cix110k12312009_exh1013.htm


    UNSECURED
REVOLVING

    DEMAND
PROMISSORY NOTE   

    $8,000,000.00                                                                                                       February
3, 2010

       



    


    Section 1.  Promise to
Pay.  For and in
consideration of value received, the undersigned, NL Industries, Inc., a
corporation duly organized under the laws of the state of New
Jersey  (“Borrower”), promises to pay
to the order of CompX
International Inc., a corporation duly organized under the laws of the
state of Delaware (“CompX”), or the holder hereof
(as applicable, CompX or such holder shall be referred to as the “Noteholder”), the principal
sum of EIGHT MILLION and NO/100ths United States Dollars ($8,000,000.00) or such
lesser amount as shall equal the unpaid principal amount of the loan made by the
Noteholder to Borrower together with interest on the unpaid principal balance
from time to time pursuant to the terms of this Unsecured Revolving Demand
Promissory Note, as it may be amended from time to time (this “Note”).  This Note
shall be unsecured and will bear interest on the terms set forth in Section 6 below. Capitalized
terms not otherwise defined shall have the meanings given to such terms in Section 16 of this
Note.

    


    Section 2.  Place of
Payment.  All payments will be made at Noteholder’s address at
Three Lincoln Centre, 5430 LBJ Freeway, Suite 1700, Dallas,
Texas   75240-2697, Attention:  Treasurer, or such
other place as the Noteholder may from time to time appoint in
writing.

    


    Section 3.  Payments.  The
unpaid principal balance of this Note and any unpaid and accrued interest
thereon shall be due and payable on the Final Payment Date.  Prior to
the Final Payment Date, any unpaid and accrued interest on an unpaid principal
balance shall be paid in arrears quarterly on the last day of each March, June,
September and December, commencing March 31, 2010.  All payments on
this Note shall be applied first to accrued and unpaid interest, next to accrued
interest not yet payable and then to principal.  If any payment of
principal or interest on this Note shall become due on a day that is not a
Business Day, such payment shall be made on the next succeeding Business Day and
the payment shall be the amount owed on the original payment date.

    


    Section 4.  Prepayments.  This
Note may be prepaid in part or in full at any time without penalty.

    


    Section 5.  Borrowings.  Prior
to the Final Payment Date, Noteholder expressly authorizes Borrower to borrow,
repay and re-borrow principal under this Note in increments of $100,000 on a
daily basis so long as:

    


    
      	
              ·  

            	
              the
      aggregate outstanding principal balance does not exceed
      $8,000,000.00;

            


    

    
      	
              ·  

            	
              no
      written demand for payment has been made by the Noteholder;
      and

            


    

    
      	
              ·  

            	
              no
      Event of Default has occurred and is
continuing.

            


    

    


    Notwithstanding
anything else in this Note, in no event will Noteholder be required to lend
money to Borrower under this Note and loans under this Note shall be at the sole
and absolute discretion of Noteholder.

    


    Section 6.  Interest.  The
unpaid principal balance of this Note (exclusive of any past due principal)
shall bear interest at the rate per annum of the Prime Rate less three quarters
of a percent (0.75%).  In the event that an Event of Default occurs
and is continuing, the unpaid principal amount shall bear interest from the
Event of Default at the rate per annum of the Prime Rate plus four percent
(4.00%) until such time as the Event of Default is cured.  Accrued
interest on the unpaid principal of this Note shall be computed on the basis of
a 365- or 366-day year for actual days (including the first, but excluding the
last day) elapsed, but in no event shall such computation result in an amount of
accrued interest that would exceed accrued interest on the unpaid principal
balance during the same period at the Maximum Rate. Notwithstanding anything to
the contrary, this Note is expressly limited so that in no contingency or event
whatsoever shall the amount paid or agreed to be paid to the Noteholder exceed
the Maximum Rate.  If, from any circumstances whatsoever, the
Noteholder shall ever receive as interest an amount that would exceed the
Maximum Rate, such amount that would be excessive interest shall be applied to
the reduction of the unpaid principal balance and not to the payment of
interest, and if the principal amount of this Note is paid in full, any
remaining excess shall be paid to Borrower, and in such event, the Noteholder
shall not be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving or receiving interest in excess of the highest
lawful rate permissible under applicable law.  All sums paid or agreed
to be paid to Noteholder for the use, forbearance or detention of the
indebtedness of the Borrower to Noteholder shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such indebtedness until payment in full of the principal (including the
period of any renewal or extension thereof) so that the interest on account of
such indebtedness shall not exceed the Maximum Rate.  If at any time
the Contract Rate is limited to the Maximum Rate, any subsequent reductions in
the Contract Rate shall not reduce the rate of interest on this Note below the
Maximum Rate until the total amount of interest accrued equals the amount of
interest that would have accrued if the Contract Rate had at all times been in
effect.  In the event that, upon the Final Payment Date the total
amount of interest paid or accrued on this Note is less than the amount of
interest that would have accrued if the Contract Rate had at all times been in
effect with respect thereto, then at such time, to the extent permitted by law,
in addition to the principal and any other amounts Borrower owes to the
Noteholder, the Borrower shall pay to the Noteholder an amount equal to the
difference between:  (i) the lesser of the amount of interest that
would have accrued if the Contract Rate had at all times been in effect or the
amount of interest that would have accrued if the Maximum Rate had at all times
been in effect; and (ii) the amount of interest actually paid on this
Note.

    


    
      
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    Section 7.  Remedy.  Upon
the occurrence and during the continuation of an Event of Default, the
Noteholder shall have all of the rights and remedies provided in the applicable
Uniform Commercial Code, this Note or any other agreement among Borrower and in
favor of the Noteholder, as well as those rights and remedies provided by any
other applicable law, rule or regulation.  In conjunction with and in
addition to the foregoing rights and remedies of the Noteholder, the Noteholder
may declare all indebtedness due under this Note, although otherwise unmatured,
to be due and payable immediately without notice or demand
whatsoever.  All rights and remedies of the Noteholder are cumulative
and may be exercised singly or concurrently.  The failure to exercise
any right or remedy will not be a waiver of such right or remedy.

    


    Section 8.  Right of
Offset.  The Noteholder shall have the right of offset against
amounts that may be due by the Noteholder now or in the future to Borrower
against amounts due under this Note.

    


    Section 9.  Record of
Outstanding Indebtedness.  The date and amount of each
repayment of principal outstanding under this Note or interest thereon shall be
recorded by Noteholder in its records.  The principal balance
outstanding and all accrued or accruing interest owed under this Note as
recorded by Noteholder in its records shall be the best evidence of the
principal balance outstanding and all accrued or accruing interest owed under
this Note; provided
that the failure of Noteholder to so record or any error in so recording or
computing any such amount owed shall not limit or otherwise affect the
obligations of the Borrower under this Note to repay the principal balance
outstanding and all accrued or accruing interest.

    


    Section 10.  Waiver.  Borrower
and each surety, endorser, guarantor, and other party now or subsequently liable
for payment of this Note, severally waive demand, presentment for payment,
notice of nonpayment, notice of dishonor, protest, notice of protest, notice of
the intention to accelerate, notice of acceleration, diligence in collecting or
bringing suit against any party liable on this Note, and further agree to any
and all extensions, renewals, modifications, partial payments, substitutions of
evidence of indebtedness, and the taking or release of any collateral with or
without notice before or after demand by the Noteholder for payment under this
Note.

    


    Section 11.  Costs and
Attorneys’ Fees.  In addition to any other amounts payable to
Noteholder pursuant to the terms of this Note, in the event the Noteholder
incurs costs in collecting on this Note, this Note is placed in the hands of any
attorney for collection, suit is filed on this Note or if proceedings are had in
bankruptcy, receivership, reorganization, or other legal or judicial proceedings
for the collection of this Note, Borrower and any guarantor jointly and
severally agree to pay on demand to the Noteholder all expenses and costs of
collection, including, but not limited to, reasonable attorneys’ fees incurred
in connection with any such collection, suit, or proceeding, in addition to the
principal and interest then due.

    


    Section 12.  Time of
Essence.  Time is of the essence with respect to all of
Borrower’s obligations and agreements under this Note.

     

     

    
      
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    Section 13.  Jurisdiction and
Venue.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT
TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE
OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.  BORROWER CONSENTS
TO JURISDICTION IN THE COURTS LOCATED IN DALLAS, TEXAS.

    


    Section 14.  Notice.  Any
notice or demand required by this Note shall be deemed to have been given and
received on the earlier of (i) when the notice or demand
is actually received by the recipient or (ii) 72 hours after the notice
is deposited in the United States mail, certified or registered, with postage
prepaid, and addressed to the recipient.  The address for giving
notice or demand under this Note (i) to the Noteholder shall be
the place of payment specified in Section 2 or such other
place as the Noteholder may specify in writing to the Borrower and (ii) to Borrower shall be the
address below the Borrower’s signature or such other place as the Borrower may
specify in writing to the Noteholder.

    


    Section 15.  Successors and
Assigns.  All of the covenants, obligations, promises and
agreements contained in this Note made by Borrower shall be binding upon its
successors and permitted assigns, as applicable.  Notwithstanding the
foregoing, Borrower shall not assign this Note or its performance under this
Note without the prior written consent of the Noteholder.

    


    Section 16.  Definitions.  For
purposes of this Note, the following terms shall have the following
meanings:

    


    (a)           “Business
Day” shall mean any day banks are open in the state of
Texas.

    


    (a)           “Contract
Rate” means the amount of any interest (including fees, charges or
expenses or any other amounts that, under applicable law, are deemed interest)
contracted for, charged or received by or for the account of
Noteholder.

    


    (b)           “Event of
Default” wherever used herein, means any one of the following
events:

    


    (i)           the
Borrower fails to pay any amount due on this Note and/or any fees or sums due
under or in connection with this Note after any such payment otherwise becomes
due and payable and three Business Days after demand for such
payment;

    


    (ii)           the
Borrower otherwise fails to perform or observe any other provision contained in
this Note and such breach or failure to perform shall continue for a period of
thirty days after notice thereof shall have been given to the Borrower by the
Noteholder;

    


    (iii)           a
case shall be commenced against Borrower, or Borrower shall file a petition
commencing a case, under any provision of the Federal Bankruptcy Code of 1978,
as amended, or shall seek relief under any provision of any other bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in effect, or
shall consent to the filing of any petition against it under such law, or
Borrower shall make an assignment for the benefit of its creditors, or shall
admit in writing its inability to pay its debts generally as they become due, or
shall consent to the appointment of a receiver, trustee or liquidator of
Borrower or all or any part of its property; or

    


    (iv)           an
event occurs that, with notice or lapse of time, or both, would become any of
the foregoing Events of Default.

     

     

     

    
      
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    (d)           “Final
Payment
Date” shall mean the earlier of:

    


    
      	
              ·  

            	
              written
      demand by the Noteholder on or after March 31, 2011 for payment of all of
      the unpaid principal and interest accrued and unpaid
    thereon;

            


    

    
      	
              ·  

            	
              December
      31, 2012; or

            


    

    
      	
              ·  

            	
              acceleration
      as provided herein.

            


    

    


    (e)           “Maximum
Rate” shall mean the highest lawful rate permissible under applicable law
for the use, forbearance or detention of money.

    


    (f)           “Prime
Rate” shall mean the fluctuating interest rate per annum in effect from
time to time equal to the base rate on corporate loans as reported as the Prime
Rate in the Money Rates column of The Wall Street Journal or
other reliable source.

     

    
 

    
    

    
                                     BORROWER:

    

    
 

    
    

    
                                     NL Industries,
Inc.



                                   By: /s/Gregory M. Swalwell

        Gregory M.
Swalwell, Vice President, Finance and Chief Financial Officer

    


           
Address:

    


        5430 LBJ Freeway,
Suite 1700

                   
Dallas, Texas   75240-2697


    
      
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