratify and confirm all things done and all documents
executed by the Trustee in the exercise of that power of attorney.
8. POWER OF SALE
8.1 After the occurrence of an Event of Default and whilst the same is
continuing unremedied or unwaived, the Trustee shall be entitled, without
prior notice to the Chargor or prior authorisation from any court, to sell
or otherwise dispose of all or any part of the Charged Portfolio (at the
times, in the manner and on the terms it thinks fit). Subject to Clause 12
(Subsequent Interest and Accounts), the Trustee shall apply the proceeds of
that sale or other disposal in paying the costs of that sale or disposal
and in or towards the discharge of the Secured Obligations in accordance
with the terms of the Indenture.
8.2 The power of sale or other disposal in Clause 8.1 shall operate as a
variation and extension of the statutory power of sale under Section 101 of
the Law of Property Act 1925. The restrictions contained in Sections 93 and
103 of the Law of Property Act 1925 shall not apply to this Agreement or to
any exercise by the Trustee of its right to consolidate mortgages or its
power of sale.
8.3 A certificate in writing by an officer or agent of the Trustee that any
power of sale or other disposal has arisen and is exercisable shall be
conclusive evidence of that fact, in favour of a purchaser of all or any
part of the Charged Portfolio.
9. RECEIVER
9.1 The Trustee may by writing (acting through an authorised officer of the
Trustee) without notice to the Chargor appoint one or more persons to be
receiver of the whole or any part of the Charged Portfolio (each such
person being (a) entitled to act individually as well as jointly and (b)
for all purposes deemed to be the agent of the Chargor) if:
(a) an Event of Default is continuing unremedied or unwaived;
(b) a petition or application is presented for the making of an
administration order in relation to the Chargor;
(c) the Chargor gives written notice of its intention to appoint an
administrator to the Chargor; or any person (other than the Chargor)
gives written notice of its intention to appoint an administrator to
the Chargor and, in the reasonable opinion of the Trustee, such other
person is not acting frivolously or vexatiously in so doing; or
(d) the Chargor requests the appointment of a receiver.
9.2 In addition to the powers of the Trustee conferred by Clause 8 (Power of
Sale), each person appointed pursuant to Clause 9.1 shall have, in relation
to the part of the Charged Portfolio in respect of which he was appointed,
all the powers (a) conferred by the Law of Property Act 1925 on a receiver
appointed under that Act, (b) of an administrative receiver set out in
Schedule 1 to the Insolvency Act 1986 (whether or not such person is an
administrative receiver) and (c) (if such person is an administrative
receiver) all the other powers exercisable by an administrative receiver in
relation to the Chargor by virtue of the Insolvency Act 1986.
10. EFFECTIVENESS OF COLLATERAL
10.1 The collateral constituted by this Agreement and the Collateral Rights
shall be cumulative, in addition to and independent of every other security
which the Trustee may at any time hold for the Secured Obligations or any
rights, powers and remedies provided by law. No prior security held by the
Trustee over the whole or any part of the Charged Portfolio shall merge
into the collateral constituted by this Agreement.
10.2 This Agreement shall remain in full force and effect as a continuing
arrangement unless and until the Trustee discharges it.
10.3 No failure to exercise, nor any delay in exercising, on the part of the
Trustee, any Collateral Right shall operate as a waiver, nor shall any
single or partial exercise of a Collateral Right prevent any further or
other exercise of that or any other Collateral Right.
10.4 If, at any time, any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under the law of any jurisdiction,
neither the legality, validity or enforceability of the remaining
provisions of this Agreement nor the legality, validity or enforceability
of such provision under the law of any other jurisdiction will in any way
be affected or impaired.
10.5 The Trustee shall, at the request and cost of the Chargor, cancel the
security granted by this Agreement, and execute a release, in each case in
respect of:
(a) any portion of the Charged Portfolio upon the disposal of such portion
of the Charged Portfolio, provided that such disposal is permitted
under the terms of the Indenture;
(b) the whole of the Charged Portfolio upon the Secured Obligations being
discharged in full; and
(c) the whole of the Charged Portfolio in the event of the Secured
Obligations being defeased in full in accordance with section 8 of the
Indenture,
(d) any such release to be without recourse to, and without any
representations or warranties by, the Trustee.
10.6 None of the Trustee, its nominee(s) or any receiver appointed pursuant to
this Agreement shall be liable by reason of (a) taking any action permitted
by this Agreement or (b) any neglect or default in connection with the
Charged Portfolio or (c) the taking possession or realisation of all or any
part of the Charged Portfolio, except in the case of gross negligence or
wilful default upon its part.
11. RIGHT OF APPROPRIATION
To the extent that any of the Charged Portfolio constitutes "financial
collateral" and this Agreement and the obligations of the Chargor hereunder
constitute a "security financial collateral arrangement" (in each case as
defined in, and for the purposes of, the Financial Collateral Arrangements
(No. 2) Regulations 2003 (SI 2003 No. 3226) (the "Regulations") the Trustee
shall have the right to appropriate all or any part of such financial
collateral in or towards discharge of the Secured Obligations. For this
purpose, the parties agree that the value of such financial collateral so
appropriated shall be the market price of the Shares determined by the
Trustee by reference to a public index or by such other process as the
Trustee may select, including independent valuation. The parties agree that
the method of valuation provided for in this Agreement shall constitute a
commercially reasonable method of valuation for the purposes of the
Regulations.
12. SUBSEQUENT INTERESTS AND ACCOUNTS
12.1 If the Trustee at any time receives notice of any subsequent mortgage,
assignment, charge or other interest affecting all or any part of the
Charged Portfolio, all payments made by the Chargor to the Trustee or any
of the Holders after that time shall be treated as having been credited to
a new account of the Chargor and not as having been applied in reduction of
the Secured Obligations as at the time when the Trustee received notice.
12.2 All monies received, recovered or realised by the Trustee under this
Agreement (including the proceeds of any conversion of currency) may in its
discretion be credited to and held in any suspense or impersonal account
(bearing a commercially reasonable rate of interest) pending their
application from time to time in or towards the discharge of any of the
Secured Obligations in accordance with the terms of the Indenture.
13. COSTS AND EXPENSES
The Chargor shall, within 3 Business Days of demand by the Trustee,
reimburse the Trustee on a full indemnity basis for all losses and
reasonable costs and expenses (including legal fees, stamp duties and any
value added tax) incurred in connection with (a) the execution of this
Agreement or otherwise in relation to it, (b) the perfection or enforcement
of the collateral constituted by this Agreement or (c) the exercise of any
Collateral Right, together with interest from the date the Trustee notified
the Chargor of the costs and expenses to the date of payment at a rate
equal to 1% per annum in excess of the interest rate applicable to the
Notes at such time (or if no interest rate is applicable at such time, the
most recent interest rate applicable to the Notes).
14. CURRENCY CONVERSION
For the purpose of or pending the discharge of any of the Secured
Obligations the Trustee may convert any money received, recovered or
realised or subject to application by it under this Agreement to the
currency in which the Secured Obligations are due to be discharged: and any
such conversion shall be effected at the Trustee's spot rate of exchange
for the time being for obtaining such other currency with the first
currency.
15. NOTICES
Any communication to be made by one person to another under or in
connection with this Agreement shall be made in writing in accordance with
those terms of the Notices provision in section 13.2 of the Indenture
applicable to notices and communications to persons other than Holders and
shall be deemed to have been duly given in accordance with the provisions
of such section 13.2 within the times prescribed in such section 13.2.
16. SUCCESSORS
This Agreement shall remain in effect despite any amalgamation or merger
(however effected) relating to the Trustee; and references to the Trustee
shall include any assignee or successor in title of the Trustee and any
person who, under the laws of its jurisdiction of incorporation or
domicile, has assumed the rights and obligations of the Trustee under this
Agreement or to which, under such laws, those rights and obligations have
been transferred.
17. GOVERNING LAW AND JURISDICTION
17.1 Governing Law
This Agreement is governed by English law.
17.2 Jurisdiction
(a) The courts of England have exclusive jurisdiction to settle any
dispute arising out of or in connection with this Agreement (including
a dispute regarding the existence, validity or termination of this
Agreement).
(b) This Clause 17.2 is for the benefit of the Trustee only.
IN WITNESS WHEREOF this Agreement has been signed on behalf of the Trustee and
executed as a deed by the Chargor and is intended to be and is hereby delivered
by it as a deed on the date specified above.
The Trustee
THE BANK OF NEW YORK
By: /s/ Luis Perez
----------------------------
Name: Luis Perez
Title: Assistant Vice President
The Chargor
EXECUTED as a DEED
by KRONOS INTERNATIONAL, INC.
By: /s/ John St. Wrba
----------------------------
Name: John St. Wrba
Title: Vice President and Assistant Treasurer